Auditor issues unmodified opinion; city restates prior-year capital accounting for power and fiber funds

Moss Adams engagement leader Kevin Muller Leilley told the Idaho Falls City Council work session that the firm issued an unmodified, or “clean,” opinion on the city’s fiscal year 2024 financial statements, while also reporting one material weakness that required a prior-period restatement.

Muller Leilley said the restatement arose after the audit team and city staff found that expenditures for multi‑year projects in the power and fiber funds had not been capitalized in the correct periods; the Fiber-to-Home project and related work orders were the largest drivers. “We did issue a clean opinion, which is an unmodified opinion,” Muller Leilley said, and added that city staff had self‑identified the error and prepared the correcting entries before the audit team finalized testing.

The finding was characterized as a material weakness because it affected previously issued statements. City finance staff told the council the issue stemmed from the work‑order accounting process used to accumulate project costs: large projects were left expensed until work orders were closed, which moved capitalization into later years. Brooks, a city finance staff member who prepared the annual comprehensive financial report, told council that the city has improved month‑end and year‑end processes and made changes to capture capital costs earlier.

Moss Adams’ presentation covered the audit scope — financial statement testing, internal‑control assessment, single‑audit testing of major federal programs and passenger facility charge compliance for the airport. Muller Leilley said the auditors tested four major federal programs (including ARPA, airport grants and a SAFER award) that represented roughly 45% of federal expenditures; the auditors reported no federal compliance findings for those programs and issued a clean compliance opinion for the passenger facility charge.

Council members and staff discussed other audit points the auditors labeled “best practice” recommendations rather than findings, including inventory processes, FAA reporting timeliness, procurement controls for checking suspended vendors on federal awards, and quarterly ARPA reporting. Brooks and other city staff described actions already in progress: updating procurement policies to include required federal checks, an ERP implementation that will centralize purchasing controls, and an inventory project for the power warehouse.

Muller Leilley also explained that the material weakness has a practical cost implication: once a government has a material weakness affecting its single audit it must have a larger proportion of federal expenditures audited (40% rather than 20%) until it clears the finding for two consecutive years, which can increase audit effort and cost.

Council members asked about potential impacts to grants or approvals; staff said the city already provides its single audit to grantors and that the single‑audit reports are shared with bonding agencies where required. The auditor and staff emphasized the city’s improvements compared with the prior year and said they expect fewer audit issues next year as internal controls and month‑end processes continue to be strengthened.

The council did not take any formal action on the audit at the session; the presentation was informational.

Ending: City staff said they will continue implementing recommended control improvements, complete remaining reporting items from the auditors’ management letter, and monitor federal‑program compliance work to reduce the risk of repeat findings in future single audits.