San Angelo council accepts FY24 financial report and single-audit after auditors cite accounting adjustments

San Angelo's City Council unanimously accepted the city's Fiscal Year 2024 Annual Comprehensive Financial Report and single-audit on a 7-0 vote after auditors told council they issued a clean, or "unmodified," opinion on the city's financial statements and federal compliance testing.

The auditor, Clayton Rogers of Pattillo, Brown and Hill, told the council the firm issued an unmodified opinion on both the financial statements and the federal single audit, which covered roughly $16.7 million in federal expenditures in FY24 and included Water Development Board funds. "Based on our audit, we believe that these financial statements are presented materially correct in accordance with accounting principles," Rogers said.

The report included 1 required audit finding tied to revenue recognition and allowance estimates. Rogers said the audit prompted a restatement of beginning fund balance because the auditors and staff differed on the timing of recognizing certain revenues, including unspent ARPA funds. Rogers summarized the accounting approach: when federal ARPA funds are received but not yet spent, the firm recommended those receipts be recorded as unearned revenue until spent. The auditors identified roughly $7.55 million of ARPA receipts recognized as a liability ("unearned revenue") and about $8.39 million recorded as an allowance for uncollectible receivables in the civic funds.

Finance Director Tina Dierski and Rogers responded to council questions about the largest components of the $8,392,829 allowance. Rogers said the largest piece of that allowance was old municipal court fines and similar long-dated receivables; Dierski agreed to provide council a breakdown of the allowance. Rogers also said the City's auditors applied a risk-based approach that allows reliance on independently available data for some large revenue streams (he cited the Texas Comptroller for sales tax data) and that the single-audit compliance testing focused on large federal programs.

Councilmembers asked for clarifications about differences between the monthly "Blue Book" financial reports used for ongoing budgeting and the audited numbers. Rogers and Dierski explained commonly observed timing and accounting-basis differences: the Blue Book reflects periodic, cash- or near-cash-based operating reports city staff use for budgeting and management, while the annual audited report reflects accrual accounting adjustments made at year-end.

Rogers also described the city's pension numbers reported in the audit: a total pension liability of about $295 million and plan assets around $249 million, producing a net pension liability on the balance sheet of about $45 million. He said the Texas Municipal Retirement System (TMRS) pool and its actuarial assumptions moderate much of the investment and actuarial risk compared with single-employer plans.

After the audit presentation and public comments, including requests from residents for more public access to the full report, Councilmember Harry Thomas moved to accept the audit; the motion was seconded and passed 7-0.

The council did not ask for additional action at the meeting; staff said they will deliver requested detail on the $8.39 million allowance and other follow-up items.

Ending

Council acceptance concludes the formal review step for the FY24 audited financials; staff and auditors said they will supply follow-up detail to council members on receivable and allowance composition and will continue to support council through the upcoming budget process.