Auditors give Redondo Beach unmodified opinion but flag material weaknesses in FY 2023–24 financial reports

Redondo Beach City auditors presented the draft Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2024, to the Finance and Budget Commission on Sept. 11, 2025, and reported they will issue an unmodified opinion while identifying material weaknesses and significant deficiencies in internal controls.

The findings matter because they required several adjustments to the city’s financial statements, and they point to control and process improvements the city needs to adopt. Commissioners voted to “receive on file” the draft report after the auditor’s presentation.

Bob Callahan, engagement partner and the audit lead, said the firm’s audit offers “an unmodified opinion,” the highest audit opinion, after the city and auditors made correcting journal entries. He told commissioners the audit identified three areas rising to the level of material weakness and two significant deficiencies, and that staff had already corrected the items that would affect the opinion. “Any of the comments I’m talking about, they’ve already been fixed or repaired and will not affect our opinion or the financial statements before you,” Callahan said.

Auditor findings and adjustments

- Grant receivables and related revenue recognition: Auditors and staff removed stale grant receivables and adjusted the related unavailable/unearned revenue accounts. Callahan described a material correction of about $250,000 in the Other Governmental Grants fund tied to stale receivables and timing rules under modified-accrual accounting.

- Construction in progress (CIP): Auditors reported large reconciling items in CIP balances that affected government-wide financial statements. Callahan referred to approximately $32 million in construction-in-progress balances that required reclassification, explaining the adjustment affected the government-wide net position rather than the general fund.

- Harbor-related adjustments: The audit identified a $400,000 restatement related to harbor tidelands (dredging/maintenance) that auditors concluded should be recorded as repair and maintenance rather than capitalized, under the city’s chosen accounting approach for infrastructure.

- Marine Avenue hotel and tidelands management accounting: Auditors said the city’s hotel-related agreements and a third-party management company had been recording certain receipts net rather than gross. The audit team and city staff adjusted reporting so gross amounts and associated expenditures are shown properly; the management company’s reporting required additional review before final close-out of a balance-sheet impact.

Audit process, scope and next steps

Callahan described the audit as a risk‑based financial statement audit (not a fraud or internal‑control audit) and said the firm completed the financial statement audit and is finishing the single-audit testing of federal grant programs. He noted the audit team’s first year working with the city, staff turnover that complicated information flow, and the collaborative effort to correct misstatements.

He also reviewed upcoming Governmental Accounting Standards Board (GASB) guidance the city should monitor — including GASB Statement No. 100 and other recent GASB pronouncements affecting disclosures, capital-asset reporting and compensated-absence accounting — and said the auditors will provide a management letter with required communications and recommended improvements.

Commission action

Commissioner Samples moved to receive the draft ACFR on file; the motion was seconded and carried with no opposition. The commission record notes there were no e-comments or Zoom participants for the item.

What the commission and staff said

Finance Director Ms. Myers said the report is a long-delayed audit and thanked the auditors and staff for their work; she said the department has been short staffed and that the audit work will help the city strengthen processes. The auditor told commissioners that management and staff responded cooperatively and that corrected misstatements had been posted.

Ending

Commissioners did not take additional formal action beyond receiving the draft report on file; auditors said they expect to finalize the single-audit testing and issue management communications to the City Council with the material‑weakness and significant‑deficiency findings.