Auditor gives Payson clean opinion; report flags one year-end accounting deficiency

Hinton Burdick LLP, the town's independent auditors, issued an unmodified (clean) opinion on the Town of Payson's fiscal 2024 financial statements and on its single audit of federal program spending, the firm told the town council at a Jan. 22 presentation.

The audit partner, McKay Hall of Hinton Burdick, said the firm found no material misstatements that would require a qualified opinion. "We are issuing an unmodified, the clean opinion," Hall said during the presentation. The audit also included a single-audit review because the town spent more than $750,000 in federal funds in fiscal 2024, Hall said.

The audit highlighted several fiscal indicators for council review. Government-wide net position was reported at about $158 million as of June 30, 2024, Hall said. The town's general fund reported an unassigned fund balance of roughly $20,151,300, which the auditor said represented about eight months (69%) of general-fund expenditures at 2024 spending levels.

Hall noted significant capital additions in fiscal 2024: roughly $5 million of construction-in-progress, about $1.2 million in land acquisitions and roughly $1 million in vehicles, machinery and equipment added to governmental activities. Depreciation expense for governmental activities was about $2.3 million.

The audit found no material weaknesses in internal controls, but it did record one significant deficiency related to year-end accounting. Hall said several year-end items had not been entered or completed when audit fieldwork began, creating a timing risk that could allow errors to pass through normal controls. The firm characterized the finding as a significant deficiency (not a material weakness) because staff understood outstanding tasks but had not completed them at the time of testing. Hall said changes to the town's accounting software and another year of operating experience should reduce the risk.

Council members asked for clarifications on the composition of the fund balance and the town's reserve policy. Hall told the council that, in Arizona, many municipalities target reserves equal to roughly 12 to 18 months of operations, and that Payson's roughly eight-month cushion is healthy but below what some other Arizona municipalities hold.

The presentation included five-year trend charts showing growing sales-tax revenues and steady increases in utility fund cash. Hall encouraged council members to contact the audit firm with follow-up questions.

The town manager said the audit report would be posted to the town website and distributed in the usual channels.