Independent auditors issue clean opinion on Meridian's FY24 financials; note opioid-settlement and subscription accounting adjustments

Meridian's independent auditors presented the city's fiscal year 2024 audit at the March 11 council meeting and issued an unmodified (clean) audit opinion on the city's financial statements and federal single-audit programs. Auditors did not report material weaknesses or significant deficiencies in internal control.

Kevin Smith, the audit partner, and audit manager Kaylee Holt walked council through the audit process, risks and the limited number of uncorrected misstatements that management elected not to post because they were immaterial to the financial statements. The auditors highlighted two accounting areas that required specific attention: revenue recognition for National Opioid Settlement funds and accounting for subscription-based information technology arrangements.

The auditors reported a prior-period recognition adjustment related to opioid settlement receipts: $172,000 of general fund revenue recognized in FY24 that related to funds received in the prior fiscal year, plus a government-wide recognition totaling $883,000 tied to the timing of settlement approvals. In addition, the auditors reported $292,000 of expense recognition related to subscription-based IT arrangements that the city elected to expense rather than capitalize under a materiality threshold the city set internally.

Audit observations and recommendations: The auditors advised the council the city should maintain conservative financial practices and continue to invest in controls and technology that help staff perform accounting tasks. They also recommended ongoing attention to cybersecurity and periodic agreed-upon procedures or internal control reviews.

Why it matters: The unmodified opinion signals that the city's financial statements present fairly in accordance with generally accepted accounting principles, giving elected officials and the public confidence in the reported fund balances and fiscal decisions. The audit identified non-material prior-period adjustments that clarify how settlement proceeds and subscription arrangements are recognized under accrual-based reporting.

What was not material: Auditors characterized the uncorrected misstatements as immaterial to the overall financial statements; they noted the adjustments were carried forward rather than corrected due to management judgment on materiality.

Next steps: City finance staff will continue to work with auditors to finalize the representation letter and will address technical accounting items and disclosure refinements in future reporting cycles. Council members asked questions about how opioid settlement receipts should be recognized; the auditors explained that as a "litigating party" the city triggered government-wide revenue recognition when the settlements were approved under accrual accounting, similar to how property tax recognition works across fund and government-wide statements.