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Auditors give city a clean opinion but flag temporary transfer of restricted road funds
Summary
Valente Rackley auditors issued an unmodified opinion on Cairo’s FY2024–25 financial statements but reported a current-year finding: $735,147.24 of Local Maintenance and Improvement Grant funds were transferred out of restricted accounts and used for noneligible purposes; management says the error was identified and corrected before issuance.
Valente Rackley & Associates presented the city’s audited financial statements for the year ended June 30, 2025, delivering an unmodified ("clean") opinion while flagging a current-year compliance issue involving restricted road grant funds.
The auditor told the council that, although the financial statements “present fairly, in all material respects, the financial position” of the city, $735,147.24 in LMIG/LMEG funds were temporarily transferred out of the restricted account and used for noneligible expenditures before the error was identified and corrected. "The error was subsequently identified and corrected by management prior to the issuance of the financial statements," the auditor said during the presentation.
City management and the auditor said the mistransfer resulted from inadequate identification of restricted funds within pooled cash accounts and turnover in key finance personnel. The auditor recommended continuing to strengthen identification, tracking and oversight of restricted funds; management said it had taken corrective steps to improve controls.
The audit presentation also highlighted that city net position rose by about $1.1 million overall year over year, driven by governmental activity gains of roughly $4.2 million offset by a $3.1 million decline in business-type (enterprise) activities. Management attributed that decline largely to transfers from enterprise funds to support governmental operations.
Council members asked detailed questions about the landfill liability and a reported $1.8 million receivable shown in the landfill fund; the auditor said he was not prepared at the meeting to give a final assessment of how those items will affect the city’s financial-assurance ratios and that additional analysis is needed.
After discussion, council members agreed to defer formal action on accepting the audit to allow staff and council members to review outstanding questions and documentation; staff noted the audited financial statements may be filed under extension before the June 30 deadline but that the council would address final acceptance at a subsequent meeting.
What’s next: council members will submit follow-up questions to finance staff and auditors, place the audit back on the next council agenda for consideration, and continued strengthening of internal controls was recommended by the auditors.
