Seldovia City Council work session: auditors give unmodified FY24 opinion but flag material adjustments and a repeated finding

Seldovia — At a city council work session on April 28, auditors from LG Rayfield LLC told council members they issued an unmodified opinion on the city’s FY24 financial statements while identifying several material adjustments and a repeated but narrowed reportable finding on internal controls.

"We had no significant difficulties during the audit or disagreements with management," said Karen Tarver, the engagement partner for LG Rayfield LLC, while walking council through the letter to the council and the audited financial statements for the year ended June 30, 2024. Tarver said auditors’ role is to opine on whether the statements are materially correct under generally accepted accounting principles and Governmental Accounting Standards Board rules, while management retains responsibility for preparing the statements and maintaining internal controls.

The auditors found several material adjustments that management corrected before finalizing the statements. Tarver said the largest categories of changes related to revenue recognition in governmental funds — specifically whether receivables met GASB’s "available and measurable" criteria (available meaning received within 60 days of year-end) — and to how retirement expense and pension liabilities flowed through payroll and accounting systems. Tarver told council those adjustments, and related corrections to grant receivables and cash postings, had been recorded in the final statements.

Tarver also noted one accounting-policy change under GASB Statement No. 100 that affected presentation: wastewater no longer met the 5% threshold for a "major fund" and was reclassified among nonmajor funds in FY24. She highlighted a net increase of $355,107 across all governmental funds as reported in the statements.

The auditors included a reportable condition (finding 2024001) and described the prior-year material weakness over financial reporting as repeated but more focused this year. "We did have to give you a finding again this year, but we did see a lot of improvement and felt like you guys are on the right path," Tarver said, commending the work of Jan and city staff and noting the city's external bookkeeping assistance had improved the records' readiness for audit.

City Manager Heidi said staff is continuing research on several small deferred or donation accounts that Tarver flagged as "in limbo," including older donation accounts that may need reclassification or closure. Tarver cited an example in the harbor improvement CIP fund: the statements reflect about $212,000 in that fund’s assets, including roughly $146,000 recorded as deferred revenues tied to older postings that management will review.

Tarver advised council that the city did not trigger a single audit for FY24 (no large federal/state compliance audit required) and that management elected to omit a Management’s Discussion and Analysis narrative from the bound financial statements — a choice she said is common among small governments and does not affect the audit opinion.

Tarver and the auditors recommended continued training and use of external bookkeeping support to address the accounting changes and to resolve specific account issues; management included a corrected action plan and summary schedule of prior-year findings in the audited statements. Tarver said she is available for follow-up questions and that auditors remain available year-round.

The chair opened the floor for questions; council members had no substantive questions and thanked Tarver and staff. The work session adjourned and the regular council meeting was set to begin at 06:00.

What happens next: management’s corrective action plan is included in the financial statements; council members and staff can follow up with LG Rayfield LLC for further clarification or technical assistance.