FAC Explorer

Audit 44567

FY End
2022-12-31
Total Expended
$3.32M
Findings
2
Programs
2
Organization: City of Babbitt, Minnesota (MN)
Year: 2022 Accepted: 2023-04-13
Auditor: Walker Giroux & Hahne LLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
41850 2022-001 Significant Deficiency Yes P
618292 2022-001 Significant Deficiency Yes P

Programs

ALN Program Spent Major Findings
66.458 Capitalization Grants for Clean Water State Revolving Funds $3.18M Yes 1
21.027 Coronavirus State and Local Fiscal Recovery Funds $144,633 - 0

Contacts

Name Title Type
S4LDJGJNFKB6 Kathy Vraa Auditee
2188273647 Thomas B. Kelly Auditor
No contacts on file

Notes to SEFA

Title: NOTE C - CAPITALIZATION LOAN Accounting Policies: NOTE A - BASIS OF PRESENTATIONThe accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of City of Babbitt, Minnesota, under programs of the federal government for the year ended December 31, 2022. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City of Babbitt, Minnesota, it is not intended to and does not present the financial position, changes in net position, or cash flows of City of Babbitt, Minnesota. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESExpenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The City of Babbitt, Minnesota has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. Federal expenditures related to the Capitalization Grants for Clean Water State Revolving Funds were reimbursed by loan proceeds. The outstanding loan balance of $4,029,523 at December 31, 2022 is comprised entirely of funds received from other governmental units. The loan is payable to the Minnesota Public Facilities Authority, a department of the State of Minnesota.Balance at December 31, 2021$ 895,182 Loan proceeds 3,177,336Principal payments (42,995)Balance at December 31, 2022$ 4,029,523
Title: NOTE D - PASS-THROUGH ENTITIES Accounting Policies: NOTE A - BASIS OF PRESENTATIONThe accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of City of Babbitt, Minnesota, under programs of the federal government for the year ended December 31, 2022. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City of Babbitt, Minnesota, it is not intended to and does not present the financial position, changes in net position, or cash flows of City of Babbitt, Minnesota. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESExpenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The City of Babbitt, Minnesota has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. There were no pass-through entities.

Finding Details

Finding 2022-001
2022-001. SEGREGATION OF DUTIES Criteria The concentration of duties and responsibilities in a limited number of individuals is not desirable from an internal accounting control point of view. Condition Due to the limited number of personnel within the City?s business office, the segregation of accounting functions necessary to ensure adequate internal accounting control is not possible. Effect Because of the weakness in segregation of duties, the City has not provided adequate internal control. Cause This occurred because of staffing limitations caused by fiscal constraints. Recommendations City officials and management should constantly be aware of this condition, attempt to segregate duties as much as possible, and provide oversight to partially compensate for this deficiency. Views of Responsible Officials and Planned Corrective Action Management agrees with the audit finding. The City Clerk-Treasurer will continue to monitor all transactions and the City?s administration will structure the duties of office personnel to help ensure as much segregation of duties as possible within the City?s staffing limitations and funding constraints. ENVIRONMENTAL PROTECTION AGENCY Capitalization Grants for Clean Water State Revolving Funds ? Assistance Listing No. 66.458? Grant Period ? Year ended December 31, 2022. The significant deficiency of lack of segregation of duties, as discussed in Section II, finding 2022-001, also applies to this grant. Finding: 2022-001 Name of Contact Person: Kathy Vraa, City Clerk-Treasurer Corrective Action: The City Clerk-Treasurer will attempt to monitor transactions and structure the duties of office personnel to help ensure as much segregation of duties as possible within the City?s staffing limitations and funding constraints. Proposed Completion Date: The City?s Clerk-Treasurer has been monitoring transactions and reviewing the duties of office personnel on an ongoing basis.
Finding 2022-001
2022-001. SEGREGATION OF DUTIES Criteria The concentration of duties and responsibilities in a limited number of individuals is not desirable from an internal accounting control point of view. Condition Due to the limited number of personnel within the City?s business office, the segregation of accounting functions necessary to ensure adequate internal accounting control is not possible. Effect Because of the weakness in segregation of duties, the City has not provided adequate internal control. Cause This occurred because of staffing limitations caused by fiscal constraints. Recommendations City officials and management should constantly be aware of this condition, attempt to segregate duties as much as possible, and provide oversight to partially compensate for this deficiency. Views of Responsible Officials and Planned Corrective Action Management agrees with the audit finding. The City Clerk-Treasurer will continue to monitor all transactions and the City?s administration will structure the duties of office personnel to help ensure as much segregation of duties as possible within the City?s staffing limitations and funding constraints. ENVIRONMENTAL PROTECTION AGENCY Capitalization Grants for Clean Water State Revolving Funds ? Assistance Listing No. 66.458? Grant Period ? Year ended December 31, 2022. The significant deficiency of lack of segregation of duties, as discussed in Section II, finding 2022-001, also applies to this grant. Finding: 2022-001 Name of Contact Person: Kathy Vraa, City Clerk-Treasurer Corrective Action: The City Clerk-Treasurer will attempt to monitor transactions and structure the duties of office personnel to help ensure as much segregation of duties as possible within the City?s staffing limitations and funding constraints. Proposed Completion Date: The City?s Clerk-Treasurer has been monitoring transactions and reviewing the duties of office personnel on an ongoing basis.