External auditors find material weaknesses, single-audit issues in NogalesFY2024 review

CliftonLarsonAllen presented results of the City of Nogalesaudit for the fiscal year ended June 30, 2024, reporting clean, unmodified opinions on the cityfinancial statements but identifying material weaknesses tied to federal-award accounting and the annual financial close.

The audit firmprincipal, Jean Marie Dietrich, said auditors rendered "clean, unmodified opinions" on governmental and business-type activities but were unable to issue unqualified single-audit opinions on several major federal programs because of compliance shortcomings. Dietrich noted material audit adjustments over ARPA revenue recognition and water-infrastructure (WIFA) transactions and identified material weaknesses in the cityfinancial close process and in procurement controls tied to specific federal awards.

Those findings prompted discussion at the council meeting about decentralization of grant activity and the need for a dedicated grants coordinator. Dietrich told councilors the city had not adopted significant accounting-policy changes but that grant activity recorded outside finance had delayed audit work and contributed to errors. "Management has identified the need for a grants coordinator position," Dietrich said, and the firm recommended stronger closing checklists, reconciliations and training for finance staff.

Council members pressed for a timetable and for steps to prevent repeat findings: "This is the fifth year it's late," Councilman Gonzalo Monteith said, noting the audit had repeatedly been presented well after the typical spring timeframe. Several councilors and the city manager discussed plans to centralize grant reporting and to add interim closing procedures so audit support schedules will be ready earlier in the year.

City management told the council it intends to add a grants coordinator in July and to implement a more formal financial-close process and disclosure checklists. The city manager also said the administration will prioritize more timely presentation of the audit and additional staff training in hopes of reducing the number and severity of repeat findings.

The auditors also reported material weaknesses tied to procurement, suspension and debarment requirements and to documentation needed for Davis-Bacon wage verification on construction projects. The firm said it did not identify any unusual or fraudulent transactions in the audit.

Council members did not vote on the audit presentation itself; instead they discussed managementcorrective-action plans and asked staff to return with timelines and documentation showing the steps the city will take to address the findings.

What's next: auditors and management will pursue corrective actions, and the city plans a new grants-coordinator hire and revised close procedures intended to produce timelier, more accurate financial reporting for FY2025.