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Audit Objective

Determine whether the City of Little Falls (City) Common Council (Council) and officials adopted realistic budgets that were structurally balanced, routinely monitored financial operations and took appropriate actions to maintain the City’s fiscal stability.

Key Findings

The Council and City officials did not adopt structurally balanced budgets, properly monitor the City’s financial operations or take appropriate actions to maintain the City’s fiscal stability. As a result, the City has significant fiscal stress. We found:

• The former Treasurer over-reported fund balance from 2017 through 2019 by more than $200,000, and the Council did not receive sufficient financial reports to monitor City finances.
• General fund balance declined to about $244,000 (by 52 percent) at the end of 2019, and officials had to rely on loans for cash flow.
• Errors in the 2020 accounting records make it difficult for officials to accurately assess the City’s current financial condition.
• Officials have not adopted a fund balance policy, multiyear financial plan or capital plan.

Key Recommendations

• Adopt structurally balanced budgets and closely monitor City finances.
• Correct accounting errors and ensure financial reports are accurate.
• Adopt a fund balance policy, multiyear financial plan and capital plan.

City officials generally agreed with our recommendations and indicated they planned to initiate corrective action.