The city's financial statements for the year ended June 30, 2025, received a clean audit opinion, the auditor told the Portland City Council on Thursday, but outside auditors also flagged deficiencies in internal controls that city staff must correct.

"The city received a clean audit opinion on the financial statements," City Auditor Simone Reddy said during the presentation. Baker Tilly, the outside audit firm, presented the results and detailed a series of audit adjustments related to construction work in progress, assets placed in service and missed depreciation.

The audit team said the adjustments did not change the overall audit opinion but do signal weaknesses in internal control over capital-asset accounting. "We identified material audit adjustment in relation to the closing out of completed projects for construction work in progress and moving them into assets placed in service and depreciating those assets," David Levitsky of Baker Tilly said.

Jonas Birri, the city's chief financial officer, said management is drafting a plan of action to respond to material findings and will bring the plan to the finance committee in January. He said the city requested and received a one-time, 30-day extension from the Oregon Secretary of State to submit the plan given timing constraints. "We're finalizing the plan of action documents, right now, essentially as we speak," Birri said.

Council members pressed auditors on the practical effects of the adjustments. Baker Tilly clarified that the roughly $200 million cited during the presentation stems from reclassifying assets for accrual-based financial reporting and "has no cash budgetary impact," Keith Stimovic said. Auditors also traced a previously unprogrammed $21 million to entries reflected in prior financial statements.

Auditors described one finding involving Prosper Portland's pollution-remediation liability that produced a separate adjustment; that error has been corrected and Prosper Portland has adopted its own plan of action. "We did have 1 finding related to Prosper Portland...that has been corrected as well," Stimovic said.

Reddy emphasized that the auditor's office is not asking the council to accept the audit report at Thursday's meeting; formal acknowledgment and adoption of a plan of action will follow committee review early next year. The auditor said her office will continue to publish the audit and related communications on the auditor's website.

The auditor and outside firm offered recommendations that include improved monitoring, periodic reviews of open projects to ensure projects are moved to assets placed in service when completed, and enhanced training for accounting staff. Birri said management will reassign or prioritize existing roles and improve bureau-to-central-accounting reporting to resolve the issues by June 2026 where possible.

Next steps: Baker Tilly and the auditor said the audit report and communications are posted on the city website; the CFO will bring a formal plan of action and resolution to the finance committee in January, followed by council action to meet state filing requirements.