Gates County audit shows clean financial statement opinion but flags material weaknesses, auditors say

External auditors presented Gates County’s fiscal year 2024 audit to the Board of Commissioners on April 16, saying the county received an unmodified opinion on its basic financial statements but that the audit identified material weaknesses and required a prior-period restatement related to opioid settlement accounting.

Leanne Vargasala, audit director for Maldens and Jenkins, told the board the auditor’s opinion on the basic financial statements was “unmodified,” which auditors described as a clean opinion indicating the statements present fairly in accordance with generally accepted accounting principles. Vargasala also said the audit report included other required reports under government auditing standards and single-audit testing: the county received an unmodified opinion for its ARPA federal program testing and state single-audit tests, but the auditors issued a significant deficiency for ARPA procurement testing and noted a material weakness relating to entries that had to be posted after the auditors’ trial-balance review.

Vargasala said the county had to restate prior-year balances because of a GASB clarification on how to account for expected opioid settlement proceeds. The auditors recorded a restatement and classified it as a material weakness because the prior-year figures needed adjustment. “We had to restate the prior year issued financial statements,” Vargasala said, describing GASB guidance and a Local Government Commission (LGC) interpretation that required the change.

Auditors also reported that required reports tied to lottery proceeds were not filed timely for completed projects, which the auditors classified as a material weakness in reporting. The auditors said the LGC has received and accepted the audit and that the commissioners must respond within 60 days to the LGC’s performance indicators, including an explanation of actions to address the late submission and the reported material weaknesses.

Vargasala highlighted several recommendations the auditors included in a management letter: (1) document and formalize a county-wide financial reporting process, (2) complete documentation of proprietary fund processes (landfill, water), and (3) revisit the county capitalization threshold in light of GASB 87 and GASB 96 for leases and subscription arrangements. She also warned that a GASB standard effective for the fiscal year ending June 30, 2025, may require changes to accounting for compensated absences (sick leave and other time), and the county should prepare policy updates.

County manager Scott Sauer and auditors discussed the audit-timing issue. Vargasala said the FY24 audit was submitted and accepted by the LGC on March 31; the audit was late compared to older statutory deadlines but the state recently extended deadlines and granted additional time because of state scheduling. Vargasala said late audit submissions can trigger more LGC scrutiny, and that the county should respond to performance indicators and the management letter.

Why it matters: The clean opinion on the county’s basic financial statements confirms the audited numbers present fairly, but the material weaknesses and restatement mean the county must tighten reporting controls and monitor future opioid proceeds accounting. The county’s financial position appears sound in many respects — the auditors’ materials show positive fund-balance changes — but the LGC requires responses and follow-up.

What’s next: The board must submit a written response to the LGC within 60 days describing corrective actions, and finance staff said they will work with auditors to implement the recommended procedural and policy changes.