San Rafael audit returns unmodified opinion; auditors flag longstanding purchasing control issue

Whitney Crockett, audit partner with Mays and Associates, told the City of San Rafael Finance Subcommittee on Nov. 12 that the audit of the city’s fiscal year ended June 30, 2024, resulted in an unmodified opinion — the highest level of assurance an auditor issues. “Our audit opinion was unmodified, which is the highest level of assurance that we can give the city,” Crockett said.

The management discussion and analysis included several headline numbers: governmental activities net position increased $29.3 million compared with June 30, 2023; current and other governmental assets rose by about $10 million (largely revenues outpacing expenses); capital assets increased roughly $8.1 million (project activity exceeding depreciation); and noncurrent governmental liabilities declined about $12 million, driven mainly by pension and OPEB decreases and debt pay‑downs.

General fund results showed revenues and transfers in exceeded expenditures and transfers out by $8.6 million for FY2024 and outperformed original budgeted revenues by approximately $4.1 million. Investment earnings and higher property tax receipts were cited as major contributors. The general fund fund balance at June 30, 2024, was reported at $36.4 million, which the auditors and staff broke down into committed, assigned and unassigned categories consistent with the city’s fund balance policy.

Crockett told the committee the audit included standard deliverables — the annual comprehensive financial report, a memorandum on internal control, required communications, the child development program financial report, and an agreed‑upon procedures report on the Proposition 111 (GANN) appropriations limit. The auditor reported no exceptions on the GANN recalculation and an unmodified opinion on the child development program financial statements; the childcare program recorded about $4.36 million in revenues, $3.73 million in expenditures and a program fund balance of $1.24 million at June 30, 2024.

On internal controls, the memorandum identified one remaining matter: purchasing policy compliance and clarity of requirements, an item that first appeared in fiscal 2022. Crockett said updated purchasing guidelines were issued with the start of the new fiscal year but were effective July 1, 2024 — one day after the FY2024 audit cutoff — so auditors could not treat the recommendation as implemented for FY2024. The subcommittee heard that the new policy requires purchase orders for expenditures over $10,000 and clarifies cumulative thresholds for contracts and change orders tied to the city manager’s delegated authority ($75,000) so that administrative approvals do not let cumulative contract changes exceed council thresholds without council review.

Staff and auditors said they will test adherence to the updated purchasing guidelines during FY2025 procedures. Paul (Finance Director) and staff indicated management has already begun implementing the changes and included the management response in the final staff report to be presented to full council.

The auditor thanked city finance staff — Paul, Sean and Vaughn — for cooperation during the audit and said she will present the audit in full to the City Council at the upcoming meeting.

The subcommittee also discussed presentation details: under the council’s revised reserve policy the city now uses a 15% general fund reserve target (previously 10%), and staff said final presentation numbers will reflect a reclassification that moves roughly $4 million of unassigned balance into assigned to match council policy priorities (deferred maintenance and capital liabilities).