Council accepts FY2025 audit; staff flags adverse opinion tied to accounting methods and plans budget amendment

The Keokuk City Council voted to accept the annual financial audit for the fiscal year ending June 30, 2025. Council discussion focused on several auditor notes and next steps rather than finding material operational deficiencies.

Staff explained the auditor issued an adverse opinion limited to the aggregate discretely presented component units because the city reports on a cash basis while the water department reports on an accrual basis; the two methods cannot be consolidated into a single report. The audit also referenced the city’s library foundation (a 501(c)(3)) as a component unit whose funds are not accounted for in the city’s financial statements, producing another note in the independent auditor’s report. Staff emphasized both the water department and the foundation receive audits of their own.

Council members reviewed items the auditors flagged for corrective action, including budget-to-actual variances that left several categories—public safety, public works and debt-service—exceeding budgeted amounts, in part driven by purchases such as a fire truck and capital work on 18th Street. Staff said they will prepare a budget amendment (the last permissible timing is in May) to ensure expenditure categories exceed expected actuals to avoid future audit findings. The audit materials cited the city’s existing debt at about $28 million (approximately $18 million in general obligation debt and the remainder in revenue debt) and noted the city remains well under its legal GO debt limit.

Council approved a resolution to accept the audit report and recorded no additional immediate actions beyond preparing the budget amendment and following up on auditor recommendations.