Cleveland Heights finance committee hears audit delays may push full 2025 budget until spring

An independent CPA advising Cleveland Heights City Council told the Finance Committee on Jan. 21 that preparation of the city’s 2023 financial statements is about 70% complete and that the formal audit is unlikely to be finished before late March — after the council’s preferred timetable for passing a full 2025 budget.

The advisory firm’s representative, Frank (independent CPA/adviser), said he had spoken with Scott Reeves of Schoenhardt and Kyle Doherty of Zepka, the firms performing the statement preparation and audit, and that Schoenhardt’s financial statement work resumed in earnest after a new staff member, Phil Willie, joined the engagement. “The financial statement preparation … is about 70% complete,” Frank said, adding that the audit itself would take at least another month after statement preparation finishes.

That delay means councilors will likely receive unaudited or partial year‑end information when they consider the 2025 appropriations. The advisory consultant flagged a new Governmental Accounting Standards Board standard related to subscription‑based information technology agreements, which may require the city to record some multi‑year software contracts as both an asset and a liability — an accounting change the consultant called potentially “cumbersome” to implement for several contracts.

Why it matters: council members said the audit and complete year‑end reports are central to their ability to evaluate the mayor’s appropriation ordinance and the administration’s capital proposals. “We want a 12‑month budget, and I don’t want to add steps,” Vice Chair Maddox said, pressing for a clear timeline and for the consultant’s role to be defined so the council can move forward. Several council members said they would accept October and November financials and a reliable December estimate if audited statements remain incomplete.

Committee members raised two practical consequences of the delay: statutory reporting and resource constraints. Frank noted the Ohio Revised Code requires filing audited financial statements within 150 days and that noncompliance can lead to penalties; he said a fine is possible but that in his experience fines have been rare. “If things are delayed too long,” he added, auditors can identify an entity as unauditable, which would trigger additional oversight from the state auditor’s office — a step Frank said had not been suggested by Zepka in his recent conversations.

Mayor and administration responses: Finance Director (Director Phelps) told the committee that a “soft close” on 2024 had already been performed to allow staff to begin 2025 work while still accepting late 2024 charges, and he said the administration intends to provide October and November financial statements and an estimate for December. Phelps also said proposed capital projects for 2025 will be structured so they do not affect the general fund: “None of the capital expenditures that I will be proposing will impact the general fund,” he said, identifying sewer and specific enterprise funds as the likely funding sources for many projects.

Staffing and systems issues also surfaced. Council members and the mayor said vacancies and limited capacity in the finance department had slowed close and reporting processes; councilors urged the administration to accelerate hiring. Several members described the municipal financial software (Tyler/New World was referenced) as outdated and said it lacked routine reporting (for example, dynamic trend reports and up‑to‑date unencumbered fund balances) that other municipalities use to monitor cash and budget performance.

Next steps and process decisions: the committee reviewed a previously distributed list of 17 information requests tied to budget preparation. The mayor said he will return with an amendment that lists proposed capital projects for 2025, including estimated costs and the fund source for each item, and the committee set a follow‑up meeting on Feb. 6 to review updates. The independent consultant will continue providing advisory services; councilors requested a clearer written scope of work and milestones for that engagement so the city and public can see how the consultant’s work will assist the council’s budget review.

Quotations in context: “The financial statement preparation … is about 70% complete,” Frank told the committee. Director Phelps said, “None of the capital expenditures that I will be proposing will impact the general fund.” Vice Chair Maddox pressed for clarity on the consultant’s role: “I want a specific scope of work,” she said.

The committee did not take a formal vote on the appropriation ordinance at the meeting. Instead, members agreed to keep a set of budget‑related items open until the administration supplies October and November closing statements, a December estimate, a capital project amendment, and a clarified scope of work for the council’s independent adviser. The committee scheduled another meeting for Feb. 6 to review those items and to determine whether the council can meet statutory deadlines for passing the full 2025 budget.