Phenix City audit shows stronger fund balances, flags recurring internal-control weaknesses

Phenix City Council heard an audit briefing in which the city’s external auditors delivered a clean opinion on the fiscal-year financial statements and presented detailed fund-level results. The auditor said the statements "are correct in accordance with generally accepted accounting principles," and pointed council members to the management discussion and analysis for year-over-year highlights.

The auditor reported that governmental activities show roughly $185.88 million in total assets and about $100.3 million in total liabilities, producing a net position of about $92.3 million, of which approximately $41.8 million is unrestricted. At the fund level the general fund finished with $58.3 million in revenues and $43.1 million in expenses, producing a $14.3 million increase in fund balance and raising total general-fund balance from $59.3 million to $73.5 million.

The public utilities fund reversed recent losses, the auditor said, reporting about $97.2 million in total assets, $56.1 million in liabilities and a net position near $43.1 million (about $5.9 million unrestricted). Operating revenues were reported near $16.1 million with operating income of about $2.9 million and a change in net position of approximately $3.6 million.

On federal funding and compliance, the auditor reported no material noncompliance. The schedule of federal expenditures showed the American Rescue Plan Act as the largest program this year (about $898,000 spent), with additional DOT and smaller grants bringing total federal expenditures to roughly $1.35 million.

The audit letter also listed three recurring internal-control findings (labeled 202401–202403). The matters included weaknesses in the financial-reporting process (timeliness and the preparation of disclosures), limited segregation of duties because of staffing constraints, and delayed or incomplete bank and accounting reconciliations. The auditor characterized the segregation-of-duties finding as common for smaller governments and said remediation will likely require additional or more experienced staff.

City leadership and the auditor discussed debt and restricted bond proceeds; council members were reminded that bond proceeds are restricted to stated purposes. A council member observed the report shows the city is "able to service our debt," and the auditor confirmed the city’s current debt-service capacity based on the presented statements.

The city manager emphasized cooperation with the auditors and said the audit did not identify any fraud. As the manager put it, "the plain simplest thing that you can say when you have credibility" is that the work and disclosures align with the auditors’ findings. Officials thanked Finance Director Labrada for producing documentation and said improving staffing and timeliness remains a priority so audits can be completed earlier in the schedule.

No formal action was taken during the presentation beyond receiving the report and discussing next steps for internal controls and staffing. Council members and staff said they plan to pursue process and staffing improvements to address the identified weaknesses and to continue strengthening reserve levels for future infrastructure needs.