Auditors report unmodified opinions for Torrington’s 2024 financial statements, flag several management items

CLA auditors told the Torrington Board of Finance on March 18 that the cityreceived unmodified (clean) opinions on its June 30, 2024 financial statements and on federal and state single audits.

The audit opinion was accompanied by management-letter recommendations and several items the auditors recommended the city address, including correction of prepaid expenditure recording by the Board of Education, a review of the Board of Educationhealth insurance fund transaction, and plans to eliminate deficits in several funds.

Leslie Zoll of CLA told the board, "I am very pleased to report that the city of Torrington did receive clean opinions all around." Gabe Epstein, a director at CLA, said the auditors also issued unmodified opinions on major-program compliance for federal and state awards.

Why it matters: an unmodified opinion indicates CLA found the cityfinancial statements presented fairly in accordance with generally accepted accounting principles. The management-letter items identify areas where practices or controls should be strengthened to reduce future risk and improve transparency.

Key audit findings and figures - Government-wide net position: Governmental activities net position was reported at about $19.7 million, an increase driven largely by recognized capital grants for the Torrington High School renovation. The water pollution control (WPCA) enterprise fund net position was reported at about $53.8 million. - Fund balances: The general fund had an unassigned fund balance of roughly $16.2 million, about 10.9% of general fund expenditures. The bonded projects fund balance was about $11.8 million. The bond-anticipation-note-backed Torrington High School renovation fund showed a negative fund balance tied to timing and bond anticipation notes. - ARPA and other grants: The ARPA (Coronavirus State and Local Fiscal Recovery Funds) award activity appeared on the balance sheet primarily as unearned revenue of about $5.4 million as of June 30, 2024; auditors noted those amounts had to be obligated by Dec. 31, 2024 and can be spent through 2026 as permitted.

Management-letter recommendations and areas for follow-up - Prepaids: CLA found some Board of Education payments for goods or services that should have been recorded as prepaid assets for FY25 but were recorded as FY24 expenditures. Auditors recommended the Board of Education review year-end cutoff processing to ensure correct prepaid recording. - Board of Education health insurance transaction: The Board of Education did not transfer all budgeted contributions to the health insurance fund and later decided to terminate participation in the plan. CLA recommended obtaining a legal opinion on obligations and distributions and strengthening controls around the new arrangement. - Fund deficits: CLA identified deficits in the Torrington High School renovation fund, the equipment maintenance fund and the economic development fund and recommended the city develop plans to eliminate or monitor these deficits. - IT and cybersecurity: CLA recommended a comprehensive disaster recovery plan, firewall upgrades and an annual vulnerability assessment. - Fraud risk assessment: CLA suggested the city and Board of Education perform a fraud risk assessment, either formally via an outside party or informally among management, to identify and mitigate fraud risks.

Federal and state single-audit highlights Gabe Epstein said total federal awards expended were about $10.6 million in FY24, down about $2 million from FY23. Major federal programs tested included ARPA and the Child Nutrition Cluster. On the state side, state financial assistance expended increased to about $105.7 million in FY24, driven largely by a roughly $53 million school construction grant tied to Torrington High School. CLA issued unmodified opinions on compliance for major federal and state programs and reported no compliance or internal-control findings for tested programs.

Board and staff response Board members and staff thanked the finance team and CLA. Mayor and finance staff noted progress toward obtaining documents and retaining outside counsel to review the Board of Education insurance matter; the mayor said CLAwill continue as the city's auditor for FY25 under a one-year extension approved earlier by council.

What to watch next The auditors and city staff said they will work on the management-letter recommendations ahead of the FY25 audit cycle. The board asked for ongoing updates on remediation of the identified fund deficits and the legal opinion related to the Board of Education health insurance transaction.

Ending note: CLA concluded its presentation offering to help the city implement upcoming GASB standards, and board members praised the comptroller and deputy comptroller for improving audit timeliness.