Audit committee accepts Safety Harbors CAFR and CRA audits after review of controls and utility receivables

The City of Safety Harbor Audit Committee voted unanimously to accept the citys Comprehensive Annual Financial Report (CAFR) and the Community Redevelopment Agencys (CRA) financial statements for the fiscal year ending Sept. 30, 2024, following a presentation by auditors from CLA.

Julie Fowler, signing director at CLA, told the committee the firm issued an unmodified (clean) opinion on the citys financial statements and an unmodified examination opinion on compliance with the cited state investment statute. "On the financial statements themselves, we've issued an unmodified opinion," Fowler said, adding that auditors provided governance communications and noted no disagreements with management.

The auditors identified several internal-control recommendations the committee discussed. Fowler said delays in preparing bank reconciliations—largely driven by staff turnover and hurricane recovery efforts near year-end—had contributed to timing issues and a small number of material audit adjustments that auditors asked the city to correct. "A loss of staff and turnover in who was preparing those reconciliations" prolonged work, Fowler said.

Committee members pressed staff on reconciliation frequency and collections of utility receivables. Fowler said reconciliations should be completed monthly and recommended additional finance resources to keep timeliness. A committee member suggested weekly reconciliations could help keep balances current.

The auditors reported the allowance for doubtful accounts in business-type activities (water, sewer, solid waste and stormwater) totaled $263,000 for fiscal 2024. Fowler characterized that balance as a small percentage of total receivables and said staff would provide trend data on delinquencies. "The total allowance in your business-type activities ... is $263,000," Fowler said.

Committee members and staff discussed collection practices for delinquent utility accounts. Staff explained that when a property owner holds the account the city can place a lien on the property, whereas tenant accounts generally go to collections, and that caused practical limits on pursuing some unpaid balances. Staff said they are running reports to quantify how much of the outstanding balance is in tenant accounts versus owner accounts and will evaluate options, including whether accounts for multi-unit properties should be required in owners names.

A staff member summarized enforcement and outreach steps: enforcing the existing ordinance that accounts must be paid before service is restored, coordinating with legal and finance, adding bill notices or flyers to remind customers of payment rules, and pursuing collections or liens where permitted.

The committee also asked about IT and security controls after earlier breaches; Fowler said a new FY24 auditing standard required auditors to evaluate IT controls related to financial applications and that auditors reviewed backups, password policies and other controls and found them sufficient for the financial systems under audit.

After discussion, an unnamed board member moved to accept the CAFR and governance communications; following a second, the committee approved the motion 7-0. The committee then separately moved to accept the CRA audit and governance communications; that motion also passed 7-0. The audit committee adjourned and planned to reconvene as the CRA.