Lebanon council accepts delayed FY2024 audit; auditors give clean opinion despite budget overages

Lebanon City Council accepted the city's fiscal year 2024 annual financial report on Aug. 27 after staff said the final audit arrived Aug. 21, nearly eight months past the statutory due date. The city's finance director said auditors issued a clean, unmodified opinion, and that the city's net position increased by about $12.2 million from 2023, largely because roughly $10.9 million in new capital assets came online in 2024. The acceptance followed an extended staff summary and questions from councilors. Finance Director Brandon (first name provided in the meeting), explained the timing: auditors performed field work the week of October 2024, followed by delayed deliverables and additional follow-up that pushed the final delivery to late August 2025. He told the council, "I'm pleased to report that the auditors did issue a clean, unmodified opinion." He also noted the audit was delivered after inquiries by a national ratings agency. Why it matters: the audit documents the city's financial position, highlights compliance issues and informs budget and bond-market decisions. Councilors said they wanted time to review the report but agreed to accept it at the Aug. 27 meeting. Key findings and figures: auditors reported the city's governmental fund balances increased by about $2.0 million to $24.9 million. The general fund closed at $4.3 million, a decline of about $387,000 and the second consecutive year the general fund spent more than revenues. The council was told the city carries $51.6 million in outstanding debt that is scheduled to decline through 2054. The finance director summarized the primary drivers of the net position increase as the $10.9 million of capital assets placed into service during 2024. The report also listed findings for improvement. Auditors identified overexpenditures in two general-fund areas (library personnel costs and capital outlay), an underbudgeting in the motel-tax fund tied to downtown restoration program timing, and budget-to-actual differences carried from prior years tied to a new financial system migration. The finance director said the library overexpenditure resulted from staffing turnover and payouts and that a vehicle and a copier purchase in capital outlay were not budgeted in advance. He said staff has adjusted internal monitoring and corrected prior-year actuals in the system. Council action and next steps: a motion to accept the FY2024 annual financial report passed by voice vote. The finance director offered to invite the audit firm to the September meeting for a presentation if the council desired additional explanation. Staff said they can also postpone formal acceptance to September if councilors want more time to review the document; the council chose to proceed. Context and constraints: staff told the council the late delivery risked the city's credit standing; a national rating agency inquired about the delay and had indicated it might revise the city's rating if the report remained missing. The finance director said the city contracted out preparation of the annual comprehensive financial report after staffing turnover and has a five-year engagement with its current audit firm, with two years remaining on the contract. Discussion-only items: councilors asked for clarifications about the motel-tax program funding rules, the effect of selling city property on different funds and the disposition of proceeds, and whether environmental cleanup would be required for a former water-treatment-plant site; staff described prior site cleanup and the need for standard buyer due diligence (phase 1/phase 2 assessments) if the city pursued a sale. The council did not adopt additional fiscal policy or emergency actions at the meeting beyond accepting the report; staff said they will continue internal controls improvements and bring routine year-end budget adjustments in June to prevent small overexpenditures from becoming reportable findings.