Albany City committee receives FY24–25 financial report; auditor issues clean opinion amid prior‑period cleanup
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Summary
The Audit & Fiscal Sustainability Committee received Albany City’s FY24–25 Annual Comprehensive Financial Report, which earned an unmodified opinion from the external auditor. Officials said a $482,000 prior‑period payroll clearing‑account adjustment and several one‑time items reduced the reported general fund but were described as implementation cleanups rather than ongoing deficits.
The Audit & Fiscal Sustainability Standing Committee of Albany City on Jan. 14 received the city’s FY24–25 Annual Comprehensive Financial Report and heard from staff and the external auditor that the report carries an unmodified (clean) opinion.
"We have an unmodified opinion," said auditor Sheldon Tfahn, summarizing the audit’s outcome and adding that the engagement produced no material misstatements, material weaknesses, or significant deficiencies. Finance Director Rena Schwartz introduced the report and answered committee questions.
Committee members pressed staff on a prior‑period payroll liability adjustment. "When you see that restatement, $482,000, keep in mind we're dealing with a $4,000,000 tolerable misstatement amount," Tfahn said, explaining the figure arose from payroll clearing accounts that did not reconcile after the city’s financial‑system implementation and were corrected as part of a larger cleanup this year. Rena Schwartz said staff and the city accountant reconciled those balances, "we really went in and scrubbed all of those cash and equity numbers," and that the reconciliation produces a cleaner presentation of the same underlying bank balances.
Councilmember Jordan asked whether those adjustments left the general fund materially weaker. Jordan cited a reported net change in fund balance of about $2.1 million and noted a $1.6 million decline in the general fund in some schedules, expressing concern about reserve levels. Staff said much of the movement reflected one‑time cleanups and extraordinary items rather than ongoing operational deficiencies.
Schwartz and auditor Tfahn described three large items that affected FY25 results: a legal settlement, higher‑than‑expected labor costs tied to Bay Area labor market pressures, and unanticipated IT and accessibility work (including a website refresh). Staff provided approximate components behind the government‑wide vs. budgetary differences: about $2.5 million of depreciation, roughly $733,000 in pension adjustments, and nearly $300,000 in capital‑related entries that appear on government‑wide statements but not as spendable budgetary transactions.
Tfahn said the city’s depreciation lives and estimates are reasonable and in line with peer cities but emphasized they remain estimates. "They're assumptions, and they change," he said, noting pension expense adjustments reflect actuarial assumptions and larger systemic issues.
To help policymakers and readers separate one‑time cleanups from recurring pressures, staff agreed to add an explicit bridge in the midyear report linking the audit numbers to midyear budget expectations and to clarify which items were cleanup versus ongoing costs. "I might suggest ... in the midyear to not only talk about all the things I would normally talk about, but to include the bridge more explicitly from the audit to the midyear," Rena Schwartz said.
No council action was required on the ACFR; the item was presented as a receiving file. Earlier in the meeting, the committee approved the minutes of the prior meeting by voice vote.
The committee was scheduled to return for a midyear review and plans to receive a quarterly investment update (including ESG components) from Justin Rosuelo of PFMAM at a future meeting. The committee adjourned after thanking staff and the auditors for the work that produced the clean audit.
Next steps: staff will add the audit‑to‑midyear bridge language to the midyear report so policymakers can better distinguish recurring budget pressures from one‑time implementation cleanups.
