Independent auditor flags material weakness in Harrisville's FY2025 financials
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Summary
Independent auditor Rob Witt presented the FY2025 audit, noting increased revenues and restricted bond proceeds for capital projects but reporting a material weakness in internal controls related to preparation of financial statements and numerous journal‑entry adjustments.
HARRISVILLE — The council heard the city’s FY2025 audited financial statements on Monday from independent auditor Rob Witt, who described overall increases in revenues but also warned of internal control gaps that produced numerous adjusting journal entries.
Witt told the council the statements presented “are in accordance with generally accepted accounting principles” after management agreed to the auditor’s recommended adjustments, but he also characterized deficiencies in controls over the preparation of financial statements as a material weakness. He said the general fund showed a net change (loss) of about $1.49 million, mainly driven by transfers for debt service and $2 million moved to construction costs.
The audit noted significant restricted cash balances in the capital projects fund tied to bond proceeds for the new city hall and public works building, and recommended the council review restricted resource use and ensure proper cash flows for operations. Witt also described an item involving justice‑court reconciliations that had not been routinely performed and advised the city to reconcile court balances monthly.
Witt said the audit identified dozens of proposed journal entries and provided a separate letter with 10–12 points of emphasis and more detailed supporting entries. He recommended that staff and council review the footnotes and roll‑forward schedules in the report and use the auditors’ suggested reconciliation and reporting processes to reduce future adjusting entries. He offered follow‑up training by his firm to help staff improve internal processes.
Councilmembers asked about the implications of repeated audit findings. Witt said a second consecutive year with the same deficiency typically prompts a state request for a corrective action plan and emphasized that smaller local governments can address these weaknesses through stronger review and segregation of duties.
The council did not take immediate action in the meeting beyond receiving the audit and asking staff to follow auditor recommendations and return with corrective steps.
