Council reviews FY2024 audit; auditors flag impact-fee mispostings and prior-period asset restatement

City Council received the independent audit for the fiscal year ending June 30, 2024, at a regular meeting where auditors summarized financial growth, a prior-period restatement tied to developer-donated assets, and a material internal-control finding related to impact-fee accounting.

The audit presentation, delivered by an auditor who identified themself as "Craft," described the firm's opinion and key highlights. "You all have a claim or what we call a modified opinion," Craft said while explaining the auditor's report language for certain governmental and business-type activities. Craft said auditors did not find material misstatements in the audited statements for the areas reviewed but that certain reporting adjustments were necessary.

Among the balance-sheet highlights, auditors reported cash increased by roughly $1.5 million (about 7%) over the prior year and noted the city has an unrestricted fund balance of about $6.2 million, which the auditors characterized as roughly six months of operating expenses. Auditors also said debt increased by about $12 million because of ongoing capital projects such as a park center and a wastewater treatment plant, and that net investment in capital assets rose substantially as new assets were recorded.

A major driver of this year's revenue increase was contributed capital: auditors highlighted a capital contributions line of approximately $3.8 million that may grow as additional developer-donated assets are finalized. That led auditors to restate beginning balances in the financial statements to reflect previously unrecorded contributed property and associated accumulated depreciation.

The report identified a material internal-control finding involving the recording of impact fees. Auditors and staff described a situation in which receipts taken in-office were posted only to a building-permit revenue code instead of also allocating the portion that represents impact fees into the separate impact-fee accounts. Craft explained the issue arose in the manual in-office receipt process while online payments were being posted correctly.

City staff told council that the entries have been corrected in the journal and that closing entries will complete the correction; a staff member said, "We've already fixed it. We have a plan to keep it fixed." The auditor said the reclassification created interfund due-to/due-from activity that was corrected for the current report and will show as part of the normal closing and conversion processes moving forward.

Auditors also reviewed schedules required by the Governmental Accounting Standards Board and state reporting requirements, including pension and OPEB schedules and federal- and state-award testing. They said the city had no compliance issues in their program testing samples but did not qualify as a low-risk auditee because of the existing findings and certain high-risk programs retained from COVID-era funding.

Council and staff discussed process improvements for accepting developer-donated assets after auditors found several contributed items (for example, lift stations and certain water lines) had been accepted at earlier board actions but were not recorded on the city's asset list or included on insurance schedules. Councilors asked for a standardized form at planning commission submittal and additional coordination among public services, planning, codes and administration so the dollar value and asset information are captured before acceptance.

The meeting record shows the council was provided the audit report and a corrected action plan from management outlining steps to address the finding. The prior-year finding cited in last year's report was reported cleared in this year's audit. The audit presentation concluded with council thanking the auditors for completing the report before the fiscal year end.