University City audit yields clean opinion; auditors report repeated significant deficiency on adjusting journal entries

University City City Council members received the city’s fiscal year 2024 Comprehensive Annual Financial Report on Feb. 10 and heard from Sikich auditors that the financial statements received an unqualified (clean) opinion, though auditors reported a significant deficiency related to adjusting journal entries and several management recommendations.

The audit presentation was delivered by Mike Williams, principal at Sikich, who said, “in our opinion, the financial statements referred to present, fairly in all material respects,” and walked council through the report’s major schedules, notes and supplemental sections. Finance Director Keith Cole introduced the presentation and assisted during the question-and-answer period.

The nut graf: the clean audit opinion signals the auditors found no material misstatement in the fiscal-year financial statements, but the significant deficiency — a non-material but reportable finding — and eight items in the management letter mean staff and council will need to address internal-control and accounting-process weaknesses to reduce future audit adjustments.

Williams summarized the government-wide and fund-level highlights in the report: total assets were reported around $91 million at June 30, 2024 (down from about $95 million the prior year), total liabilities decreased from about $112 million to about $104 million, and net position improved slightly (from a negative ~$17 million to a negative ~$16 million). He told council the general fund’s fund balance was about $21.8 million and total revenues across funds were about $47.5 million in 2024 versus $48.8 million in 2023, largely reflecting recognition differences in intergovernmental ARPA funds.

Williams also reviewed proprietary and pension fund detail: the solid waste fund showed about a $1 million loss in the change in net position for the year; the nonuniform employee pension plan showed an asset of $156,000 at June 30, 2024 (an improvement from a liability in the prior year); the police and fire pension plan showed a net pension liability of about $9.7 million, improved from about $12 million the prior year. The report includes notes on capital assets, long-term debt and pensions as well as a single-audit schedule of federal awards totaling $1,657,000; the largest federal award line was a FEMA disaster grants/public assistance item of $934,000.

On internal controls and compliance, Sikich issued an independent auditors report on internal control that flagged adjusting journal entries as a significant deficiency (similar in nature to an adjustment noted in the prior year). Williams and Cole explained to council that the finding stems from audit adjustments the auditors identified after receiving the city’s trial balance and from a fixed-assets system error this year that duplicated disposals and required multiple corrective journal entries.

Williams summarized the management letter’s other items as eight recommendations: review certain liability accounts; review allocation of internal service fund operating costs; review inventory-software use; review outstanding receivables; review daily receipts procedures at the golf department; update credit-card policies and receipt procedures; approve overage amounts related to personnel hours carried over; and reconcile pension census differences.

Council members pressed for context and follow-up. Councilmember Clay asked whether the nonuniform pension plan is “fully funded”; Williams and Cole cautioned there are multiple measures and deferred inflows/outflows that affect that determination. Several council members, including Councilmember Timan, asked staff what the council could do to reduce the chance of repeat findings; Councilmember Timan later called the report “extraordinary” and requested a short follow-up on the smaller items listed in the management letter. City Manager Rose and Director Cole described the fixed-assets duplication as the main operational cause this year and said staff is working with the accounting-software vendor to resolve the issue.

Council also asked for a status update on corrective actions; council members requested a written follow-up on the management-letter items and the plan to eliminate repeated significant deficiencies in future audits.

Ending: After questions, council thanked the auditors and accepted the presentation; no formal acceptance vote was taken on the audit during the Feb. 10 meeting. Council proceeded to remaining agenda items including a separate budget amendment resolution and the introduction of two solid-waste ordinances.