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City auditors give 2 Rivers a clean opinion but note internal control findings and utility cash strains
Summary
CliftonLarsonAllen presented the independent audit of the City of 2 Rivers for fiscal year 2024, reporting an unmodified (clean) opinion, two internal control findings, material accounting adjustments, continued interfund borrowing, and utility-specific cash and rate considerations.
CliftonLarsonAllen, the city's independent auditors, presented the fiscal year 2024 audit Monday and issued an unmodified (clean) opinion on the city's financial statements while flagging two internal control findings and several material adjustments.
The auditors told the council they found a recurring issue related to the preparation of the annual financial report and a second, year‑to‑year issue involving adjustments required to the city's books. The latter included recording a retainage payable on an ongoing contract and ensuring American Rescue Plan Act (ARPA) revenue was recorded in the correct period. The auditors said those and other adjustments are disclosed in the governance communication in the audit packet.
The audit presentation highlighted that the general fund’s reported fund balance — about $2.2 million across recent years — masks significant interfund borrowing: cash in the general fund has been loaned to other funds, producing 15 funds with year‑end cash deficits. The water utility was singled out for continued legacy cash shortfalls despite showing a positive change in net position for 2024; the auditors said the water utility produced about $618,000 of operating margin in 2024 but still had a net use of cash of roughly $72,000 once debt and capital replacements were considered. The auditors noted the amount owed to the general fund (and to a TIF fund) is beginning to come down but remains material.
On regulatory reporting, the auditors said the Public Service Commission (PSC) rate‑of‑return calculation for the water utility was 4.7% for 2024, which the auditor described as within an acceptable range but noted the PSC’s approach examines a narrower set of years and inputs than the city’s broader multi‑year picture.
CliftonLarsonAllen also reported that, based on the amount of federal grant spending recorded in 2024, the city did not trigger a single audit (uniform guidance compliance audit) this year but that federal spending and reporting remain an area under audit scrutiny. The auditors discussed upcoming Governmental Accounting Standards Board (GASB) changes (the presentation referenced recent and anticipated GASB pronouncements) and advised staff and the finance committee to monitor implementation and enhanced disclosures in future years.
Council members asked technical questions about the interfund receivable disclosures, utility rate structures, and where to find budget‑to‑actual information in the published financial statements; the auditors pointed to specific pages in the audit packet for general fund budget comparisons and the debt footnote for lease‑related obligations.
No formal council action was required on the audit presentation; council received and filed the report by motion and voice vote.
