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Audit committee hears FY24 accounting issues; city granted short extension to clarify interfund balances
Summary
Committee heard that conversion to a new accounting system and two large checks recorded inconsistently created reconciliation questions for the FY24 audit; staff said auditors were granted an extension to Sept. 30 to resolve interfund cash placement.
Jackson City audit staff told the Audit Committee on an unspecified date that conversion to a new accounting system and inconsistent recording of two large checks created discrepancies auditors flagged in the FY24 audit, and the city obtained a short extension to supply clarifying documentation.
Mister Reed, a finance staff member, updated the committee on the FY24 audit and said the city's previous method of accounting for interfund balances did not translate cleanly during the transition to the new system. Reed said those discrepancies are being addressed and evaluated and noted that Lisonbee Franklin of JTA attended a meeting to discuss the comptroller’s letter about a negative net position. Reed told the committee the unrestricted net position “continues to show positive progress.”
Why it matters: Auditors flagged that fund-based cash needed clearer mapping after the city moved to pooled cash accounting. Staff said auditors must remain independent and therefore cannot reassign the auditors’ work to city staff; instead, city staff will provide backup documentation so auditors can place cash in the correct funds.
Finance staff described one concrete source of the discrepancy: during the conversion two checks intended for an Education Foundation were issued four days apart; one was recorded in the new general ledger and then voided, and the other — which was never recorded in the new general ledger — was cashed. The result produced roughly a $1 million swing in reported cash until staff reconciled the entries. Committee members said the mix of due tos/due froms carried forward from the old system had not been cleared and complicated the pool-cash accounting reconciliation.
City staff said they requested and received an extension from the relevant oversight office for the FY24 audit submission; committee members discussed a September 30 deadline for delivering reconciliations. Nathan, a finance staff member, reported the city has not yet begun collecting property taxes for tax year 2025 and that the city is missing about $1.3 million of collections from the prior tax year out of a $36 million levy, per preliminary figures discussed in the meeting. Staff also reported year-to-date non-property tax revenue (including sales tax) was down compared to the same period last year; the 12-month rolling average for non-property tax revenue was at its lowest point in July since May 2024.
Committee members asked for follow-up documentation and staff said they planned an afternoon session to prepare backup detail for auditors. "Our staff is gonna go back through and try to provide the clarity and the backup that they need, to put the cash where it belongs in the different funds," a finance staff member said. The committee did not take a formal vote on audit findings at the meeting but recorded staff direction to reconcile interfund balances and report back.
Clarifying details recorded during the discussion included that two checks involved approximately $500,000 each, one of which was voided and one of which was cashed; that the city moved from fund-based cash accounting to a pooled-cash approach; and that the budget submission to the state had been made but approval was pending. Staff said they planned to continue reconciliation work and to return to the committee with the requested documentation.
