City auditor reports clean opinion; consultant flags internal-control gaps and county payment delay

CliftonLarsonAllen LLP told the City of Pacific Board of Aldermen on March 18 that it expects to issue an unmodified (clean) audit opinion for the fiscal year after a final quality review, but auditors identified a material weakness tied to incomplete accounting for 2023 certificates of participation and several internal-control improvements the city should make.

Andrew Spell, principal with CliftonLarsonAllen, told aldermen the firm converted the city’s cash-basis records into accrual-based statements for the audit and reviewed government-wide statements, major funds and enterprise funds including water and sewer. He said the audit identified uncorrected misstatements that were immaterial to the financial statements but required to be communicated to governance, and it flagged the 2023 certificates of participation activity — about $2.3 million in construction expenditures — that had not been recorded in the city’s accounting records.

That omission, Spell said, constitutes a material weakness in internal control because the city’s books did not include those construction-related transactions. He also described significant deficiencies around accounts payable procedures, suggested implementing an allowance for uncollectible customer accounts in the water and sewer funds, and recommended a formal capitalization policy for government and enterprise funds. Spell said some of these accounting tasks exceed current staff capacity and suggested the city consider hiring an accountant, adding a part-time staffer, or outsourcing bookkeeping tasks.

Finance consultant Annette Moore presented companion monthly reports she has developed from the city’s packet. Moore said she consolidated 29 pages of financial packet material into three reports (high-level revenues/expenses, detailed fund statements and a cash-balance/variance summary). She said the reports make it easier to spot cyclical timing differences and highlighted several items by fund.

Moore pointed aldermen to one large timing item: a $2,800,000 payment the city is still awaiting from Franklin County. She said that timing of interfund transfers and of that pending county payment affects how the budget and fund balances appear midyear, and recommended the city show planned use of prior-year fund balances in budget documents so monthly comparisons are clearer.

The auditor and consultant answered aldermen’s questions at the meeting; Spell said CLA expects to finish its quality review and provide a management representation letter and final financial statements by the end of March. Spell said there was no evidence of fraud and no accounting standards newly adopted in the year under audit that materially affected the results, though he noted upcoming 2025 guidance on compensated absences.

Aldermen did not vote on any audit recommendations at the meeting. Staff said CLA will deliver a final audit report and required communications for the board’s signature once the firm completes its internal review and the city signs the management representation letter.