Redondo Beach council receives FY2023–24 audited financial reports, auditor issues governance and internal-control findings

The Redondo Beach City Council on Tuesday received and filed the city's audited financial reports for the fiscal year ended June 30, 2024, after auditors from CLA issued an unmodified opinion while noting governance and internal-control findings that require corrective action.

The audit's unmodified opinion means auditors found the financial statements fairly presented in all material respects, Auditor Bob Callanan told the council. But Callanan also delivered an internal-control letter listing findings the auditors are required to disclose to the council and a governance letter summarizing the audit process and any difficulties encountered.

"The internal control letter is a listing of some findings that we came across during the course of our audit that we consider that we're required to disclose to the council," Bob Callanan, audit partner for CLA, said during the council discussion. He said the city received an "unmodified" opinion, which he described as the highest form of opinion an auditor can give.

Council member Barron had pulled the item from the consent calendar to ask what changed in blue-folder material the council had received. City staff said the blue-folder packet added a governance letter, an internal-controls letter, and an inmate trust fund statement that were not available with the original agenda packet; the additional documents did not change the financial result, staff said.

City staff and the audit committee told the council the flagged matters were not unexpected and were largely procedural items the new auditor identified in its first-year review. City staff said many of the issues reflect changes that follow the transition to a new auditing firm and turnover in finance personnel; the city intends to implement process changes to address the items in the coming year.

Council discussion noted Moody's had received a draft of the audit and retained the city's AA1 rating, city staff reported.

The council voted unanimously to receive and file the audit reports. City staff said the audit committee and the Budget and Finance Commission had reviewed the draft documents and recommended the council receive them. Staff offered to circulate final versions without draft stamps once they are available and to return to the council with evidence of completed corrective actions for the committee's review.

The auditor's governance and internal-control letters identify areas for the city to strengthen journal accounting, reconciliation procedures and other internal processes, Callanan said. City staff described those items as process adjustments rather than cases of fraud or material misstatement and said some corrective steps already are underway.

Councilmember Barron said the council's audit subcommittee had devoted more than an hour to the draft findings and recommended that the finance director return to the committee with progress updates on process changes. The council acknowledged the audit was late because staff turnover delayed completion and welcomed the new auditor's scrutiny as a fresh set of eyes.

Ending: City staff said they will post the final audit documents to the finance department web page when the auditor finalizes them and will report back to the audit committee and council on implementation of corrective steps.