External auditor issues clean opinion but cites two repeat material weaknesses for Polk County

CliftonLarsonAllen issued an unmodified — or "clean" — opinion on Polk County's 2024 financial statements, but the firm's principal flagged two repeat material weaknesses and several items for county leaders to monitor.

Jonathan Sherwood, a principal with CliftonLarsonAllen, told the Polk County Board of Supervisors on Sept. 16 that CLA issued a clean audit opinion covering the county's financial statements and that the county's federal- and state-related filings required under the single-audit process were submitted on time with no findings. "We can actually issue that sort of opinion over your financial statements," Sherwood said.

Sherwood said CLA identified two repeat material weaknesses: (1) material audit adjustments, and (2) limited segregation of duties across transaction cycles. "Material audit adjustments just basically means that if we didn't propose the journal entries and we didn't make those journal entries, your audit would not be able to be materially relied upon," he said. On segregation of duties, Sherwood said fully remediating the finding would be costly because it would require additional accounting staff across departments.

The auditor highlighted several financial metrics for supervisors to consider as they move into the 2026 budget cycle. Sherwood reported Polk County's unassigned fund balance at 86.9% of general fund operating expenditures — about $31 million in unassigned reserves versus roughly $35.7 million in general fund expenditures — and said the county's reserve level is well above typical minimums. He noted the county updated its fund-balance policy in 2025; Sherwood initially referenced a 40% target, then acknowledged the policy was updated to a 50% minimum in 2025.

Other audit details reported to the board included:

- Dams special revenue fund: a negative balance of about $1.8 million in 2024 attributable to timing differences when expenditures were recognized in 2024 but reimbursements were not received until 2025. The auditor said that timing issue should correct in 2025 if reimbursements arrive as expected.

- Enterprise funds: Golden Age Manor (the county nursing home) reported a positive change in net position of just over $1.1 million in 2024; Sherwood attributed the improvement primarily to about a 10% increase in occupancy. Polk County highway (an internal service/proprietary fund) reported a positive change in net position of about $505,000 for 2024 after depreciation and noncash items.

- Long-term debt: the county is using about 2.5% of its statutory debt limit, which Sherwood characterized as low relative to the statutory cap.

Sherwood said auditors recorded roughly 17–20 audit journal entries in recent years, with the number driven in part by grant-period recognition and required disclosures such as Wisconsin Retirement System (WRS) reporting. When asked whether the two material weaknesses are common, he said many similar-size governments have similar findings and that 98% of his regional clients have both findings.

Sherwood recommended continued governance oversight as a compensating control and encouraged supervisors to consult county finance staff on corrective steps, especially around grant reconciliation and WRS disclosures.

The presentation closed with Sherwood inviting follow-up questions and offering to assist finance staff with additional clarification.

The board did not take a formal vote on the audit presentation; the item was an informational presentation to assist the board's budgeting and oversight work.