Council hears audit presentation, S&P downgrade explanation and awards new independent-audit contract
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Summary
Staff and auditors presented the FY2024 capital outlay findings and S&P Global’s downgrade to AA+ from AA minus; council approved an audit contract award to Lyle & Carter and emphasized completing future audits on schedule to restore rating upward momentum.
EAGLE PASS, Texas — City staff and the city’s auditor presented an explanation of the fiscal-year 2024 capital outlay reporting, and staff briefed council on Standard & Poor’s recent credit-rating action and its causes. The council then approved awarding the independent-accounting and audit-services contract to Lyle & Carter.
Audit presentation and capital outlay: An auditor explained the difference between fund-level (cash-basis) reporting used for budgeting and government-wide full-accrual statements required under GASB, showing how approximately $20.4 million in capital outlay was allocated between capitalized assets and expense items in the government-wide statements. The auditor said the conversions and the city’s fixed-asset policy drive how expenditures are reported across funds and the government-wide balance sheet.
S&P Global credit rating: City staff reported Standard & Poor’s lowered Eagle Pass’s rating by one notch (from AA minus to AA+). Staff and the rating consultant attributed the downgrade primarily to prior internal-control weaknesses and audit findings from fiscal years 2022–2023 and to limited liquidity and receivable collection issues that were subsequently addressed. Staff emphasized that the downgrade reflected earlier problems, not corrective actions completed during FY2024; they noted the FY2024 audit was clean and that several prior-year findings were cleared.
Why it matters: Credit ratings affect municipal borrowing costs. The consultant explained the one-notch change would result in a modest increase in hypothetical borrowing costs (illustrated with a sample $50 million analysis), and stressed that completing audits on time and sustaining internal-control improvements would be critical to regaining upward momentum on the rating.
Awarding independent audit services: Following presentations, the council unanimously approved awarding RFQ 2025-033 for independent accounting and audit services to Lyle & Carter, authorizing the city manager to negotiate and execute a contract. Staff said Lyle & Carter scored highest in interview and scoring matrices.
Council direction: Council members thanked auditors and staff for completing the FY2024 audit promptly (auditors reported completion in about 45 days) and emphasized the importance of maintaining timely audits and reconciliations going forward to support creditworthiness.
Ending: Staff said they will continue to pursue timely audits and internal control improvements and will report back to S&P in annual surveillance calls; council emphasized follow-up reporting and targets for FY2025 audit timeliness.
