City audit gives clean opinion but flags reporting error on federal grants

Boulder’s outside auditors issued a clean, unqualified opinion on the city’s 2024 financial statements, but the audit committee reported a material weakness involving the classification of certain grants that led to an omission on federal reporting.

David Gross, teaching professor of finance at CU Boulder and member of the city’s audit committee, told council that CliftonLarsonAllen’s audit produced a “clean and unqualified opinion” on the financial statements but that auditors identified a material weakness in the city’s grant reporting processes. The material weakness arose because the city recorded about $22 million in federal grants properly in its ledgers, but roughly $1 million of federal grant activity routed through the Boulder County Small Business Development Center (SBDC) had been reported as state grants rather than federal on the SEFA, the federal report listing expenditures of federal awards.

Gross said the error was a reporting — not a recording — error that did not affect the city’s financial statements, creditworthiness or general accounting, and auditors were satisfied with planned process changes to centralize and clarify grant reporting. He said the city discovered the misclassification and would file the corrected federal schedule; the audit committee recommended that council accept the annual comprehensive financial report.

Council accepted the audit as part of the consent agenda vote. During discussion, Councilmember Wallach asked whether staff’s changes would avoid a recurrence; Gross said he was convinced the revised centralized process would mitigate future errors.

The matter did not require restatement of the city’s financial statements; only the SEFA required correction. The committee and auditors characterized the issue as a material weakness because it affected the city’s federal reporting package, and they recommended the administration keep centralized control over grant classification and reporting going forward.