Committee recommends approval of Elm Grove's clean 2025 audit showing stable reserves and TID activity

Michelle Walter of accounting firm Baker Tilly told the Finance & Licensing Committee that the firm issued an unmodified (clean) opinion on Elm Grove's 2025 financial statements and summarized the audit process, which focused on risk areas including management override and revenue recognition.

The audit showed the General Fund recorded $8.4 million in revenues and $8.3 million in expenditures, increasing fund balance by about $100,000 to $2.7 million, of which just over $1.0 million is unassigned (roughly 12% of next year's budgeted expenditures). Walter said the unassigned balance falls slightly below the Village's policy target range of 15'25%, attributing the shortfall in part to advances to other funds. "Baker Tilly issued an unmodified audit opinion," she said, indicating the statements are materially accurate and contain required disclosures.

Committee members and Finance Director Brian Lahey discussed several fund-level items highlighted in the audit. Lahey identified TID 2 activity that produced a fund deficit and said the deficit is expected to be recouped through future tax increment and planned debt issuance. He also noted that TID 3 had been classified as a new major fund because of high activity in 2025: revenues were $186,000 against $8.7 million in expenditures, offset by $8.5 million in debt issuance; the primary activity was a developer payment to Mandel that was accrued in 2025 when occupancy triggered the obligation, with cash disbursement occurring in January 2026.

Lahey flagged two narrative items for correction: a bullet on page 9 referencing TID 3 tax increment used an incorrect base year and would be redacted in the public electronic version, and the MD&A's reference to a projected $12 million 2026 debt issuance is likely closer to $15 million with repayment not solely from TID increment but also from stormwater and other funding sources.

Other audit details noted by Baker Tilly and staff: the Sewer Fund increased fund balance to about $2.1 million, the Debt Service Fund increased to roughly $1.01 million (restricted for debt service), the Five-Year Capital Fund ended near breakeven with a committed balance of about $2.4 million, and aggregate non'major funds decreased by about $1.6 million. Long-term obligations totaled approximately $11.4 million, including $8.5 million in new debt issued in 2025 tied to the Mandel payment, with scheduled principal and interest through 2040.

President Jim Koleski and committee members requested fuller visibility into audit adjustments. Koleski said he would prefer the committee be made aware of all journal entries and corrections during the audit, not only those deemed material; Michelle Walter said Baker Tilly provides a complete listing of entries to the Finance Director and that could be accommodated. Mr. Nicholas Ganos moved to recommend approval of the 2025 audited financial statements; Trustee John Schindler seconded and the motion passed 4-0.

The committee forwarded the audit and recommended corrections to the full board; the item will move to the board for formal acceptance and public posting of the corrected electronic financial statements.