Suffolk auditors give city—s FY2025 financial statements an unmodified opinion, note restatements and one material weakness
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Summary
Independent auditors issued an unmodified opinion on Suffolk City—s FY2025 financial statements and single audit but reported four noncompliance items, one material weakness (leading to a ~$1.6 million restatement), and other accounting adjustments; city staff reported a $32 million net change and a CIP funding gap.
An independent audit presented to the Suffolk City Council on Monday said the city—s fiscal year 2025 financial statements received an unmodified opinion while auditors reported a set of accounting adjustments and one material weakness.
Laura Harden, engagement director for Cherry Beckert, told the council the firm issued an unmodified opinion on the financial statements and an unmodified opinion on the city—s compliance with major federal programs (the single audit). "We issued what's called an unmodified opinion on the financial statements," Harden said, calling it "the best opinion you can receive as a result of your audit."
Harden said auditors identified four instances of noncompliance under the Commonwealth—s audit specifications (listed in the report as items 2025-2 through 2025-5) and one material weakness in internal control over financial reporting (item 2025-001). That material weakness, she said, led to a beginning-of-year restatement of the general fund balance and governmental net position of about $1,600,000 related to an overstatement of "due from the schools" as of June 30, 2024. During the audit, management also corrected a $742,000 unaccrued accounts-payable liability for fiscal 2025, Harden said; auditors reported no uncorrected misstatements.
"We did not identify any fraud, illegal acts, or waste or abuse during our audit and there are no events or conditions that indicate substantial doubt about the city's ability to continue as a going concern," Harden said.
City Finance Director Stephanie Wells then reviewed the Annual Comprehensive Financial Report (ACFAR), explaining the report—s sections and the budgetary schedule that the council reviews annually. Wells said the city recorded a net change in fund balance for FY2025 of $32,000,000 and described how that surplus is allocated under the city—s fund-balance "waterfall" policy. The policy calls for a 20% unassigned fund-balance target, a first $500,000 allowance for one-time operating or capital outlay, then splits of remaining surplus between budget stabilization and capital reserve.
Wells said the prior-year unassigned fund balance was about $106,000,000, against a target of $105,000,000, so the city did not need to increase reserves. She attributed the FY2025 surplus largely to unexpected increases in property and other local tax revenues and to expenditure savings. The budget stabilization fund holds approximately $13,200,000, Wells said.
On capital needs, Wells presented a five-year proposed capital improvement plan totaling $119,000,000 while available capital reserves and transfers currently total about $78,000,000. She warned that surplus funds are likely to be needed for capital projects: "Don't think because we've had a surplus that we don't have a need for the surplus funds," she said.
Auditors also told the council the city implemented GASB Statement No. 101 (compensated absences), which resulted in a beginning net position restatement of $10,900,000; Harden said upcoming GASB statements 103 and 104 for FY2026 were not expected to cause further restatements. When asked whether the schools receive a separate audit opinion, Harden replied the schools are audited as a major component unit included in the city's ACFAR and do not receive a separately issued audit opinion.
The auditor's report, the ACFAR presentation and the council discussion focused on transparency, required disclosures and the need to align capital planning with available resources. City staff said they will present more detailed operating-budget proposals and options during the operating budget process.
