Audit finds clean opinion but flags internal-control and federal-compliance weaknesses

Tracy Hanson, a partner with Cato Thorstenson, told the Rapid City Legal and Finance Committee on Sept. 10 that the independent auditors issued an unmodified opinion on the city—s 2024 financial statements and an unmodified opinion on the compliance audit component, but they also identified material weaknesses and two compliance findings.

Hanson said, "the independent auditors report expresses an unmodified opinion that is a clean opinion that you want to receive as a, as a part of the audit process." She told the committee that auditors found internal-control weaknesses "related to internal controls for various departments within the city consistently and completely reporting information to the finance office."

On compliance matters, Hanson described two findings tied to federal funds. One involved the city—s lack of documented procedures to check whether vendors receiving federal funds were on suspension or debarment lists; auditors found the vendors in question were not suspended or debarred but the controls to verify that were not in place. Hanson said, "entities are not allowed to spend federal funding to an entity or a vendor that is suspended or the termination was not made. You did not check that the vendor was suspended or debarred. They were indeed not. You did not have non compliance, but you did not have the controls in place to verify that."

The second compliance finding concerned the period of performance for certain federal grants. Hanson said the city had expended funds after a grant—s stated period of performance based on an oral communication with the regional federal office; the regional office would not later confirm that oral approval in writing, and the city lacked documentation to justify the expenditures outside the authorized performance period.

Finance Director Ainsley and committee members thanked the audit team and staff for their work. Ainsley singled out staff members who supported the audit process and called out the weeks of effort involved. Councilman Evans praised the auditors— presentation.

No vote was recorded specifically on the audit aside from the consent approval of the audit report as part of consent items; the committee approved consent items 1 through 10, which included the annual audit report, by voice vote with no roll-call tally provided.

The audit report was attached to the agenda; Hanson noted a written summary on page 112 summarizing items one through nine. Committee members asked no substantive amendments during the public meeting.