Auditor gives Fairview a clean opinion for FY 2021–22 but flags late audits, controls and accounting adjustments

Dickey and Tremper LLP audit partner Rob Tremper told the Urban Renewal Agency and City Council on Oct. 15 that the firm issued clean audit opinions on the FY 2021–22 financial statements but identified timing and internal-control issues that warrant management attention.

For the Urban Renewal Agency, Tremper said audit adjustments included recording about $180,000 of retainage payable (funds withheld under construction contracts) and properly capitalizing approximately $250,000 of a prior deposit tied to a land purchase. The audit also reflected implementation of a new lease accounting standard that affected the renewal agency’s accounting for the food court leasehold improvements and other items, Tremper said.

Tremper described a material weakness tied to audit timing: both the City and the Urban Renewal Agency are several years behind on completing audits, which reduces oversight and increases the risk of errors. He said Urban Renewal records showed an internal cash-tracking balance of about $3.4 million while the agency’s funds in a local government investment pool exceeded $8 million — a gap staff should reconcile and document so checks and expenses are drawn from the correct accounts.

The city audit presentation repeated several themes: a new lease accounting standard increased recognized lease receivables (Tremper said about $840,000 of lease receivables were recognized) and caused additional disclosures; there was a prior-period adjustment for grant receivables of about $41,000; and auditors found bank reconciliations and other year-end processes were late for multiple periods because of staffing turnover. Tremper said those issues led to a number of audit adjustments at year-end (accounts receivable, deferred inflows, prepaid deposits, accounts payable, retainage payable and capital assets) but that the engagement ultimately resulted in an unmodified (clean) opinion.

Tremper recommended continued focus on segregation of duties and restoring timely account reconciliations as staff vacancies are filled. City staff noted they have hired a new accounting manager, Leslie Purcell, and are working with consultants to update systems and timelines for on-time audit reporting. Staff and auditors described a multi-year plan to complete back audits (two audits per year) and return annual audits to a current cycle; county bond-rating disclosure and reporting to the municipal market had been affected while audits were delayed.

Key figures mentioned in the presentations and discussion included the Urban Renewal Agency’s ending fund balance (about $2.2 million at 6/30/2022), negative net position (about $3.3 million driven largely by project funding and debt obligations), approximately $6 million in bonds issued in 2022 related to URA projects, and the City’s general-fund unassigned balance (about $3.3 million) against general fund expenditures of about $5.7 million for FY22. Tremper told the council these items and the related footnote disclosures are important for long-term debt planning and property-tax coverage of future debt service.

Staff said they will continue to work closely with auditors and consultants to finish back audits, improve reconciliations, and complete planned upgrades to financial modules so accounting and permitting modules better align. City and URA management committed to bringing more timely schedules to the council and to provide requested historical details on related-party reimbursements for administrative services and infrastructure work.