Auditors give Pueblo City a clean opinion but flag grant-reporting weaknesses

Auditors told the Pueblo City Council they issued an unmodified (clean) opinion on the city’s 2024 financial statements but identified material weaknesses in the city’s grant accounting and in required reporting for a Community Development Block Grant.

"We did issue an unmodified or clean opinion on the financial statements," said Matt Marino, the engagement partner for the audit, describing that result as the highest level of assurance. Marino said the city also implemented the new Governmental Accounting Standards Board standard GASB 101 for compensated absences, working with an actuary to estimate liabilities.

The auditors said they identified one material weakness in grant accounting after finding two grants for which either a deferred item was not relieved or additional revenue was not recognized. Marino said, "It was really an error. It wasn't malicious or intentional," and that city management has implemented a new accounting process to check and recalculate those numbers.

Within the single-audit portion of the review — the federally required audit for entities that expend more than $750,000 in federal funds — auditors examined four programs, including the fiscal recovery (ARPA) funds, highway planning and construction, HOME, and the Community Development Block Grant (CDBG). Auditors reported a material weakness tied to the CDBG program: a control designed to ensure required federal reporting was not effective and the Federal Funding Transparency report for a subrecipient was not filed when required. Management provided a management action plan and auditors said they will follow up next year on implementation.

Council members asked whether ARPA/fiscal recovery dollars were spent properly. An auditor replied that the fiscal recovery program was audited, that no findings were issued about misuse, and that, "The allotment was spent by when it was supposed to be spent and it was used for the appropriate purposes under the grant's original terms." A councilor’s estimate that the city accepted about $36,000,000 in ARPA funds was referenced during the exchange; auditors limited their comment to compliance with grant rules and controls.

Marino said the new GASB 101 change shifts how compensated absences are measured — from what might be immediately payable to a projection of future obligations — and required substantial work with the city’s actuary to implement. When asked why the audit was later this year, auditors said the compensated-absences calculation and actuary work drove the schedule.

Auditors closed by urging the council to raise concerns about accounting standards directly with the Governmental Accounting Standards Board if members see standards that warrant comment and by noting that management filed required extensions and the firm remains available for follow-up.

The council did not take formal action during the presentation; auditors said they will follow up on the CDBG remediation plan in next year’s audit.