Auditor gives Utica clean opinion but flags low reserves, large pension and retiree-health liabilities

Greg Evans, an auditor with the Adeo Group, presented the City of Utica's financial audit for the year ended March 31, 2024, to the Utica City Council, saying the auditors issued an unmodified ("clean") opinion and found no material weaknesses in the city's accounting records.

Evans said the audit showed a $5 million decrease in the city's statement of net position and highlighted two very large long-term liabilities: a net pension liability of about $46 million and other post-employment benefit (OPEB) liability of about $60 million. He said those actuarially determined numbers are long-term items that do not directly affect the city's operating budget but do drive the overall net position reported in the financial statements.

The audit reported $107 million in revenues and $105 million in expenditures for the fiscal year, producing roughly $1.1 million change in fund balance before transfers. Evans pointed to interfund transfers and debt transactions that affected year-end totals, and he noted that the general fund's unassigned fund balance had fallen to about $1.6 million, roughly 1% of annual expenditures, down from an earlier level closer to 8%–9%.

Evans said the city had no journal entries proposed by auditors and no material weaknesses, which he described as positive signs of reliable year-to-date reporting. "The opinion that we have issued is an unmodified opinion or clean opinion," Evans told the council. He recommended starting the next audit earlier in the calendar (around September) so audited numbers are available sooner for budgeting and oversight.

Council members pressed staff and the auditor on specifics. Several members pointed to a borrowing action in February that brought in $2.1 million that council members said reduced the apparent hit to fund balance; one councilmember, Rocco, said the borrowing had been mischaracterized to the council during that transaction, saying "they lied about" where the money came from. City staff responded that portions of the year's financing involved bond anticipation notes and short-term borrowing that later would be converted into long-term financing.

The audit also presented information on component and proprietary funds. The Harbor Point blended component unit reported a loss (Evans described a roughly $510,000 negative impact tied to a property sale after allocation of costs), and the Sewer Fund showed an increase of about $1.2 million for the year. Evans pointed to a roughly $30 million deficit reported in the capital projects fund that is tied to bond anticipation notes payable; he said that deficit will be offset when the short-term notes convert to long-term financing and the projects are financed.

Evans told the council the city had expended about $48 million of ARPA (American Rescue Plan Act) funds through March 31, 2024, leaving roughly $12 million to obligate or spend by federal deadlines. City staff confirmed to the council that ARPA amounts had been allocated (contracted) by the December 31 deadline, meaning the funds were assigned to projects even if not yet spent.

Council members repeatedly expressed concern about the low unassigned fund balance and the timing of the audit. Councilmember Ayala asked whether line items budgeted with ARPA (for example, $250,000 for police salaries) had been charged to the intended accounts; Evans said auditors look at material variances and would query large reconciling items but that detailed grant-usage auditing varies by award and year. Several council members urged moving audit start dates earlier so elected officials have audited financials ahead of budget discussions.

The presentation closed with council discussion about the budgetary implications of converting short-term borrowing to long-term debt, the impact on debt service, and the need for clearer communications about which revenues were ARPA versus bond proceeds. Evans answered technical questions from council members and staff and said he would welcome earlier engagement for the next audit cycle.

The council did not take any formal vote during the auditor presentation; the meeting moved into questions from council and staff responses after the presentation.