Auditor reports draft FY23-24 financials; plans unqualified opinion but flags fund-balance and year-end control issues

City finance staff introduced Squire and Company's draft independent audit for fiscal year 2023-24 and invited the firm's lead auditor, Jason Wheeler, to summarize the status and findings.

Wheeler said the audit package was near completion and that the firm planned to issue an unqualified (clean) opinion on the city's financial statements. "We are planning on issuing an unqualified opinion," Wheeler told the council, and he said the draft had passed partner and second-partner reviews and was undergoing final quality-control checks.

Wheeler and Crystal highlighted several findings required to be reported under state legal-compliance and government-auditing standards. First, the auditors found the general fund balance was above the state's 35% limitation for allowable reserves. Second, the water and sewer utility funds were in deficit positions; Wheeler said the city is required to address deficits through budgetary transfers or other measures and noted the budget amendment presented earlier in the work session included transfers that would address those requirements. Third, auditors noted instances where monthly financial-statement updates were not documented as received, a state requirement for the size of the municipality. Wheeler said these state-compliance findings were straightforward to resolve through transfers and improved documentation.

On internal control, the auditors issued a material-weakness finding related to year-end accounting and the number of audit adjustments required to bring the financial statements into conformity with governmental accounting standards. Wheeler said the city had a substantial number of year-end closing adjustments and recommended additional staffing or process changes to ensure year-end entries are completed before the audit begins.

Wheeler also summarized other highlights in the draft audited financial report: the city received more than $10,000,000 in grants across federal, state, county, local and private sources during the year; the public works campus project is nearing ground-breaking; and the city placed an aerial-ladder fire apparatus into service in July after testing and training in the prior fiscal year.

Crystal said the council would be asked to acknowledge receipt of the draft in the regular meeting; the final audit would be posted on the city website and in the finance office once the auditor's quality-control work was complete.