Auditors give New Rochelle a clean opinion but flag three repeat findings and fund‑balance strain

Brian Salba, the engagement director for EFPR Group, told the New Rochelle City Council on Sept. 9 that the independent audit of the city's financial statements for the year ended Dec. 31, 2024, is substantially complete and will receive unmodified opinions — the clean opinion auditors issue when they find no material misstatement.

Salba said auditors found three formal findings to report: (1) unresolved errors in federal data submissions for the Housing Choice Voucher (Section 8) program that have blocked later submissions; (2) repeated material adjusting journal entries that required auditors to post multiple corrections across funds; and (3) deficiencies in the city's home‑program eligibility determinations (tests showed two of five files lacked required eligibility documentation, dating back to 2019 and 2023). He said auditors will follow up on corrective actions in next year's audit work.

Why it matters: the audit shows the city's financial statements present fairly under generally accepted accounting principles, but the findings point to internal control and compliance gaps that could affect grant reporting and program management if not fixed.

Key fiscal figures and council questions

- Total general‑fund balance reported (subject to final drafting): $23.9 million. That total included a $5.5 million nonspendable balance (prepaids/inventory), $7.6 million assigned (including $3.0 million appropriated for 2025), and $4.6 million in encumbrances. - Unassigned fund balance was reported at about $10.8 million, which Salba said equated to roughly 15 days of operating cash at the 2024 expenditure level. By contrast the city's internal guideline is roughly 10% of the operating budget (about $18.1 million based on a roughly $181.8 million operating budget). - Council members repeatedly pressed for more timely and regular reporting. Several said they had only recently received the audit slides and asked for monthly snapshots going forward.

Cost drivers and one‑time items discussed

Council members and staff reviewed items that affected 2024 results: a retroactive public‑safety pay settlement that auditors described as roughly $8 million covering 2019–2023 contract years; the city's prepayment of retirement contributions of about $5.5 million in 2024 (the prepayment saved roughly $160,000 compared with not prepaying); and shifting impacts from ARPA funds in 2022–23 that improved the bottom line in those years by roughly $3 million. Auditors and staff emphasized the $8 million retro pay was a one‑time item that analysts will call out in disclosures.

Audit follow‑up and next steps

Salba said management will prepare a corrective‑action plan; auditors will follow up on findings, and the home‑program eligibility matter already has an internal review underway led by city housing staff. Salba also noted the city plans to early adopt a new accounting disclosure standard to highlight risks such as collective‑bargaining expirations so readers can better see items like the $8 million retro pay in context.

Council reaction and requests

Council members pressed for clearer, more frequent financial reporting (monthly fund‑balance updates and line‑item breakdowns of the prior year's additional appropriations). Several members requested a breakdown of the $2.9 million of additional appropriations that auditors showed on a slide, and multiple council members asked that staff provide more advance briefing materials before public presentations.

What auditors said directly

"We do expect to issue unmodified opinions," Brian Salba told the council. He also told the council the findings are primarily internal‑control issues that will require follow‑up in next year's audit.

Less technical implications

The audit does not change the city's official results until the financial statements are finalized and the management representation letter is signed. But the council's discussion showed the findings have already raised questions about financial transparency, the timing of reporting to elected officials, and the need for clearer disclosure of one‑time items and contingency planning for future contract expirations.

Ending

Auditors recommended corrective actions and follow‑up testing next year; council members asked staff for more frequent fund‑balance reporting and deeper, year‑over‑year explanations of swings that council members can share with constituents. The draft financial statements will be finalized and released with the auditors' opinion and the city's management representation letter.