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City accepts CAFR; auditor flags segregation-of-duty weakness and reporting items
Summary
Auditor presented the FY2024 Comprehensive Annual Financial Report, issued an unmodified opinion, and noted material weaknesses around segregation of duties and certain audit adjustments; Council accepted the report and discussed finance priorities for FY26.
The Ottumwa City Council accepted the Comprehensive Annual Financial Report for the fiscal year ending June 30, 2024, after a presentation by the city's external auditor. The auditor delivered an unmodified opinion on the financial statements but identified material weaknesses and compliance items that staff will address.
Dustin, the senior audit manager, told the Council the audit produced an unmodified (clean) opinion—meaning the financial statements were fairly presented in all material respects—but that there were material internal control findings. The most significant control finding was a lack of segregation of accounting duties driven by turnover and limited staff capacity. The auditor also reported a material audit adjustment and a prior-period adjustment. On compliance testing, the auditor noted three findings: presence of fund deficits in certain funds, expenditures exceeding budget at the functional level in two instances, and a missing 509A actuarial filing tied to post-employment benefits (staff has since filed the required paperwork and will provide the actuarial study).
Finance staff (Cole and team) reviewed accomplishments from FY25 and priorities for FY26: implementing a new accounting system and online invoice approvals, new credit-card processing systems, improved collection procedures and a 5-year capital improvement plan. Priorities include better budget workflows, activity codes to simplify expense coding, asset-management tracking for depreciation, and process improvements to streamline audits and purchase-order matching. Staff reported investment-bidding practices that recently delivered yields above 4%.
Council discussion emphasized staffing and internal controls. Finance staff acknowledged structural constraints in small-city operations and described compensating controls (cross-checks, reviews) while pursuing staffing continuity. The CAFR and related policies were accepted, and staff was directed to continue work on the corrective items identified by the auditor.
Council members were given a copy of the auditor's communication and will receive follow-up on the corrective steps and any required filings.
