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Jackson audit committee hears FY24 findings, targets Oct. 17 issuance after $2.5M cash misstatement
Summary
City finance staff told the Jackson City Audit Committee that a process change tied to a system conversion led to about $2.5 million in cash being double‑booked; auditors are targeting an Oct. 17 report and officials said the final audit will affect the FY26 budget and upcoming bond ratings work.
The Jackson City Audit Committee was told that the draft FY24 audit shows a significant accounting misstatement tied to a system conversion and that auditors are targeting Oct. 17 to issue the report.
Nathan Reed, a finance staff member who updated the committee, said the issue stemmed from a change in accounting processes when the city switched systems. "We were underreporting about 2 and a half million dollars in cash," Reed said, adding that some end‑of‑year accruals and reconciliations were double‑booked when legacy processes did not convert correctly. "They basically hit it twice." Reed said staff isolated the problem and planned follow‑up work in November to clean up interfund balances and legacy entries.
The committee heard that the draft financial statements and compliance documents have been reviewed and returned to the audit firm for final review. "The target issue date now for our audit is October 17," Reed said. He also said the FY25 audit will not be complete by Dec. 1 and staff are targeting March as a reasonable completion date.
Committee members pressed staff on follow‑up steps. Reed said the team will work with the auditors — Malden Jenkins and possibly another firm — beginning in November to address legacy interfund balances. He described the problem as a process error created when the city attempted to simulate pooled cash without fully moving to a pooled‑cash system, leaving interfund amounts that did not balance automatically.
Reed warned that the audit report will include "some very large numbers" as material journal entries and other findings, but said the bottom‑line effect on the city's finances was not as severe as the headline figures might suggest. He offered to update committee materials and the first page of the report to reflect corrections so council members can see an accurate fund‑balance number once the final report is issued.
Committee members and staff discussed staffing and training to prevent recurrence. Reed said the city is hiring accounting associates and planning refresher training with existing staff; he noted the city has lost institutional knowledge during previous transitions. Committee members recommended written procedures and periodic training so new hires can perform consistently.
Committee members asked how the audit timing and findings might affect borrowing. Reed said the city has been in contact with ratings advisers and planned meetings with PFM and other firms after the audit is issued to prepare materials for ratings agencies. He noted Moody's had temporarily withdrawn its rating pending the audit submission but said Moody's would reissue a rating once the audit report is filed.
The committee requested a detailed list of interfund issues and follow‑up items staff will address, and Reed said he would circulate updated materials after the audit is posted to the Comptroller's website.
