City of Yuma receives clean FY2024 audit; auditors flag sales-tax timing issue, development-fee audit finds no exceptions

The City of Yuma received an unmodified (clean) opinion on its fiscal year 2024 financial statements, but external auditors reported one material weakness related to the timing of transaction privilege tax (sales tax) revenue recognition, Baker Tilly principal auditor Brian Hemmerly told the City Council on Feb. 19.

The auditor reported the opinion had been issued on Jan. 28, 2025, for the year ended June 30, 2024, and said the only finding in the Government Auditing Standards Compliance Report was a restatement tied to when the city recognized certain transaction-privilege-tax revenues at year-end. "There was a restatement for the equity at the city for net position related to transaction privilege tax," Hemmerly said. "It's really a timing issue of revenue."

Why it matters: an unmodified opinion means the auditors found the financial statements free from material misstatement. The reported material weakness affects internal controls over the timing of revenue recognition for sales tax at fiscal year-end and alters receivable and equity presentation, though Hemmerly said the total revenue recognized over time is largely unchanged.

Auditor findings and context

Hemmerly told council the audit provides reasonable — not absolute — assurance that the statements are materially correct. He said auditors found no other internal control matters requiring report and no disagreements with management. Among highlights, Hemmerly read figures from the Management's Discussion and Analysis: the General Fund increased its fund balance by about $8.6 million in FY2024, with beginning-balance adjustments of roughly $2.7 million; the Water Fund's operating revenue exceeded operating expenses by about $4.3 million, contributing to an approximately $9.2 million positive change in that fund's equity; the Wastewater Fund had an operating loss near $2.0 million that was offset by about $3.0 million in investment gains and nearly $4.2 million in capital contributions, producing an overall positive equity change of about $4.9 million.

Hemmerly also reported the city spent roughly $8.5 million in federal funds during FY2024, which triggered a federal single-audit requirement; Baker Tilly issued clean (unmodified) opinions on the audited federal programs, including the Community Development Block Grant, the rural formula transit program, and the COVID-19 State and Local Fiscal Recovery Fund grant.

Expenditure limitation note

Hemmerly reminded council that the city's Arizona expenditure limitation for the year was $160,800,000 and said the city has relied on carry-forward provisions to remain within that limit. He cautioned that "if it continues in the way it is for using carry forward provisions ... it would only be a matter of a few years before the future may experience spending more than they're allowed to spend per the expenditure limitation," and said he had been advised the finance director had communicated that to council.

Biennial development-fee audit

At the start of a public hearing on the biennial development-fee audit, Hemmerly told council Baker Tilly had performed the audit required by Arizona Revised Statutes 9-463.05(g)(2). The auditors sampled 40 receipts and 40 expenditures tied to the city's infrastructure improvement plan and recalculated fees for a sample of 40 developer transactions; Baker Tilly reported no exceptions on any of those tests. "We had no exceptions noted," Hemmerly said.

Council action and consent votes

Council handled multiple consent-agenda items during the meeting. Mayor Nichols declared a conflict on item MC2025-17 because his firm prepared the plans tied to that bid; Nichols recused himself and left the dais before the vote, and Deputy Mayor Smith presided for that item. Council member Morales moved to approve MC2025-17, with Council member Watts seconding; the motion carried. Council later approved the remainder of the motion consent agenda on a motion by Council member Morris, seconded by Council member Morales.

Separately, the council adopted two resolutions and one ordinance on the consent agendas: Resolution R2025-012 (Memorandum of Understanding with Marine Corps Air Station Yuma on law-enforcement jurisdiction and procedures) and Resolution R2025-013 (an intergovernmental agreement with Crane Elementary School District No. 13) were adopted by roll call. Ordinance O2025-004 (easement for Latter-day Saints property) was also adopted by roll call.

Public comment and next steps

The public hearing on the development-fee audit included one speaker signed up at the time the transcript ends. Hemmerly concluded his remarks and offered to answer questions; Council members asked clarifying questions about expenditure limitations and whether the restatement implied a tax increase, which Hemmerly directly addressed: "It shouldn't be related at all to tax increases," he said. Hemmerly and city staff indicated the restatement has been corrected on the financial statements going forward.

Votes at a glance

- Motion consent item MC2025-17 (recusal by Mayor Nichols): motion to approve made by Council member Morales, seconded by Council member Watts; outcome: approved (aye votes recorded while mayor was recused). - Motion consent remainder: motion to approve made by Council member Morris, seconded by Council member Morales; outcome: approved. - Resolution R2025-012: "Memorandum of Understanding Marine Corps Air Station Yuma for law enforcement jurisdiction and procedures"; outcome: adopted by roll call (Aye: Council members Martinez, Morris, McClendon, Deputy Mayor Smith, Morales, Watts, Mayor Nichols). - Resolution R2025-013: "Intergovernmental Agreement Crane Elementary School District No. 13"; outcome: adopted by roll call (Aye: same as above). - Ordinance O2025-004: "Latter-day Saints Property Easement"; outcome: adopted by roll call (Aye: same as above).

(At the time the available transcript ends, introductions of two new ordinances and the start of public comment on the development-fee audit had begun.)