Joy Mariner, audit partner with BDO USA, told the Kenai Peninsula Borough Finance Committee on Wednesday that the firm issued an unmodified opinion on the boroughfinancial statements for the year ended June 30, 2024, and clean opinions on both the federal and state single-audit reports.

Mariner said BDO completed the audit on a normal schedule and issued the opinions on Nov. 22. "Unmodified is a clean opinion on the financial statements," she said, adding the single-audit work found no material compliance exceptions.

The audit presentation highlighted one unusual reporting situation tied to an EPA grant for a leachate project. Mariner said the borough incurred most costs in fiscal 2023 but the EPA did not sign the grant award until 2024. Because the grant award was not formally issued until 2024, BDO and borough staff changed the federal single-audit reporting so the award appears on the 2024 federal schedule even though the expenses were incurred in 2023. Mariner called the transaction "very unusual" and said the change was made to avoid the risk the federal government would reject the 2023 single-audit filing.

The auditor summarized group-audit results that include the borough, two hospitals and the school district. Central Peninsula General Hospital and South Peninsula Hospital each received unmodified opinions, with a handful of operational deficiencies the auditors described as common following software conversions or structural changes. Mariner noted a $400,000 uncorrected item related to the South Peninsula Hospital Foundationassets that had not yet been consolidated into SPHfinancial statements, and she said that as the foundation grows it likely will be included.

BDO described internal-control and compliance observations falling into three tiers: control efficiencies, significant deficiencies and material weaknesses. The presentation cited three recurrent operational items:

- Administrative-level ("super user") access in the accounting system for two senior finance employees and the need to maintain compensating monitoring controls; BDO recommended formal documentation of monitoring procedures and stronger written policies for journal-entry review and approval.

- Procurement-file documentation: BDO found that checks for debarred vendors were performed but not retained in procurement files for three of six procurements tested.

- Subrecipient monitoring: two subrecipients tied to ARPA funds lacked complete monitoring documentation required by the award agreements.

Mariner said the borough has robust compensating controls but recommended formalizing journal-entry approval policies and more frequent reconciliations between borough central treasury records and hospital ledgers. She noted the borough updated its landfill closure liability this year following a study and that key liquidity measures remain sound: the general fund had roughly six months of expenditures in fund balance at year-end.

Assembly members asked clarifying questions about hospital payroll rate approvals, reconciliation timing, and the EPA grant reporting decision. Mariner said the borough's finance team was cooperative and timely throughout the audit and that the adjustments made were intended to put both the borough and BDO in the best position if federal reviewers queried the single-audit submission.

The presentation concluded with auditors advising management-level follow-ups; no modified opinions or reportable noncompliance were issued.

Questions raised during the presentation were primarily clarifying; no final committee actions or votes were recorded on audit items during the meeting.