Fort Smith board accepts clean audit, discusses $22.7 million assignment to cover 2025 shortfall

The Fort Smith Board of Directors voted 5-0 Tuesday to accept the city's fiscal 2024 external audit and to allow staff to file the final reports.

The audit, prepared by the city's finance staff and audited by Forvis Mazars, returned an unmodified (clean) opinion on the city's financial statements and reported no material weaknesses or significant deficiencies in internal control, Dina Enfield, chair of the Audit Advisory Committee, told the board. "We are receiving an unmodified or clean opinion on the financial statements," Enfield said.

The audit packet included the annual comprehensive financial report prepared by Chief Financial Officer Andy Richards and a Government Finance Officers Association certificate of achievement for the 2023 ACFR. Richards told the board the city reported a total fund balance of $35,400,000 at year end, which he said represents about 48% of annual expenditures and transfers; the unassigned portion of that balance was reported at roughly $12,000,000, about 12% of expenditures and transfers.

Board members spent most of their discussion on a $22,700,000 assignment of 2024 fund balance that will be used to cover a projected 2025 budget shortfall. Richards described that amount as largely composed of 2024 carryovers and specific actions taken after the budget was passed, including the purchase of a building. "The amount that was assigned for subsequent year's budget was $22,700,000 and so that is something that's kind of new," Richards said, noting that the figure derives from the amended budget adopted in May.

Director Martin, who has served on the audit advisory committee, said the board needs to be mindful of the general fund through 2025 and recited the board's fund-balance policy thresholds: steps would be taken if the fund-balance percentage fell below 20% and deeper measures if it fell below 15%. Martin also noted the audit reported a 114% debt-service coverage ratio on the schedule cited in the AFCR, above the 110% target.

Public comment on the item included a two-minute statement from Joy McCutchen asking for clarification about carryovers and how the $22.7 million was spent; Richards and Enfield responded to explain the assignment reflected carryovers and recent budget adjustments.

After discussion the board called the roll and the measure passed 5 in favor, 0 opposed. Enfield and Richards were thanked for their presentation; staff will file the final reports to meet reporting deadlines.

Less critical details: the audit also included governmental and single-audit reports under uniform guidance; auditors tested four federal programs that together made up about 63% of the city's total federal awards for 2024, and the audit team reported an unmodified opinion on those major programs.

Votes at a glance: the resolution to accept and file the external auditor's report was adopted 5-0 during the special meeting portion of the session; the board directed staff to file the final reports by the end of the month to meet deadlines.