Auditors give Palatka a clean opinion but flag six control weaknesses; commission approves audit

Roderick Harvey, partner at HCT, told the Palatka City Commission that the firm reached "a clean audit opinion again for the year ended September 30, 2025," and that the audit report will be dated June 29, 2026.

Harvey said the audit was conducted under AICPA and GAAP standards and that auditors found no suspected fraud or outstanding matters affecting the financial-statement presentation. He nonetheless reported six findings for management and the elected body to address, spanning procurement approvals, accounting for land-swap transactions, grant revenue recognition, interfund transfers in the CRA fund, contract change orders, and unsupported journal entries.

The audit review included two-year financial comparisons: revenues of $35.6 million for fiscal 2025 versus $37.4 million in 2024; expenses of $34.3 million in 2025 versus $28.3 million in 2024; capital assets of $105.1 million at year-end 2025 (up from $96 million); and long-term debt roughly flat at $22.6 million (2025) versus $22.9 million (2024). Harvey said auditors confirmed debt balances with third parties.

On internal controls, Harvey said auditors "have noted six findings" and enumerated control weaknesses the firm recommends management correct. He highlighted one area of particular concern: certain sales or land-swap transactions where gains and supporting calculations "were appropriately calculated and supported" (the auditor characterized the accounting treatment as a concern and recommended independent review of significant or unusual transactions). Harvey also noted that at a May 28, 2026 commission meeting the commission had ratified a motion to ban future land-swap transactions; he offered that as contextual background rather than a new audit finding.

Commissioners asked whether the findings were new or reflected longer-standing problems. Commissioner Borum and Commissioner Davis pressed for clarification on scope and prior coverage; Harvey said the firm increased audit effort this year after requesting additional procedures and that some matters may have been present previously but were elevated to written findings during this engagement. On potential conflicts of interest, Harvey said auditors rely on related-party confirmations and disclosures; operational or nonfinancial issues would typically surface to auditors only if documented and escalated by management or legal counsel.

After the presentation and questions, a commissioner moved and a second was made to approve the financial audit so it could be submitted on schedule. The motion was taken by voice vote; commissioners recorded ayes and no nays were noted, and the commission passed the audit.

Commissioners and staff also discussed reinstating an annual comprehensive financial report (ACFR) and pursuing a GFOA certificate. Officials recalled the city issued ACFRs in 2019 and 2021 and last received a GFOA certificate in 2019; commissioners urged budgeting for the higher cost of the ACFR to restore that level of transparency.

Interim City Manager Miss Pierre said an operational audit team already under contract will be asked to "dig into" the six findings and provide department-level recommendations and process improvements. Commissioners welcomed that approach as a next step to translate the financial-audit findings into operational remedies.

The commission closed the item by thanking finance staff for their work during a difficult audit season and moving to adjourn. The operational audit and any follow-up actions on the six findings were left as the next steps.