Del City audit: auditors report $1 million general‑fund deficit, two budget findings and bank‑reconciliation issue

Tamara of HBC CPAs presented the city's independent audit for the fiscal year ended June 30, 2024, telling the Del City City Council the firm issued a clean opinion on the basic financial statements but found three material control and reporting issues.

“In our opinion, the financial statements referred to above present fairly in all material respects,” Tamara said, and later pointed to three findings in the auditors' report: an unassigned general‑fund deficit, multiple negative budget variances, and unreconciled bank balances following a conversion to new financial software.

Why it matters: the audit is the city's primary independent check on its financial statements and compliance with federal funding requirements. A clean opinion means the statements can be relied on by users, but the findings identify operational problems the city's finance team must correct.

Key figures and findings - Unassigned general‑fund balance: auditors identified a deficit of about $1,000,000 in the general fund. Tamara said a healthy unassigned balance is commonly 10–30% of revenue; the city's general fund revenues were reported at about $11,000,000. - Proprietary (utility) funds: auditors reported approximately $3,100,000 in unrestricted net position for proprietary activities, roughly 35% of those funds' $9,100,000 in revenue. - Federal programs: the audit included a single‑audit of federal awards. Auditors reported the city expended more than the federal single‑audit threshold on federal programs (roughly $2+ million) and issued a clean opinion on major federal program compliance.

Three audit findings and management responses 1) Deficit fund balance: auditors said a transfer of ARPA funds had not been recorded with the proper restriction classification. Management told auditors it will correct recording practices and has described corrective steps in the audit report. 2) Budget variances: auditors found several line‑item expenditures that caused negative variances under state budget law. Management told auditors it has enabled software controls to prevent line items from going negative and will require formal amendments to authorize overspending going forward. 3) Bank reconciliations: the city's conversion to new accounting software (Encode) created reconciliation differences between the ledger and bank statements. Auditors noted ongoing vendor support calls with the software vendor and said the city is working to resolve the conversion issues.

Council action Council moved to receive the presentation and accompanying independent auditors' report; the motion passed unanimously on a roll call vote (Councilmen Dean, Brown, Tatum, Finch and Mayor voted aye). Tamara and Chris Heim of HBC CPAs answered questions about the findings before the council voted to accept the reports.

What happens next Council and staff did not adopt new ordinance changes at the meeting; the audit document includes management's written responses and recommended corrective steps. City staff said they will pursue the ledger reclassification, enforce budget controls through software changes, and continue to work with the software vendor to finish bank reconciliations.