Selma receives clean FY2024 audit but auditors flag major accounting adjustments and control weaknesses

Selma's external auditors issued a clean (unmodified) opinion on the town's fiscal year 2024 financial statements but reported four formal findings and recommended corrective actions, the Town Council heard June 25.

The audit presentation by Leanne Bagasala, audit director at Mullins and Jenkins, summarized the town's financial position and identified material audit adjustments and internal control weaknesses that delayed the audit and required corrective action.

Bagasala told council the government-wide statement of net position showed total assets and deferred outflows of approximately $55,000,000, liabilities and deferred inflows of about $19,000,000, and reported net position of about $36,000,000. Net investment in capital assets was about $21,000,000, restricted net position about $5,600,000 and unrestricted net position about $9,000,000. The town increased net position by about $8.1 million in FY2024, she said.

The auditors performed both federal and state single-audit work for ARPA expenditures and a state revolving loan for the Brett Wilson sewer project and issued clean opinions for both programs, Bagasala said.

But the audit identified four findings that management must address. Bagasala said the auditor-required corrections to revenue and related balances exceeded $2,000,000 and that several federal and state grants were initially missing or misstated on the schedule of federal awards, which required additional single-audit procedures and contributed to the audit being completed late.

Auditors also reported material year-end accrual adjustments for payroll and compensated absences totaling roughly $500,000, the use of manual journal entries lacking adequate supporting documentation and segregation of duties, and a noncompliance finding under North Carolina General Statute 159-29 because the interim finance director was not properly bonded for several months in FY2024. Bagasala said management has submitted a corrective action plan addressing those findings.

Bagasala noted a water fund budget overage of about $231,000 tied to unplanned contractual expenditures and disclosed a subsequent financing agreement for a sweeper truck executed in August 2024.

In the audit discussion Bagasala recommended the council consider hiring a permanent, qualified finance director to reduce future findings, review capitalization thresholds in light of GASB 87 (leases) and GASB 96 (subscription-based IT), and ensure timely submission of sales tax reimbursement claims to the North Carolina Department of Revenue. She also noted the Local Government Commission's financial-performance indicators require council response on items including the late audit submission, the bonding lapse and a water/sewer condition-of-assets ratio of 0.36 (the LGC recommends 0.50).

Council members asked about auditor help with recruiting; Bagasala said the firm typically cannot assist with hiring but advised the council on posting strategies. Council thanked the audit team and acknowledged the corrective-action steps already begun.

The presentation and the written auditor discussion and analysis were entered into the record; council did not take a separate vote to approve the audit during the meeting.