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Independent auditors give Atwater a clean opinion but flag internal-control deficiencies
Summary
Auditor Ahmed Badawi told the Atwater City Council the fiscal-year 2025 financial statements received an unmodified (clean) opinion, while the audit identified two significant internal-control deficiencies (audit close preparedness and long-term liability schedules) and recommended faster year-end close procedures.
Ahmed Badawi, audit partner with Badawi & Associates, told the Atwater City Council on June 8 that the firm issued an unmodified opinion on the city’s financial statements for the year ended June 30, 2025, meaning the statements are "fairly stated in all material respects," he said.
Badawi summarized key figures and trends: the city holds a large portion of net position in capital assets (about $74 million) and roughly $25 million in restricted funds; the unrestricted general-fund balance is healthy—about 14 months of expenditures on hand by his calculation. He also highlighted sensitivity in pension and OPEB liabilities to discount-rate assumptions, saying the city's pension liability at a 6.9% discount rate is about $28 million and could range from roughly $17 million to $42 million if the rate changes by one percentage point.
The auditor described two significant deficiencies (not material weaknesses): delays in year-end close and audit preparedness, and shortcomings in the city’s long-term debt schedules that made it difficult to verify balances for some leases or obligations. Badawi recommended strengthening year-end close processes, improving documentation of long-term liabilities, and maintaining independence safeguards between audit and any drafting services. He noted the firm performed targeted procedures on American Rescue Plan Act (ARPA) expenditures and issued related reports.
City staff and council members asked for follow-up materials. Council requested additional actuarial and amortization detail about pension and OPEB liabilities for a future meeting; Badawi and staff said they'd provide those schedules. The audit presentation concluded with the council thanking the audit team for their work.
The auditor’s presentation was informational; no council vote on the audit opinion itself was recorded in the transcript.
