Biloxi auditors give FY25 unmodified opinion but flag ARPA reporting and procurement findings

The City of Biloxi received an unmodified audit opinion for fiscal year 2025, the auditors told the City Council, while the audit report also identified two federal award findings and two findings of noncompliance with Mississippi law.

Maria Sailor, audit director for ABL, told the council the audit produced three deliverables: the audited financial statements, a letter of communication to those charged with governance, and a management recommendations letter. She said the financial statements ‘‘paint a picture of the city's financial health as of 09/30/25’’ and that the unmodified opinion is ‘‘the highest opinion that we can offer.’’

The report includes two federal award findings: an incomplete prior‑year schedule of federal expenditures and ‘‘lack of documented policies and procedures’’ required by uniform guidance, Sailor said; the auditors noted there were no questioned costs associated with those findings. On state compliance, Sailor said auditors identified two instances where Mississippi laws were not followed: the state preference law was not applied on a contract awarded to a nonresident bidder, and bidding was opened before the required 15 working‑day period. Management provided corrective action plans, she said.

Council members pressed auditors for clarity on fund balances and prior‑period ARPA adjustments. Sailor pointed council members to the governmental funds financial statements (page 19 of the report) and identified the total fund balance as $27,929,848 and the unassigned general fund balance as $11,521,562. She explained a prior‑period adjustment tied to roughly $6.9 million in ARPA obligations that were obligated near the September fiscal year end and therefore were reported as prior‑period revenue rather than in the prior year’s statements.

On the water and sewer enterprise, a council member asked whether a reported operating loss of $9,121,315 meant the fund was ‘‘underwater.’’ Sailor said net position for business‑type activities remained positive (about $369 million) and that the current‑year operating loss included depreciation and amortization; excluding those noncash items, she said the fund would show roughly a $1 million gain.

Sailor also reviewed note disclosures, including restricted cash (note 2) and long‑term liabilities (note 4 and note 10 on employee benefit plans), and said the city expended over $18 million in federal funds in FY25, triggering a single audit and the federal findings. She said new GASB standards (GASB 101 and GASB 104) will take effect for the city in FY26 and will change aspects of financial reporting, including capital asset presentation and the management’s discussion and analysis.

The council did not take a vote to accept the audit at the meeting; Sailor confirmed that corrective action plans and management responses are included in the report and that the administration intends to address the findings. The audit materials were provided for the council’s review, with formal action on acceptance deferred to a future meeting.