Marathon County audit yields clean opinion; $8 million loan and budget choices shrink available fund balance

The Marathon County Human Resources, Finance and Property Committee heard a report on the county's 2024 draft financial statements that said auditors will issue an unmodified (clean) opinion and that the county's fund balance has fallen after recent commitments, including an $8,000,000 loan cited in the audit materials.

County Administrator Leonard told the committee the draft financials show an "unmodified opinion" and that staff will return in August with final audit acceptance; the county submitted the audit in July as required. John, a partner from audit firm Baker Tilly, said the audit team "did issue a clean opinion" on the financial statements and noted improvements in the audit process compared with recent years.

The audit materials include an annual comprehensive financial report, the first such submission since 2018, which Administrator Leonard and the auditors said increases transparency by adding historical comparative schedules. The auditors told the committee the county made several accounting restatements this year (including landfill depreciation and adjustments to a social services fund tied to the ERP conversion) and implemented new GASB standards for reporting restatements and for compensated absences.

Why it matters: A clean audit opinion affirms the financial statements' presentation; at the same time, the committee was warned that available reserves for operations have fallen. Leonard told the committee that the county used the fund-balance rollover strategy to support capital needs, and that allocations and an $8 million loan referenced in the packet reduced the unassigned general-fund balance and left less available working capital than the committee's existing designation.

Details from the presentation: - Draft issuance timing: auditors issued a draft on June 20, earlier than last year, which staff and auditors attributed to improvements in finance operations and coordination across departments. - Comprehensive financial report: staff prepared a 125-page report with management's discussion and analysis and a statistical section that includes multi-year trends for debt, fund balance, and revenue capacity. - Restatements and GASB: the auditors reported restatements in the landfill and a social services fund tied to ERP implementation; GASB Statements 100 and 101 were implemented in the financials. - Fund balance specifics: the presentation described nonspendable, restricted, committed, assigned and unassigned components. Administrator Leonard and the auditors said assigned balances rose, largely because of the $8,000,000 item described in the audit packet; unassigned fund balance declined materially as a result of that commitment and other budgeted uses. - Debt and debt service: auditors showed the county is using a small portion of its statutory general-obligation debt capacity; debt levels have trended down as older bonds are retired.

Committee discussion and next steps: Committee members pressed staff on centralizing financial controls and internal controls over cash, which the auditor described as a recurring risk in counties with decentralized accounts. Administrator Leonard said staff are working to centralize some reporting and strengthen oversight; Sam, the county finance lead, said changes in procedures should reduce control findings in 2025.

No formal action was taken to accept the final audit at this meeting; staff told the committee the final audit acceptance and the comprehensive financial report will be brought back for action at the committee's August meeting.

Ending: The committee agreed administrators should continue to refine the fund-balance policy and bring a revised policy and the finalized audit to the August meeting for formal acceptance.