Auditors give City of Kiel a clean 2023 opinion but flag year-end close, reserves and staffing; council accepts report

CliftonLarsonAllen LLP presented the City of Kiel’s 2023 audited financial statements and delivered an unmodified opinion — commonly called a “clean” opinion — the auditors told the council.

The auditors said the city’s general fund returned to a positive position as of Dec. 31, 2023, but that the unassigned portion of fund balance remained low compared with standard benchmarks. The firm called attention to year-end close procedures, turnover in administrative staff that required additional audit work, and opportunities to update financial policies and procurement ordinances.

"We were able to get an unmodified opinion," said Stuart, an auditor with CliftonLarsonAllen LLP. "That's the gold standard. It's a very good thing to see." He told the council the auditors had to perform additional procedures because of turnover in the administrative office and recommended improved year-end closing practices.

The audit presentation highlighted several quantitative points the auditor urged the council to monitor: the city’s minimum fund expenditures for 2023 were just under $3,000,000; a common benchmark is holding roughly 25% of annual expenditures in reserve (the auditors cited about $600,000–$650,000 as the target range); and the city’s unassigned general-fund balance was roughly $220,000, which the auditors said is “on the low side.”

The auditors also reviewed utility fund results for 2023: the electric utility showed an operating loss of about $420,000; the water utility had positive operating income of roughly $339,000; and the sewer utility reported operating income of about $740,000. The auditors emphasized that electric and water utilities are regulated by the Public Service Commission and that the city must continue monitoring rates and debt covenants tied to recently issued revenue bonds for the sewer facility upgrade.

In the management letter included with the audit, CliftonLarsonAllen flagged (1) the need for stronger year-end close procedures and more consistent financial recordkeeping, (2) updating procurement and purchasing ordinances that have not been revised for decades, and (3) clarifying roles and responsibilities in the finance function. The auditors offered to assist the city with catch-up and close procedures.

City officials said they have begun adding staff and are scheduling follow-up work: the administrator noted meetings with financial planners to update procurement and purchasing practices, and the city intends to meet with Ehlers on debt management and provide a report to the council by March. One council member said the added staff should help reduce the need for supplemental audit procedures going forward.

After the presentation, the council voted unanimously to accept the 2023 audit report.

Votes at a glance

• Motion to approve 2023 audit report by CliftonLarsonAllen LLP: approved (unanimous). • Other recorded routine motions during the meeting (minutes approval, donation acceptance, paid-bills approval): approved (see separate minutes).