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City auditor issues unmodified opinion but cites material weaknesses and state compliance findings
Summary
Bergan KDV presented the FY2025 comprehensive annual financial report, giving an unmodified opinion on the statements but reporting two material weaknesses (lack of segregation of duties; material audit adjustments) and three Iowa compliance findings including deficit fund balances and disbursements exceeding budget.
Dustin Opitz of Bergan KDV told the Ottumwa City Council that the firm issued an unmodified opinion on the city’s FY2025 financial statements, meaning the auditor concluded the statements are fairly presented in all material respects. “We do give an unmodified opinion, which is the best we're allowed to give as your auditors,” Opitz said.
Opitz also reported two findings at the material weakness level: limited segregation of accounting duties, which he said is common in small municipal offices, and a material audit adjustment the auditors made to the city’s records. He said single-audit procedures — required because the city expended more than $750,000 in federal funds — produced no findings. Opitz added the Iowa legal compliance review identified three reportable matters: deficit fund balances in three funds, disbursements exceeding budgeted amounts for some functions, and several old outstanding checks that should be remitted to the state.
Council members pressed staff about timing and causes for the findings. City staff explained delays during the conversion to a new financial system and staffing shortages contributed to slower information flow to auditors and necessitated audit adjustments. Staff said they have a plan to address fund deficits, have begun cleanup work on the system conversion and are exploring administrative approaches used by other cities to mitigate segregation concerns.
Financial highlights Opitz presented included a roughly 3% increase in the general fund balance to just under $6 million (about 35% of expenditures), modest revenue changes related to ARPA spending, and enterprise fund notes: the sewer fund did not cover depreciation in four of five presented years and had an unrestricted net position around $14 million; the solid waste fund covered depreciation over the last two years but showed a negative ending unrestricted position largely tied to landfill post-closure liabilities; the event center has operated at an operating loss.
Council adopted Resolution 56-2026 approving the comprehensive annual financial report. Staff committed to follow-up work to reduce audit adjustments, address deficit funds and pursue internal controls improvements where feasible given current staffing constraints.
