Custer County auditors deliver draft 2024 financial report; no major federal compliance findings

Sam Donardo, the independent auditor who led the presentation, told the Custer County Board of Commissioners at an Oct. workshop that the county's draft 2024 financial statements received an unmodified opinion and that the main body of the report is not expected to change beyond minor typographical corrections.

Donardo said the auditor's three-page opinion states in plain terms that "we think the financial statements as they're presented fairly present financial position and results of operations as they apply to governmental entities." He also explained the county is subject to single-audit rules this year because federal grant expenditures exceeded the federal threshold for 2024.

Why it matters: an unmodified opinion means the auditors found the county's financial statements to be free of material misstatement under government accounting standards. The single-audit work requires additional compliance testing and reporting for major federal programs; Donardo said his team selected programs that together met the sampling threshold used in single-audit guidance and found no questioned costs to report for 2024.

Key findings and figures

- Audit opinion: Donardo presented an unmodified (clean) auditor's opinion on the county's 2024 financial statements.

- Single-audit threshold and testing: The audit included a Schedule of Expenditures of Federal Awards; the total federal expenditures that triggered single-audit testing exceeded the traditional $750,000 threshold used in prior years. Donardo noted the federal threshold is moving toward $1,000,000 for future years and that the county will be evaluated year to year based on that standard.

- Fund- and government-wide results: The audit shows Custer County reported a positive change in net position and increases in several fund balances. Donardo cited a net increase in the general fund balance of $404,917 for 2024 after transfers and other adjustments.

- Major capital/lease transaction explained: The report discloses a 2024 financed acquisition of a landfill compactor. Donardo said the compactor cost about $680,000, with an approximate down payment of $80,000 and a financed balance of about $600,000 recognized in the capital improvement fund as "proceeds from leases" under GASB reporting conventions.

- Landfill long-term obligation: The audit includes the required engineer's estimate of closure and post-closure costs for the county landfill. Donardo told commissioners those costs were estimated and recorded as a net present value long-term obligation in the footnotes; the figure in the notes was reported in the audit as an amount on the order of $1.0 million (engineer estimate/net present value).

- Interfund balances: The auditors reported outstanding interfund balances originating in prior years (first recorded in 2021, with additions in 2022 and 2023). Donardo said those balances total about $386,481.11 owed by the general fund to other county funds (road and bridge, capital improvement, EMS, and human services) and recommended clearing them by moving monies or otherwise reconciling the accounts.

Management-letter observations and repeated issues

Donardo delivered a management letter that separates current-year observations (none new) from repeat findings. Repeated items and management recommendations discussed at the workshop included:

- Adopt and publish a comprehensive, up-to-date set of written financial policies and procedures, with a tracked status or inventory of policies adopted and in progress.

- Maintain reliable processes to identify, monitor and archive lease and subscription-based IT agreements (GASB 87 and related standards). The county implemented GASB 87 in 2023 but the auditor noted inconsistencies remain in document identification and retention.

- Reconcile and clear outstanding interfund balances timely (the auditor recommended clearing balances that have lingered since 2021).

- Strengthen timely reconciliations for key accounts, including cash and payroll, and ensure payroll journals reconcile to the general ledger and tax filings on a monthly basis.

- Improve grant accounting and documentation across county departments so federal/state grant expenditures are recorded and supported consistently.

No federal questioned costs; compliance reporting next steps

Donardo said the single-audit compliance testing did not identify questioned costs and that the auditors will submit the final audit and required federal reporting electronically. He told the board the office will upload the final audited financial statements and single-audit submission to the state auditor and the federal clearinghouse ahead of the statutory September 30 deadline for the clearinghouse filing (donor's presentation noted the filing schedule and that minor cosmetic edits remain before finalizing the report).

Board and staff directions noted at the workshop

Commissioners and staff discussed practical next steps the county intends to take, including:

- Finance staff will receive the auditor's worksheet and follow up to reconcile and clear interfund balances during 2025.

- The county will continue issuing and implementing written policies; staff reported multiple policies already adopted and additional policies under preparation for board approval.

- County staff and the auditor will continue monthly reconciliations for cash and payroll accounts and will work with the county's accounting vendor (referenced as Redlands) to improve postings and supporting documentation.

- The auditors will electronically submit the final report to the state auditor's office and federal clearinghouse; the county will be prompted to validate certain answers during that submission process.

What the audit does not change

Donardo emphasized the draft status is cosmetic only: typographical edits and presentation tweaks remain, but the substantive financial results and audit conclusions are not expected to change.

Looking ahead

Commissioners and staff agreed to continue the work items discussed at the workshop, start the 2026 audit planning earlier (a suggested May 1 start date was mentioned) and to provide the auditor with documentation on adopted policies and corrective-action timelines so repeated items can be closed in future audits.

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"If we are able to provide responses that sound like a thoughtful consideration of what we are or are intending to do to address these considerations, they'll usually accept that," Donardo said of the federal single-audit follow-up process.

Ending

The audit presentation closed with Donardo saying he would finalize a few cosmetic items and then upload the final reports; county finance staff and commissioners committed to follow-up actions intended to address repeated management-letter observations and clear interfund balances during 2025.