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ARDEN HILLS CITY COUNCIL WORK SESSION – AUGUST 17, 2020 2 have physical access to the related assets, and have responsibility or authority to record the transaction. Finance Director Bauman said she met with Mr. Aaron Nielsen from MMKR to discuss 16 different areas where there was a high risk that errors or fraud could occur and not be detected in a timely manner in the normal course of business due to limited segregation of duties. Many of the areas would require the Accounting Analyst be trained in either preparing or reviewing certain transactions throughout the year. Finance Director Bauman indicated she is working on updating the City’s positive pay program. At this time the bank won’t cash a check unless the check number and the amount match the amount issued but it doesn’t currently match the vendor name. She is updating the program to take vendor name into consideration. She will also determine the feasibility of adding new processes to review entries made into Springbrook. There are a couple of areas where no changes can be made based on current staffing: Pension and OPEB - the auditor assists in creating some of those entries, Capital Assets and Financial Close Review and Reporting. Staff feels they could implement enough of the changes noted to reduce the finding from a material weakness to a significant deficiency with existing staffing. The City Administrator has a finance background and the Finance Director has over 20 years experience, which assists in making adjustments. To entirely eliminate this finding, the City would need to consider additional staffing or contract out with someone each year to either prepare or review certain financial transactions throughout the year. At this time staff does not believe this to be a cost-effective solution. We will continue to monitor our controls on an ongoing basis and adapt as needed for changes in our processes and reporting environment. Mayor Grant asked Mr. Nielsen if, as the auditor, he felt the changes could get the City from a material weakness classification to a significant deficiency. Mr. Nielsen said yes, with the changes proposed he would be comfortable reducing the finding, although it would come over time. The 16 areas that are identified were used to facilitate the discussion, and some areas pose more risk than other areas. Mr. Nielsen said he would start with number four on the list, accounts payable and prepaid items, also items one, three and five (cash and investments, utility funds and payroll, pension, OPEB). Councilmember Scott said his concern was continuity of operations if something should happen to Finance Director Bauman and wondered if the City had any proprietary tools that would make it more difficult for someone new coming in. Councilmember Holden commented that the City has hired contractors in the past. Finance Director Bauman replied the City uses Springbrook software but otherwise is on par with other cities. Councilmember Holden asked if the accounting analyst position would need to be changed if the cross training is done.