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Auditors issue unmodified opinion; Newport adopts a redesigned chart of accounts for clearer reporting
Summary
External auditors (KBS) issued an unmodified opinion on Newports FY2025 financial statements while noting a new accounting requirement and operational issues. The council also heard a proposal from Chip Stearns to overhaul the chart of accounts to improve transparency and monthly reporting.
KBS auditors presented the June 30, 2025 audit to Newport City Council on Nov. 3, issuing an unmodified opinion on the citys financial statements while highlighting a required accounting change and two operational areas needing improvement.
Bill Kaiser, KBS, told the council a new accounting requirement resulted in a prior-period adjustment that reduced beginning fund equity by $164,000 and that the current-year impact on the general fund was approximately $17,000. He said the audit did not include single-audit testing because federal expenditures were below the $750,000 threshold.
Kaiser and Andy Beshand pointed to two material operational issues: a rise in delinquent taxes (from $398,000 to $623,000) and delays in billing reimbursable grants. "The delinquent tax balance increased year over year, 2024 to 2025, from 398,000 to $623,000," the auditors told the council, and they described ongoing steps (including a tax-sale process and an internal grants administrator) to improve collections and grant billing.
Separately, financial consultant Chip Stearns presented a comprehensive redesign of Newports chart of accounts. Stearns proposed expanding fund digits to allow 2-digit fund codes, adding a type digit to distinguish balance-sheet accounts from revenue/expense accounts, and standardizing object codes (for example, a single object code for salaries across funds). He said the redesign will allow direct departmental reports showing revenue and expenses side-by-side, clearer sinking-fund/reserve accounting, and faster monthly reporting to help spot interfund due-to/due-from trends.
Council members asked technical questions about proprietary funds, grant accounting, and how historical data would be remapped. Stearns said the conversion process would reassign historical data to the new structure so past reports remain comparable, while the city would keep an archival copy of the original dataset.
Why it matters: The audits unmodified opinion confirms the FY2025 statements are materially correct, but the operational recommendations and the proposed account redesign directly address the transparency and cash-flow problems that the council cited as reasons for the recent borrowing. Stearns and auditors said the new reporting should help the council monitor interfund balances and avoid future shortfalls.
Next steps: City staff will work with Stearns to implement the chart-of-accounts change, adopt revised monthly reporting formats, and continue improving collections and grant billing as recommended by auditors.
