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Visalia accepts 2024-25 financial report after auditor flags bank reconciliation issue and GASB change adds $5.6M liability
Summary
Council accepted the city's annual comprehensive financial report, which included one audit finding on cash and bank reconciliations and the implementation of a GASB standard that added an estimated $5.6 million in compensated-absence liabilities.
The Visalia City Council voted unanimously to accept the City's fiscal year 2024'25 annual comprehensive financial report after staff and auditors reviewed the year'end statements and related disclosures.
Finance Director Renee Nagle introduced the report and Brown Armstrong auditors described the scope of their tests of controls, including journal entry testing and third-party confirmations. A Brown Armstrong representative told the council, "we have one audit finding," explaining the issue related to the city's cash and bank reconciliation process that staff discovered during the fiscal year amid turnover in duties.
The presentation also detailed the impact of recent Governmental Accounting Standards Board (GASB) guidance. Staff said GASB Statement 101 requires the city to estimate and recognize additional compensated-absence liability for accrued sick time likely to be used in the future. "The implementation resulted in an additional $5,600,000 of compensated absences liabilities," staff reported, and noted that future annual increases should be much smaller, in the order of several hundred thousand dollars depending on retirements and usage.
Officials reviewed general fund performance and revenue trends: sales tax increased about 2.2%, property tax rose roughly 7.9% and transient occupancy tax was up about 4.4%. Staff cautioned that "fund balance does not equal cash" and explained reserves, other financing sources, and earmarked funds. The city's emergency reserve ended the year at $24.0 million, or about 27.5% of operating expenditures, slightly below the council's 30% policy because the GASB adjustment reduced transfer capacity.
Councilmembers asked staff to clarify the GASB change and its recurring effect; staff explained the initial recognition was large because it applied to balances citywide, and that subsequent annual adjustments should be smaller. Council voted 5'0to'0 to accept the report.
Next steps: staff will continue reconciling the audit finding on bank reconciliations and will include the GASB-related balances in future budget and reserve planning.
