Audit finds accounting errors, $850,000 promissory note misclassification; public and council call for stronger controls

Public comment and staff discussion at the Fort Thomas council meeting focused on audit findings that the city’s financial statements contained multiple reconciling items and process weaknesses, including an $850,000 promissory note that had been carried on bank reconciliations rather than recorded on the balance sheet as a receivable.

A speaker summarized the finding in public comment: "We also had an $850,000 balance sheet loan since 2022 off balance sheet loan since 2022 that was found by the auditors. Thank you." (public comment, 00:03:55)

Staff explained how the item was recorded and clarified it was not hidden: "On the bank record, the former finance director was doing that $850,000 was being carried as an outstanding item. So it was on the bank rec and it should have been moved from the bank rec and put on the balance sheet as the receivable... it just wasn't properly recorded." (staff explanation, 00:04:44)

Audit context: The audit report listed eight primary areas of concern and four recommendations, and the auditors issued a qualified opinion for the 2023–24 audit. Commenters and council members cited late delivery of the audit, changes in auditors and accounting software, and gaps in monthly reconciliations as factors that reduce transparency and create optics problems for the city.

Controls and reserves: Multiple commenters urged the council to create a formal reserve account rather than labeling year‑end balances after the fact. One speaker said establishing a separate reserve account would provide "more peace of mind." (public comment, 00:00:00)

Staff said many of the audit recommendations are being implemented, including separating cash accounts in the trial balance and reconciling cash accounts monthly. Linda summarized implemented items: "The recommendation, the first 1 was the reduction in cash balance that has been taken care of with the prior period entry. All cash accounts presented individually on the trial balance... ensure all cash accounts are reconciled on timely monthly basis... fixed asset schedules are prepared." (Linda, 00:06:44)

Next steps: Council directed staff to incorporate these findings into the forensic‑audit RFP scope and to continue implementing audit recommendations, including monthly reconciliations, clearer fixed‑asset capitalization timing, and attaching source documents in Springbrook for future look‑backs.