Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Audit topic
No spam. Unsubscribe anytime.
Auditor issues clean 2025 opinion for Madelia but flags collateral shortfall on bank deposits
Summary
An auditor told the Madelia workshop the city’s 2025 financial statements received a clean opinion, but the auditor flagged a Minnesota statutory compliance finding: the city lacked the 10% collateral cushion required above FDIC coverage on some deposits. Staff will receive the compliance materials for follow-up.
The city’s independent auditor told the Madelia workshop the 2025 financial statements received an unmodified (clean) opinion but identified a statutory compliance finding related to bank-deposit collateral.
The auditor said state law requires cities to hold collateral on deposits that exceed FDIC coverage and explained that FDIC insures deposits up to $250,000. “The state statute requires cities to hold collateral on deposits in excess of FDIC coverage,” the auditor said, adding that the city was covered by FDIC limits but did not have the additional 10% cushion the statute requires.
Why it matters: without the additional statutory collateral, taxpayers would be exposed above the FDIC cap if a bank failure occurred during a high-cash period. The auditor pointed to the year-end cash high point that can occur when local government aid and taxes arrive, and said the city should track collateral more closely with its banks and consider diversifying deposits across financial institutions.
Numbers and context: the auditor summarized the city’s combined totals reported in the 2025 audit, saying total assets were about $51,470,000 and total liabilities about $14,100,000, yielding a combined net position near $36 million, of which roughly $11,385,000 was unrestricted (spendable). The auditor also reported a $6.3 million change in governmental activities tied to capital grant receipts and said the general fund showed a year-end decrease of about $121,000 while several enterprise (utility) funds showed net increases (water +$174,000; wastewater +$584,000; liquor +$90,000).
The auditor described internal-control findings typical for small governments — including that the city does not prepare its own financial statements and limited segregation of duties because of staffing size — and said the auditor will send the compliance and report materials to staff (named contacts: Chris and Heather) so the city can work with its banks to obtain monthly collateral reports.
Next steps: staff said the 2025 audit will be added to a future council agenda for formal approval and that staff will follow up with banks about collateral reporting and with auditors on timing for supplemental reports (for example, the fire relief reporting change noted for next year). The auditor recommended communicating with the banks before high-cash periods (early December) to ensure collateral is in place.
