County auditors issue clean opinion but report three correcting entries and a material weakness

Auditors for Ottawa County delivered a clean opinion on the county's annual comprehensive financial report for the year ended Sept. 30, 2024, but reported three correcting journal entries that led them to classify a material weakness in internal control.

The material weakness stems from three audit adjustments the firm recorded during its review, auditor Mike Freydeveld of Freydeveld Heffner LLC told the Finance and Administration Committee. "The first two were timing and recording items," Freydeveld said, and he described the overall opinion on the financial statements as "a good clean report." He added that the county spent about $15.6 million in federal awards that triggered a single-audit review; auditors reported no compliance findings for federal grant rules.

The material weakness arose because the auditors discovered three entries that management corrected during the audit, Freydeveld said. The governance letter that accompanies the audit lists those three correcting entries and notes that their size warranted the material weakness classification. The governance letter also identified two other audit findings: budget amendments that were completed prior to fiscal year-end but not formally approved until after the year ended (which the auditors said violates state law), and bank reconciliations that showed no documented evidence of review and were tied only to the Treasury system rather than to the general ledger (Munis).

"We missed three entries," Fiscal Services Director Karen said in the meeting, addressing the wording in the governance letter. "One was related to taxes receivable, one was a late accounts payable for a parks project, and one was a pension-calculation entry discovered during training." Karen said the entries were not compliance failures and emphasized the single-audit work found no compliance issues with federal grants.

Commissioners pressed staff on next steps. Freydeveld pointed the committee to the governance letter and the schedule of findings in the audit report. The county manager and members of the committee discussed scheduling follow-up work with the treasurer's office and fiscal staff to document bank reconciliation review and to make sure budget amendments are approved before fiscal year-end.

Why this matters: the audit report is the county's annual independent assessment of its financial statements and internal controls. A clean opinion means auditors found the statements fairly presented; a material weakness signals that auditors identified a control deficiency significant enough to merit public attention and corrective action.

County officials said they will publish the report and follow up. "We will meet with the treasurer's office and we'll work those things out," Karen said. The county also staff recommended publishing the management tools and summaries so residents can review how discretionary funds were spent.

What happens next: the county will post the audited financial statements and the required governance letter, pursue the reconciliation and amendment documentation items the auditors noted, and consider an informational work session for commissioners to walk through the financial statements. Freydeveld said the county should receive its formal certificate of excellence in financial reporting from the Government Finance Officers Association in the months after filing, if applicable.

Ending: Committee members thanked staff and the audit team for the work and agreed to return to the audit recommendations in follow-up sessions.