City audit: auditors expect unmodified opinion; ARPA and city hall purchase shape results

Aaron Calderon, audit manager with RSM, presented preliminary results of the City of Des Moines’ fiscal 2024 annual financial statement audit during the April 21 work session. The audit was not yet officially issued at the time of the presentation; Calderon said the firm expected to finalize and issue the report at the end of the week or early the next week.

Calderon told council members RSM expects to issue an unmodified opinion — commonly called a clean opinion — indicating the audited financial statements are, in his view, materially correct. "At this time, we expect to issue what is called an unmodified opinion. That's another term for a clean opinion," Calderon said.

Key audit highlights Calderon shared included:

- No audit adjustments: RSM recorded no audit adjustments to the financial statements and said the numbers management provided were consistent with what the auditors tested.

- Revenues: Total governmental fund revenues decreased by about $30 million year‑over‑year (roughly a 6% decline). Calderon said the largest intergovernmental decrease — approximately $20 million — reflected the spend‑down of pandemic relief funds (ARPA). Tax collections also were down about $7.5 million.

- Expenditures: Total expenditures increased roughly $47 million (about 10%). The largest driver was a $27 million increase in capital outlay tied to the city's purchase of the new city hall; without that purchase, overall expenditures would have slightly decreased year over year.

- Fund balance: The city's unrestricted general fund balance equated to about 161 days of operations at year end, a decline from the prior year but a material improvement relative to earlier years and an indicator of operational resilience.

- Business‑type funds: Operating income for enterprise funds rose by about $7 million (near 20%), with sewer and stormwater funds contributing materially to the increase, driven mainly by higher usage.

Calderon also identified a small number of uncorrected misstatements RSM reported to the council: an accounts payable cutoff issue related to the MHA (about $10,000 recorded, projected to $45,000 in RSM’s sample projection) and an item the auditor described as an excess interest liability related to bond proceeds (approximately $1.7 million) that had been disclosed in the financial statements and requires return to the federal government under applicable rules. Calderon emphasized these items had been disclosed and that the audit engagement had yielded no disagreements with management or reportable audit difficulties.

On compliance work tied to federal funds, Calderon said RSM performed required single‑audit procedures on three major programs — COVID‑related programs, highway planning grants, and Community Development Block Grants — which together represented about 83% of federal funding the city received during the year. The auditors reported no compliance findings and no material weaknesses in internal control under government auditing standards.

Calderon also described recent accounting standard developments and key estimates in the financials that auditors scrutinize, including investment fair‑value measurements, allowance for doubtful accounts, useful lives of capital assets, self‑insurance liabilities, and pension/OPEB actuarial valuations.

Ending: Calderon said the audit would be finalized soon and that if anything changed in the final issued report the firm would notify the council in writing; RSM’s preliminary view was a clean set of financial statements with no reportable internal control deficiencies.