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Asheville receives clean FY2025 audit but must report material weakness and fund-balance shortfall to state
Summary
City finance staff and external auditors said the FY2025 financial statements received an unmodified (clean) opinion, but auditors flagged a material weakness (an unaccrued capital invoice) and the city ended the year with an unassigned fund balance of 14%, below the 15% policy; staff will prepare a required Local Government Commission letter and complete the single-audit work.
City of Asheville finance staff told council Tuesday that the fiscal year 2025 financial statements were issued with an unmodified — or "clean" — audit opinion, while the external audit team identified a single material weakness and a modest decline in the city's unassigned fund balance.
Tony McDowell, finance director, said the financial statements were completed and issued on Nov. 14, 2025, and that the city received the highest level of assurance from the auditors. "The audit opinion that we received this year was what's called the unmodified or clean opinion," McDowell said. He added the city ended fiscal 2025 with an unassigned fund balance of 14%, down from 16.8% the previous year and slightly below the city's 15% policy threshold.
Dan Garrity, the lead from external auditors Cherry Bekaert, outlined the firm's communications and findings. He said the audit identified one material weakness: the city did not properly accrue for a construction-related invoice in the capital projects fund that should have been recorded as of June 30, 2025. "This related to your general capital projects fund," Garrity said. "Due to when the work was performed, it should have been recorded as of June 30, 2025. Management did correct this as part of the audit."
Garrity also reviewed accounting changes required by GASB guidance and an implementation that increased compensated-absences liabilities by about $12.2 million for government and business-type activities; he said that change affects reported liabilities but does not require additional cash payments at once. The auditors reported no evidence of fraud, illegal acts or going-concern issues in the work they performed.
McDowell told council the single-audit portion (the grant compliance testing) remains incomplete because auditors depend on federal compliance guidance that arrived the week of Thanksgiving; staff and auditors expect to finish that work soon and noted the Local Government Commission granted an extended deadline of Feb. 12. Because of the material weakness finding and the fund-balance drop below policy, McDowell said the city must submit a letter to the LGC under its performance-indicator program. "We will prepare that letter and bring it back to you all for your signature at your first meeting in January," he said.
Councilors asked questions about the timing and the implications for budget work in the coming year. McDowell said the city's full annual comprehensive financial report (ACFR) is available on the city's website for more detail and that staff will notify council if the single-audit work uncovers additional matters.
The council did not take a vote on the audit itself during the work session; the presentation provided an opportunity for council to hear the auditors' findings and ask clarifying questions.
