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CITY OF ARDEN HILLS Schedule of Findings and Responses Year Ended December 31, 2023 FINANCIAL STATEMENT FINDINGS SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER FINANCIAL REPORTING 2023-001 Segregation of Duties Criteria — Internal control over financial reporting. Condition — The City of Arden Hills, Minnesota (the City) has limited segregation of duties in a number of areas. Questioned Costs — Not applicable. Context — The condition applies to multiple areas as noted above. Repeat Finding — This is a current year and prior year finding. Cause — The limited segregation of duties is primarily caused by the limited size of the City's finance department staff. Effect — One important element of internal accounting controls is an adequate segregation of duties such that no one individual should have responsibility to execute a transaction, have physical access to the related assets, and have responsibility or authority to record the transaction. A lack of segregation of duties subjects the City to a higher risk that errors or fraud could occur and not be detected in a timely manner in the normal course of business. Recommendation — This condition is common to organizations of your size. We recommend that the City segregate duties as best it can within the limits of the staff available. Any modifications in internal control in this area should be viewed from a cost -benefit perspective. Management Response — There is no disagreement with the audit finding. The City reviews and makes improvements to its internal control structure on an ongoing basis and attempts to maximize the segregation of duties in all areas within the limits of the staff available to eliminate or mitigate this internal control weakness. However, the City does not consider it cost -beneficial at this time to increase the size of its staff in order to further segregate accounting functions. -4-