North Platte auditors give city unmodified opinion, flag segregation-of-duty weakness and capital planning needs

Auditors from Almquist, Maltzen, Galloway and Luth, PC told the North Platte City Council work session Tuesday that they issued an unmodified opinion on the city's financial statements for the year ended Sept. 30, 2024, while identifying one internal-control finding and several recommendations for tracking grants, forgivable loans and capital assets.

The audit presentation, led by Marcy Luth of Almquist, Maltzen, Galloway and Luth, PC, summarized key financial ratios and footnotes and said the city's governmental and utility funds showed increased capital investment in 2024. Luth told councilmembers that "you guys received an unmodified opinion for the 09/30/2024 year end." She also pointed to a single internal-control finding, 2024-001, saying there remains "a concentration of responsibilities within a limited number of people."

Why it matters: The unmodified opinion means the auditors found the city's financial statements fairly presented in accordance with accounting standards, but the internal-control comment and the audit's recommended follow-up touch on routine financial operations (segregation of duties, tracking of forgivable loans, timely accounting entries) that affect financial transparency and the city's readiness for upcoming capital projects.

Key figures and audit highlights presented to the council included: a city valuation reported near $1.9 billion (per-capita valuation just under $81,000); sales tax of $6.93 per capita (compared with a peer average of about $5.6); an unassigned general-fund balance of $12.4 million (about 36% of general-fund expenditures); total cash and investments of about $67.7 million with roughly $24.8 million restricted; warrants payable of about $18.6 million reported in the assessment fund; and significant capital additions (the audit showed net capital-asset increases of roughly $15 million on the governmental side and additional increases on the utility side).

On reserves and capital needs, the auditors' internal ratio analysis recommended a general cash-reserve target of about $11.2 million and, under the firm's formula for anticipated capital replacement, an estimated $26 million for upcoming governmental capital projects. For utilities the audit's recommended reserve figure was about $28.5 million; the city had roughly $30 million on the utility side. Luth said the city's outstanding general-obligation debt was below 1% of valuation, which the auditors categorize as "excellent" capacity to service debt.

The auditors reported a year with substantial capital-related grant receipts and project activity. Marcy Luth said capital grants and contributions totaled about $6.4 million in the governmental funds and noted about $2 million in grant proceeds in the new industrial wastewater treatment (sewer) fund. The audit also identified roughly $3.2 million in outstanding notes receivable issued through the North Platte Quality Growth Fund (some forgivable) and a $500,000 forgivable note through a Northwestern Economic Development Fund noted in the report.

On compliance and single-audit procedures, the auditors said the city had federal expenditures above the single-audit threshold and that testing of the major program (the federal coronavirus/state and local recovery funds through ARPA) found controls and compliance to be satisfactory. The audit noted the ARPA fund had about $3.7 million in cash at year-end, of which about $1.6 million was due to the electric fund per the audit's footnotes.

Audit adjustments and findings: The firm proposed seven government-side audit adjustments that increased governmental fund balances by about $11.3 million (one large element was reclassifying amounts into warrants payable). For proprietary funds the adjustments increased net position by about $3.7 million, including capital-asset and transfer entries tied to water construction in progress. The auditors reiterated finding 2024-001 on internal controls and reiterated standard recommendations: strengthen segregation of duties, track forgivable-loan terms and repayments, record health-insurance revenues and expenses on the general ledger rather than as year-end adjustments, and ensure capital-asset capitalization and depreciation schedules are maintained during the year.

Council questions and staff responses: Councilman Garrick and other councilmembers asked about stop-loss (reinsurance) receipts and timing. Dawn, identified in the meeting as a city staff member, confirmed the city had not experienced problems receiving stop-loss payments but said the department had turnover and that staff were "continuing to try to enhance internally" the monitoring and collection processes. When asked about the source of the city's payment in lieu of taxes line, Marcy confirmed it is a transfer from the water and electric funds; Dawn agreed: "Yes. Marcy, you're exactly right. It would come, as a transfer from water and electric."

Other items the auditors flagged for follow-up included ensuring timely repayment or enforcement on a Quality Growth Fund loan that was to begin repayments in November 2023 but had not started by November 2024, improving monitoring of forgivable-loan metrics (one loan had a forgiveness schedule tied to sales-tax and payroll metrics), and making sure smaller accounting issues (for example, netting certain grant transactions instead of recording expenditures) are corrected in routine reporting.

No formal votes were taken at the May 20 work session; the meeting was a presentation and question-and-answer session. The work session adjourned with the council thanking staff and auditors and stating staff would continue to implement the report's recommendations and return to council as needed on related budget or capital matters.