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VII.4. 2019 Audit and Comprehensive Annual Financial Report; Bishop CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: August 4, 2020 Subject: 2019 Audit and Comprehensive Annual Financial Report (CAFR) _____________________________________________________________________ PURPOSE Informational INFORMATION CliftonLarsonAllen, LLC has completed the City’s Audit for the year ended December 31, 2019. John Lorenzini, Manager and Lance Lauinger, Senior Associate will present the results of the audit. Dennis Hoogeveen, Principal will also be available for questions. A copy of their presentation and Executive Audit Summary are attached. Due to its size, the CAFR will be provided by email. It is also available on the City’s website: http://www.hopkinsmn.com/ArchiveCenter/ViewFile/Item/331 FUTURE ACTION None FINANCE DEPARTMENT WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor ©2019 CliftonLarsonAllen LLPCity of Hopkins, Minnesota Audit Presentation -Council - Year Ending December 31, 2019 Meeting Date Tuesday, August 4, 2020 ©2019 CliftonLarsonAllen LLPCreate Opportunities Audit Team Your audit team consisted of the following professionals with extensive experience in governmental accounting and auditing: –Dennis Hoogeveen –Principal (30 years) –John Lorenzini –Manager (12 years) –Lance Lauinger –Senior Associate (4 years) –Charlie Hynes, Tomi Ogundare (Associates) 2 ©2019 CliftonLarsonAllen LLPCreate Opportunities Audit Results •Audit Opinion: –The City has an unmodified (clean) opinion for the December 31, 2019 financial statement audit. •Internal Controls over Financial Reporting: –Material Weakness – None –Significant Deficiencies – None •Minnesota Legal Compliance: –No legal compliance findings 3 ©2019 CliftonLarsonAllen LLPCreate Opportunities Required Communications •No New Accounting Policies •Accounting Estimates •Difficulties performing the audit (None) •Uncorrected misstatements (“passed adjustments”) –Timing of State Fire Relief Aid •Corrected misstatements (“audit adjustments”) –No material audit adjustments •Disagreements with management (None) 4 ©2019 CliftonLarsonAllen LLPCreate Opportunities Financial Results •Governmental Funds fund balances totaled $21.6 million, an increase of $1.8M from 2018 –Positive operating results in the General Fund –Recognition of previously deferred grant revenue –2019A and 2019B bonds issuance •General Fund Revenues were $504K or 3.4% higher than budget •General Fund Expenditures were $38K or 0.3% higher than budget •Unassigned fund balance of the General Fund totaled $5.6M –39% of annual expenditures, approx. 5 months –State Auditor - 35%-50%, or 5 months –City Policy –42%, or 5 months 5 ©2019 CliftonLarsonAllen LLPCreate Opportunities City Presentation Financial Results –Gen Fund Revs by Source 6 •79% -Taxes •5% -Licenses and Permits •9% -Inter- governmental •3% -Charges for Services •4% -Other Revenues79%78%77%78% 79% 4%6% 6%5% 5% 9% 9% 8%10% 9% 2% 3% 3%3% 3% 5% 5% 5%4% 4% $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 $11,000,000 $12,000,000 $13,000,000 $14,000,000 $15,000,000 2015 2016 2017 2018 2019 Taxes Licenses and Permits Intergovernmental Charges for Services Other Revenues ©2019 CliftonLarsonAllen LLPCreate Opportunities City Presentation Financial Results –Gen Fund Exp by Dept. 7 •17% -General Government •54% -Public Safety •1% -Health and Welfare •21% -Highways and streets •1% -Urban Redevelopment and Housing •5% -Culture and Recreation18%18%18%18%17% 54%53%53%54%54% 2% 1% 1% 1%1% 21% 22% 21% 21%21% 1% 1% 1% 1% 1% 5% 5% 5% 5% 5% $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 $11,000,000 $12,000,000 $13,000,000 $14,000,000 $15,000,000 2015 2016 2017 2018 2019 General government Public safety Health and welfare Highways and streets Urban redevelopment and housing Culture and recreation ©2019 CliftonLarsonAllen LLPCreate Opportunities Water Fund Operations •Operating revenues increased 2.0% (or $39K) from prior year •Operating expenses up 41.6% (or $545K) from prior year •Cash flow provided by operations $126K in 2019 Financial Results 8 $(300,000) $(100,000) $100,000 $300,000 $500,000 $700,000 $900,000 $1,100,000 $1,300,000 $1,500,000 $1,700,000 $1,900,000 2015 2016 2017 2018 2019 Operating Revenues Operating Expenses (excludes depreciation) Depreciation Expense Operating Income (before depreciation) Operating Income ©2019 CliftonLarsonAllen LLPCreate Opportunities Sewer Fund Operations •Operating revenues increased 3.6% (or $100K) from prior year •Operating expenses up 5.5% (or $116K) from prior year •Cash flow provided by operations $759K in 2019 •Covering depreciation Financial Results 9 $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 $2,200,000 $2,400,000 $2,600,000 $2,800,000 $3,000,000 2015 2016 2017 2018 2019 Operating Revenues Operating Expenses (excludes depreciation) Depreciation Expense Operating Income (before depreciation) Operating Income ©2019 CliftonLarsonAllen LLPCreate Opportunities Storm Sewer Fund Operations •Operating revenues within $500 of prior year •Operating expenses up 120.1% (or $166K) from prior year •Cash flow provided by operations $512K in 2019 •Covering depreciation Financial Results 10 $- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 2015 2016 2017 2018 2019 Operating Revenues Operating Expenses (excludes depreciation) Depreciation Expense Operating Income (before depreciation) Operating Income ©2019 CliftonLarsonAllen LLPCreate Opportunities •Effective December 31, 2020 year-end: –Governmental Accounting Standards Board Statement No. 84 ◊Fiduciary Activities ◊Delayed from FY19 to FY20 •Effective December 31, 2022 year-end: –Governmental Accounting Standards Board Statement No. 87 ◊Leases ◊Delayed from FY20 to FY22 Emerging Issues 11 ©2019 CliftonLarsonAllen LLPCLAconnect.com Thank You! Dennis Hoogeveen, Principal (612) 397-3063 Dennis.Hoogeveen@CLAconnect.com John Lorenzini, Manager (612) 397-3268 John.Lorenzini@CLAconnect.com 1 2 CITY OF HOPKINS, MINNESOTA EXECUTIVE AUDIT SUMMARY (EAS) DECEMBER 31, 2019 CITY OF HOPKINS, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2019 AUDIT REPORT SUMMARY 1 FINANCIAL RESULTS GOVERNMENT-WIDE FINANCIAL STATEMENTS 2 GENERAL FUND 4 ENTERPRISE FUNDS 5 APPENDIX A FORMAL REQUIRED COMMUNICATIONS 6 APPENDIX B INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 10 APPENDIX C INDEPENDENT AUDITORS’ REPORT ON LEGAL COMPLIANCE 12 (1) AUDIT REPORT SUMMARY We prepared this Executive Audit Summary and Management Report in conjunction with our audit of the City of Hopkins, Minnesota’s (the City’s) financial records for the year ended December 31, 2019. The following is a summary of reports we have issued: Audit Opinion The financial statements are fairly stated in accordance with generally accepted accounting principles. We issued an “unmodified” audit opinion. Yellow Book Opinion Our report on internal control over financial reporting noted no material weaknesses. Minnesota Legal Compliance No compliance issues were reported with respect to Minnesota Statutes. CITY OF HOPKINS, MINNESOTA FINANCIAL RESULTS DECEMBER 31, 2019 (2) GOVERNMENT-WIDE FINANCIAL STATEMENTS Statement of Net Position The Statement of Net Position reflects what the City owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the City has left over to use for providing services after its debts are settled. However, those resources are not always in expendable form, or there may be restrictions on how some of those resources can be used. For instance, net investment in capital assets is the largest classification and reflects the balance of infrastructure (streets, storm water, sidewalks, etc.) and other assets net of the debt incurred to finance them and therefore, not cash available for use. In order to address this, the statement divides the net position into three components: net investment in capital assets, restricted net position, and unrestricted net position. The following is a condensed version of the Statement of Net Position at December 31, 2019: Governmental Business-Type Activities Activities Total Assets: Current Assets 30,626,890$ 3,734,763$ 34,361,653$ Capital Assets 95,394,401 39,848,335 135,242,736 Total Assets 126,021,291 43,583,098 169,604,389 Deferred Outflows of Resources: Deferred Charge on Refunding 146,371 - 146,371 Pensions 4,016,475 71,929 4,088,404 OPEB 121,741 17,501 139,242 Total Deferred Outflows 4,284,587 89,430 4,374,017 Liabilities: Current Liabilities 5,186,231 651,882 5,838,113 Long-Term Liabilities 79,863,054 9,793,276 89,656,330 Total Liabilities 85,049,285 10,445,158 95,494,443 Deferred Inflows of Resources: Pensions 6,188,034 177,264 6,365,298 OPEB 20,093 2,888 22,981 Total Deferred Inflows 6,208,127 180,152 6,388,279 Net Position: Net Investment in Capital Assets 37,857,254 31,184,022 69,041,276 Restricted 16,056,962 - 16,056,962 Unrestricted (14,865,750) 1,863,196 (13,002,554) Total Net Position 39,048,466$ 33,047,218$ 72,095,684$ A significant portion of the City’s net position translate into restricted net position by virtue of external restrictions (statutory reserves) or by the nature of the fund they are in (e.g., equity in a debt service fund typically can only be spent on future repayment of debt). CITY OF HOPKINS, MINNESOTA FINANCIAL RESULTS DECEMBER 31, 2019 (3) GOVERNMENT-WIDE FINANCIAL STATEMENTS (CONTINUED) Statement of Activities The Statement of Activities tracks the City’s yearly revenues and expenses, as well as any other transactions that increase or reduce total net position. These amounts represent the full cost of providing services. This statement provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses. The following is a condensed version of the Statement of Activities for the year ended December 31, 2019: Functions/Programs Expenses Program Revenue Difference Governmental Activities: General Government 5,435,138$ 2,155,273$ (3,279,865)$ Public Safety 9,200,365 1,541,896 (7,658,469) Health and Welfare 189,917 220,450 30,533 Highways and Streets 5,175,949 2,068,003 (3,107,946) Urban Redevelopment and Housing 2,431,931 237,324 (2,194,607) Culture and Recreation 2,385,415 1,154,134 (1,231,281) Interest on Long-Term Debt 212,538 - (212,538) Total Governmental Activities 25,031,253 7,377,080 (17,654,173) Business-Type Activities: Water 2,204,922 1,997,826 (207,096) Sewer 2,618,842 3,093,433 474,591 Storm Sewer 605,214 806,193 200,979 Refuse 924,090 1,001,952 77,862 Pavilion/Ice Arena 1,081,741 484,640 (597,101) Housing and Redevelopment Authority 743,227 956,393 213,166 Total Business-Type Activities 8,178,036 8,340,437 162,401 Total Governmental and Business-Type Activities 33,209,289$ 15,717,517$ (17,491,772) General Revenues: Property Taxes 16,270,015 Tax Increments 3,209,850 Grants and Contributions, Not Restricted 75,229 Unrestricted Investment Earnings 414,386 Gain on Disposal of Capital Assets 5,562 Total General Revenues, Special Items, and Transfers 19,975,042 Change in Net Position 2,483,270$ CITY OF HOPKINS, MINNESOTA FINANCIAL RESULTS DECEMBER 31, 2019 (4) GENERAL FUND The following table presents the City’s General Fund revenue sources for each of the past five years. The most significant component is property taxes which amounted to $11,714,684 for 2019. It is important that the City operate governmental and enterprise funds effectively so that there is not a need to be subsidized by the General Fund. $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 2015 2016 2017 2018 2019 General Fund Revenue by Source Years Ended December 31, Taxes Intergovernmental Charges for Services License and Permits Other The following table presents the City’s General Fund expenditures for each of the past five years. The most significant component is public safety which amounted to $7,836,700 for 2019. $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 2015 2016 2017 2018 2019 General Fund Expenditures by Function Years Ended December 31, General Governmental Public Safety Health & Welfare Highways & Streets Culture & Recreation Capital Outlay Urban Redevelopment and Housing CITY OF HOPKINS, MINNESOTA FINANCIAL RESULTS DECEMBER 31, 2019 (5) GENERAL FUND (CONTINUED) Fund Balance – Total fund balance of the City’s General Fund increased by $466,303 during fiscal 2019, from $5,617,686 to $6,083,989 at December 31, 2019. A City’s fund balance in the General Fund is an important aspect in considering the City’s financial well-being since a healthy fund balance represents things such as the availability of general cash flows, as a cushion against unanticipated expenditures, funding deficiencies, and similar problems. At December 31, 2019, the unassigned fund balance as a percentage of annual expenditures was 39.0% or approximately 20 weeks of expenditures. In order to properly analyze fund balance levels you must review all categories of fund balance (nonspendable, restricted, committed, and assigned) as well as growth indicators of the City. The percentage above is average for established communities such as the City of Hopkins. Budget to Actual – Total revenues in the General Fund were $503,979 (approx. 3.4%) higher than the budgeted amount while total expenditures were $37,676 (approx. 0.3%) higher than had been budgeted. After considering operating transfers, the net effect was an increase to total fund balance that was $466,303 more than had been reflected in the City’s budget. As part of any budget update initiated for fiscal 2020, the Council will want to take this and other budget variances into consideration in order to limit future budget differences to every extent possible. ENTERPRISE FUNDS The enterprise funds (Water Utility, Sewer Utility, Storm Sewer Utility, Refuse Utility, Pavilion/Ice Arena, and Housing Authority Funds) have a healthy combined net position balance in the amount of $33,047,218 as of December 31, 2019. The largest portion of this being an investment in infrastructure and other capital assets net of related debt in the amount of $31,184,022. (6) APPENDIX A FORMAL REQUIRED COMMUNICATIONS Honorable Mayor and Members of the City Council City of Hopkins, Minnesota We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Hopkins, Minnesota (the City) as of and for the year ended December 31, 2019, and have issued our report thereon dated July 23, 2020. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2019. We noted no transactions entered into by the entity during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Honorable Mayor and Members of the City Council City of Hopkins, Minnesota (7) The most sensitive estimates affecting the financial statements were:  Management’s estimate of the useful lives of capital assets is based on authoritative guidance and past experience.  Management’s estimate of the investments at fair value is based on published market values at December 31, 2019.  Management’s estimate of for other postemployment benefits is based on the actuarial valuation conducted by an independent third party.  Management’s estimate of the amount of the year-end compensated absences payable balance to be taken by employees within one year of December 31, 2019.  Management’s estimate of the City’s proportionate share of the PERA’s GERF and PEPFF and Hopkins Fire Relief Association’s net pension liabilities, as well as the deferred inflows and outflows, is based on guidance from GASB Statement No. 68, GASB Statement No. 71, and the plans’ allocation tables. The plans’ allocation tables allocate a portion of the plans’ net pension liabilities based on the City’s contributions during the plan’s fiscal years as a percentage of total contributions received for the related fiscal year by the plans. We evaluated the key factors and assumptions used to develop the above estimates in determining that it is reasonable in relation to the financial statements taken as a whole. Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures. The financial statement disclosures are neutral, consistent, and clear. Difficulties encountered in performing the audit The completion of our audit was delayed due to delays in receiving required audit information from management. Uncorrected misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. The following summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. The City passed on recording fire state aid as a deferred inflow in the General Fund. Late submissions by the Fire Relief Association resulted in a delay of when the 2018 and 2019 fire state aid was received. Because the state aid was received later than 60 days after year-end these revenues were not “available” for each of the years ended December 31, 2018 and 2019. As a result of passing on this adjustment, deferred inflows of resources are understated and fund balances is overstated by $111,191 in the General Fund, as of December 31, 2019. Honorable Mayor and Members of the City Council City of Hopkins, Minnesota (8) Corrected misstatements None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. No such disagreements arose during our audit. Management representations We have requested certain representations from management that are included in the management representation letter dated July 23, 2020. Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the entity’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the entity’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses. Other information in documents containing audited financial statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI. With respect to the combining and individual nonmajor fund statements and schedules (collectively, the supplementary information) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine t hat the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated July 23, 2020. Honorable Mayor and Members of the City Council City of Hopkins, Minnesota (9) The introductory and statistical sections accompanying the financial statements, which is the responsibility of management, was prepared for purposes of additional analysis and is not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we did not express an opinion or provide any assurance on it. Our auditors’ opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document This communication is intended solely for the information and use of the Mayor, members of the City Council, and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Minneapolis, Minnesota July 23, 2020 (10) APPENDIX B INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and Members of the City Council City of Hopkins, Minnesota We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Hopkins, Minnesota (the City), as of and for the year ended December 31, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated July 23, 2020. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by thos e charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Honorable Mayor and Members of the City Council City of Hopkins, Minnesota (11) Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CliftonLarsonAllen LLP Minneapolis, Minnesota July 23, 2020 (12) APPENDIX C INDEPENDENT AUDITORS’ REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor and Members of the City Council City of Hopkins, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Hopkins, Minnesota (the City), as of and for the year ended December 31, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated July 23, 2020. The Minnesota Legal Compliance Audit Guide for Cities promulgated by the State Auditor pursuant to Minnesota Statutes §6.65 contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit included all of the listed categories. In connection with our audit, nothing came to our attention that caused us to believe that the City, failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Cities, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City’s noncompliance with the above-referenced provisions, insofar as they relate to accounting matters. The purpose of this report is solely to describe the scope of our testing of compliance relating to the provisions of the Minnesota Legal Compliance Audit Guide for Cities and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. CliftonLarsonAllen LLP Minneapolis, Minnesota July 23, 2020