Tipton

SCHEDULE OF FINDINGS AND RESPONSES YEAR ENDED JUNE 30, 2026(52)Section I – Summary of the Independent Auditors’ Results(a) Unmodified opinions were issued on the financial statements which were prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. (b) A material weakness and significant deficiency in internal control over financial reporting were reported by the audit of the financial statements. (c) The audit did not disclose any noncompliance which is material to the financial statements. ### Page 56 CITY OF TIPTON, IOWA SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) YEAR ENDED JUNE 30, 2026(53)Section II – Findings Related to the Basic Financial StatementsFINDING: 2026-001 Preparation of the Financial StatementsType of Finding: Material Weakness in Internal Control Over Financial ReportingCriteria or Specific Requirement: The City cannot rely on independent auditors as a part of its internal control system, including, but not limited to, preparing the financial statements.Condition: The City does not have an internal control policy in place over annual financial reporting that would enable management to prepare its annual financial statements and ensure related footnote disclosures are complete and presented in accordance with the cash basis of accounting. City management reviews and approves the financial statements as prepared by the independent auditors.Cause: The City has relied on the independent auditor to some degree to prepare the financial statements.Effect: As a result of these conditions, there is more than a remote risk that misstatements that are more than material to the financial statements could occur and not be detected.Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2025-001.Recommendation: We recommend sufficient financial statement and disclosure review procedures be performed by an individual possessing a thorough understanding of applicable accounting principles generally accepted in the United States of America and knowledge of the City’s activities and operations.View of Responsible Officials: The City does not have the resources to employ staff possessing the detailed understanding of applicable accounting principles to the extent required to utilize such a disclosure checklist. As a result, the City of Tipton has relied on the independent auditor to identify disclosures required in the financial statements.Conclusion: Response accepted. ### Page 57 CITY OF TIPTON, IOWA SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) YEAR ENDED JUNE 30, 2026(54)Section II – Findings Related to the Basic Financial Statements (Continued)FINDING: 2026-002 Debt CovenantType of Finding: Significant Deficiency in Internal Control Over Compliance and Other MatterCriteria or Specific Requirement: The City should have adequate procedures in place to ensure debt covenants are met.Condition: The City did not meet the debt covenant in relation to the electric revenue bonds. The covenant states that the City shall establish a sinking fund with a balance of 1/6th of the installment of interest coming due and 1/12th of the installment of principle coming due.Cause: The City did not establish a balance in the sinking fund before the first payment of principal and interest were due.Effect: The City is in violation of the covenant.Repeat Finding: No.Recommendation: We recommend the City complete a regular review over the Electric Fund to ensure sinking fund balances are adequate to meet 1/6th of the installment of interest coming due and 1/12th of the installment of principle coming due. If the City anticipates not meeting the covenant in a given year, we recommend the City speak with its financial advisor and creditor to discuss the possible adverse effects, if any.View of Responsible Officials: The City project was not completed in the timeframe expected resulting in the insufficient balance of a sinking fund. In the future, the City will ensure the sinking fund will have a sufficient balance to meet the bond covenant requirement.Conclusion: Response accepted. ### Page 58 CITY OF TIPTON, IOWA SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) YEAR ENDED JUNE 30, 2026(55)Section III – Other Findings Related to Required Statutory ReportingIII-A-2026 Certified Budget: Disbursements during the year-end June 30, 2026 exceeded amounts budgeted in the capital projects function before an amendment was approved. Disbursements did not exceed amounts budgeted as of June 30, 2026 in the General Government function. However, before an amendment was adopted, disbursements exceeded amounts budgeted in the General Government function. Chapter 384.20 of the Code of Iowa states, in part, “Public monies may not be expended or encumbered except under an annual or continuing appropriation.” Recommendation: The budget should have been amended in accordance with Chapter 384.18 of the Code of Iowa before disbursements were allowed to exceed the budget. Response: The budget will be amended in the future, if applicable. Conclusion: Response accepted. III-B-2026 Questionable Disbursements: We noted no disbursements that failed to meet the requirements of public purpose as defined in an Attorney General’s opinion dated April 25, 1979. III-C-2026 Travel Expense: No disbursements of City money for travel expenses of spouses of City officials or employees were noted. III-D-2026 Business Transactions: No business transactions between the City and City officials or employees were noted. III-E-2026 Bond Coverage: Surety bond coverage of City officials and employees is in accordance with statutory provisions. The amount of coverage should continue to be reviewed annually to ensure that the coverage is adequate for current operations. III-F-2026 Council Minutes: We noted no transactions that we believe should have been approved in the Council minutes but were not. III-G-2026 Deposits and Investments: No instances of noncompliance with the deposit and investment provisions of Chapters 12B and 12C of the Code of Iowa and the City’s investment policy were noted. III-H-2026 Revenue Bonds and Notes: We noted one instance of noncompliance with bond covenants related to the Electric Revenue Bonds, Series 2025, as noted in finding 2026-002 in the previous section. ### Page 59 CITY OF TIPTON, IOWA SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) YEAR ENDED JUNE 30, 2026(56)Section III – Other Findings Related to Required Statutory Reporting (Continued)III-I-2026 Financial Condition: The following funds had deficit balances at June 30, 2026: Nonmajor Capital Projects Highway 38 Project (219,866)$ Nonmajor Debt Service GO Bond Debt Service (14,504) Nonmajor Special Revenue: Aquatic Campaign (576,279) Nonmajor Enterprise: Airport Operating (333,151) Recommendation: The City should generate and implement a good strategic plan in order to finance these deficit balances. Response: The City is looking at options to clear the deficit balance in the Aquatic Campaign fund, including a transfer from another fund. The City is awaiting completion of the Highway 38 project to receive retainage and close out that fund. The City did a transfer from the General fund to the GO Bond Debt Service and Airport Operating funds, but they did not process completely. In the future, the City will ensure that all transfer resolutions are processed completely before the end of the fiscal year. Conclusion: Response accepted. III-J-2026 Annual Urban Renewal Report: The annual urban renewal report was approved and certified to the Iowa Department of Management on or before December 1. III-K-2026 Questionable Donations: During the fiscal year ended June 30, 2026, no instances of noncompliance with Article III, Section 31 of the Constitution of the state of Iowa were noted. ### Page 60 CLA (CliftonLarsonAllen LLP) is a network member of CLA Global. See CLAglobal.com/disclaimer. 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