State auditors give Edmonds a clean financial statement opinion, warn of general fund sustainability risks

The Washington State Auditor's Office told the Edmonds City Council it issued an unmodified opinion on the city's fiscal 2023 financial statements but identified cautionary signals in the city's general fund sustainability.

Erica (auditor, State Auditor's Office) summarized the financial statement audit, saying the auditors "are issuing an unmodified opinion," and noted they did not identify significant deficiencies, material weaknesses, or material noncompliance requiring reportable action for the financial statements.

Auditors reviewed processes behind the numbers, including journal entries and accounts payable, and said they found no evidence of management override of controls. The office did identify a small number of immaterial misstatements that management chose not to correct.

Separately, auditors used the State Auditor's Financial Intelligence Tool (FIT) to assess financial-condition ratios for Edmonds. Courtney Ammetson, audit manager, explained the FIT uses five standard ratios — fund-balance days, change in fund equity, governmental funds sustainability, debt load, and current ratio — to indicate areas that warrant attention.

The auditors reported that Edmonds' utility funds (water, storm, sewer) showed green (no warning indicators) but that several governmental-fund metrics were cautionary. Courtney noted the city's fund-balance days measured at 65 days (above the 60-day benchmark) but that fund balance and change in fund equity have declined for two consecutive years. Auditors pointed to one more concerning flag: governmental funds sustainability for the general fund decreased about 16% in the latest year, suggesting revenues are not keeping pace with expenditures in that fund.

Auditors classified the sustainability concern as an "exit item," the office's lowest reporting level, because the city has been actively monitoring its finances, holds regular related discussions, and has a blue-ribbon panel focused on financial condition. The auditors encouraged use of the FIT and the State Auditor's help desk for guidance on accounting treatment and budgeting questions.

Council members asked whether the auditors recommend specific reserve percentages. Auditors said there is no single statewide percentage the office prescribes; jurisdictions commonly use either percentages or flat targets and the choice depends on local volatility and council preferences. Auditors also supported expanded footnotes to explain large beginning-balance adjustments when helpful for transparency.

The auditors said the city's 2024 filing will soon update the FIT and that their published report was scheduled for release this week. They also reminded the council of available training and the Help Desk to assist finance staff with accounting questions before issues escalate to audits.

This article reports the financial statement audit opinion, the FIT results for fiscal 2023, and auditors' recommendations for monitoring and disclosure. It does not infer actions beyond the auditors' stated recommendations.