City auditors give unmodified opinion for FY2023 but flag internal-control weaknesses and single-audit findings

Homewood City received an unmodified audit opinion for the fiscal year ending Sept. 30, 2023, but auditors from BMSS told the finance committee on Feb. 3 that the city has several material weaknesses in internal control and findings in its single-audit review.

BMSS assurance senior manager Jenny Gray told the committee the firm concluded the financial statements were "presented fairly in all material respects" but reported three material weaknesses and one significant deficiency in internal controls. Gray said the city had $3.5 million in federal-award expenditures in 2023 and that BMSS tested major federal programs as required under the Uniform Guidance.

The audit packet shows the cityhad total assets and deferred outflows of roughly $280 million and an increase in net position of about $7.4 million for the year. BMSS noted decreases in capital assets and debt and provided a schedule of audited financial statements, the single-audit report, and a management letter spelling out control issues.

Among the findings BMSS listed: lack of control over wire transfers (a finance staff member could both initiate and confirm wires), insufficient controls over the master vendor list, inadequate support for credit-card purchases, and untimely filing of certain state returns. The single-audit findings included late submission of the single-audit package and missing required ARPA reporting as well as the absence of a written policy to check the federal suspension and debarment list for vendors.

Gray said the firm filed the audit and related reports with the Federal Audit Clearinghouse and that findings remain open in the clearinghouse until closed by subsequent documentation. Finance staff told the committee they are preparing corrective-action steps and aim to address much of the work before the June 30, 2025, deadline tied to the next yearaudit cycle.

Finance staff and auditors discussed causes including delayed field work, the need for improved policies and documentation, and the importance of "tone at the top" for an effective control environment. Gray recommended tightened policies for vendor creation, card documentation, bank-wire controls and investment policy compliance with state code.

Committee members asked for and were given details about next steps. Committee member motioned to accept the BMSS audit report; the committee approved the motion 4-0.

The acceptance of the audit report does not close the corrective items documented in the single-audit and management letters; auditors and staff said they will return with corrective-action documentation and that federal reporting requirements will keep the findings visible until the clearinghouse records their remediation.