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Auditor tells Assembly finance panel CBJ received unmodified FY25 opinion despite two material weaknesses
Summary
An external auditor told the Assembly Finance Committee the City and Borough of Juneau received unmodified FY25 opinions but the audit found two material weaknesses (reconciliations and lease accounting), one significant deficiency and several corrected misstatements; staff said improvements and training are underway.
Karen Tarver, engagement partner with audit firm LG Rayfeld, told the Juneau City and Borough Assembly Finance Committee on June 3 that LG Rayfeld issued an unmodified opinion on CBJ’s FY25 annual comprehensive financial report but identified two material weaknesses in internal controls and one significant deficiency.
Tarver said the audit covered CBJ’s governmental and proprietary funds; separate auditors handled the Bartlett Hospital and Juneau School District entries that were included in CBJ’s financial statements as referred audits. ‘‘We issued unmodified opinions over all opinion units,’’ she said, but noted two material weaknesses and a significant deficiency related to reconciliations, lease accounting and the federal/state compliance schedule preparation.
Tarver described several corrected misstatements discovered during audit work: a $10 million timing entry tied to a bond recording that belonged in FY26, an $8.6 million overstatement in harbor lease receivables and deferred inflows due to lease valuation treatment, and a $2.7 million sales‑and‑hotel‑tax accrual error caused by a linked‑spreadsheet cell. She said those adjustments affected balance‑sheet presentation and certain deferred revenue items rather than the operating results used in the budget process.
Assembly members asked about causes and remedies. Tarver and CBJ staff attributed delays and control weaknesses to overlapping close schedules with Bartlett Hospital and the school district, turnover in the finance department, and late issuance of the federal compliance supplement, which auditors use to determine single‑audit procedures. ‘‘The compliance supplement is totally out of CBJ’s control,’’ Tarver said, noting the supplement’s release date has been inconsistent in recent years.
CBJ finance staff said a reorganization, additional training, use of shared software tools, and an RFP for ongoing external assistance for financial‑statement preparation are already underway. Treasurer Ruth Costik and Director Flick said voluntary process changes and closer coordination with Bartlett should reduce the risk of repeat issues.
The committee did not take formal action on the audit presentation; Tarver concluded by offering to answer questions and staff described a more aggressive FY26 timeline to close books earlier in the year and reduce the scope for last‑minute adjustments.
The assembly committee’s discussion will feed into the full assembly’s oversight of finance policies and any follow‑up reporting staff provide on corrective actions.
