External auditors give South Fulton an unmodified opinion but flag five material weaknesses and long filing delays

Marlon & Jenkins LLC presented the City of South Fulton's FY2023 audited financial statements and issued an unmodified (clean) opinion, but the audit report identified five material weaknesses in accounting processes and noted the city's financial reports have been issued late for several years.

The auditor, engagement partner Doug Moses of Marlon & Jenkins LLC, told the council the firm ''did issue an unmodified opinion is what you hope to get from the external and independent audit.'' The report nonetheless lists repeated weaknesses: untimely bank reconciliations, errors in revenue recognition and grant reporting, understated accounts payable and accruals, unrecorded receivables and allowances in the newly created sanitation enterprise fund, and a restatement to correct a previously recorded receivable in a capital grant fund.

Why this matters: The nut graf -- the audit shows the city's financial position has improved (auditors reported a large, liquid fund balance as of Sept. 30, 2023) but also documents systemic control failures that prompted material adjustments and require process changes to avoid recurrence.

Key findings and figures: Moses said the city's general fund balance rose to roughly $102.6 million at Sept. 30, 2023, and auditors reported about $118 million in cash and cash equivalents on that date (a figure the presentation described as a snapshot of liquidity). The single-audit work identified two major federal award programs (Coronavirus State and Local Fiscal Recovery Fund and Highway Planning and Construction) that accounted for roughly 99.7% of the city's federal awards in the year under audit.

The five material weaknesses described in the report included: - Bank reconciliations: auditors found eight of 20 bank accounts were not accurately reconciled as of Sept. 30, 2023, and audit adjustments (totaling in the low millions) were required to correct general ledger cash, TSPOS and capital grant balances. - Revenue and grant accounting: multiple adjustments were required to receivables, deferred inflows and revenue recognition across the general fund, grant funds and the TSPOS fund; auditors noted one federal highway grant had not been included on the schedule of federal expenditures used to determine single-audit coverage. - Accounts payable and cutoffs: auditors identified understated accrued liabilities in several funds and recommended stronger year-end cutoff controls and procedures for departments to submit invoices promptly to accounting. - Sanitation enterprise fund setup: after the city moved sanitation operations from the general fund to a dedicated enterprise fund, auditors helped record receivables and an allowance for doubtful accounts that had not been recognized. - Restatement of beginning fund balance: auditors removed a previously recorded receivable for an alleged vendor overpayment once follow-up work showed it was not owed, necessitating a prior-period restatement for the affected fund.

Management points and recommendations: The audit listed management points (transaction support for P-card/PCAR transactions, timely invoice payment, segregation of duties for invoice entry and approval, and adoption of a formal investment policy). Auditors reiterated upcoming GASB implementation deadlines (for example GASB 96, and other standards) and encouraged improved MD&A disclosures that explain why balances changed year-over-year rather than only reporting dollar and percent changes.

City response and next steps: City Manager Sharon Subedon and CFO Althea Phillip-Bradley told council they have added staff and used contract help to clear backlog and are working with auditors to address findings. Subedon emphasized the audit period largely reflects work done before her arrival and told council the city is training staff, stabilizing finance personnel and expects to begin the FY2024 audit work in September with a goal to be current for subsequent years.

Council reaction and follow-up: Council members pressed staff on details: how the adjustments arose (turnover and pooled-cash issues), what steps are being taken to reconcile accounts monthly, and when the city expects to be caught up. Moses said the FY2023 audit was issued in June 2025 after prior years' reports were delayed (some reports were many months late) and that the city should target timelier issuance going forward. City management said recruitment is ongoing and the city has used contracted accounting resources to reduce risk while positions are filled.

Ending: Auditors emphasized the improvements needed in basic accounting controls (reconciliations, grant coding, cutoffs and segregation of duties) even as they noted the city's improved fund balance and liquidity. Council directed staff to continue work on corrective actions and to return with progress updates as the city moves to bring audits up to a regular schedule.