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Morganton auditors find no material misstatements but flag water/sewer asset condition
Summary
Independent auditors told Morganton City Council on Dec. 2 that the FY2024 financial statements contained no material misstatements, but the Local Government Commissionperformance indicator flagged the water and sewer capital asset condition ratio as a concern (0.43; target >0.5).
The City of Morgantons independent auditors reported Dec. 2 that they found no material misstatements in the citys fiscal year 2024 financial statements but identified a financial-performance concern for the water and sewer capital asset condition ratio.
Hugh Wiseman, an auditor with Thompson Price, Scott and Adams, told the City Council the audit "states that we have audited the financial statements for the fiscal year ending June 30, 2024. We are not aware of any material misstatements which have not been adjusted." He added that any accounting estimates reviewed were reasonable and that auditors had "encountered no difficulties with management in performing our duties."
The finding matters because the North Carolina Local Government Commission (LGC) expects a capital asset condition ratio greater than 0.5; Morgantons water fund ratio is 0.43, Wiseman said, and the city has 60 days to submit a response to the LGC. The auditor also noted that GASB Statement No. 101 on compensated absences will be implemented in fiscal year 2025 and that city staff are preparing for that change.
Wiseman reviewed multi-year trends in the presentation packet distributed to council. Key points he highlighted: general fund balance increased from 2023, restricted and assigned balances held relatively steady, general fund expenditures increased but so did available fund balance as a percentage of expenditures, and cash and investments rose for the major enterprise funds (water, wastewater, electric). He also noted the last recognition of ARPA funds in 2023 explained a drop in other governmental revenues.
On the utilities side, Wiseman emphasized increases in water, wastewater and electric revenues. The presentation flagged that accumulated depreciation for the water fund exceeds half of the gross fixed-asset value, which triggered the LGCs performance concern. He advised the council that the auditors had brought any required adjustments to management and that the management representation letter was received Nov. 8, 2024.
City Manager Sally Sandy and council members acknowledged the report during the meeting; no formal council action was required on the audit at the Dec. 2 meeting.
The packet distributed to council contains detailed comparative schedules and charts covering five years of activity; Wiseman told the council to refer to the full financial statements for more detail. The LGCs letter and any related city response are the next formal steps the council should expect.
