Seward audit issues clean opinion but finds 18-month utility-billing lapse

Seward — At a July 13 work session, auditors from Altman Rogers and Company told the Seward City Council that the city’s 2025 financial statements received an unmodified opinion, while reporting a single significant deficiency in utility-billing controls.

“My name is Grant Todd. I’m an audit partner with Altman Rogers and Company,” Todd said as he opened the presentation and summarized the firm’s risk-based approach, including statistical samples of 40 transactions per class that he said produce about “90 to 92% confidence.” He emphasized that an unmodified opinion means the statements present fairly, in all material respects, the city’s financial position as of Dec. 31, 2025.

The audit found one error rising to the level of a significant deficiency: a customer account that had not been billed for a prolonged period. Todd described that the missed bills spanned roughly 13 to 18 months; the account did not appear on the monthly meter-reading or missed-reading exception reports. “Management did identify the problem and correct it,” Todd said, and the finding is recorded in the audit’s schedule of findings and responses. The audit letter and corrective action plan are included in the compliance section of the report.

Council members and staff used the session to probe how the lapse occurred and what safeguards are being added. A council member asked why the missed billing did not show up on exception reports; city staff answered that the meter had not been read and that staff discovered the issue in June 2025. The city manager and staff said they recently expanded billing oversight—adding positions in the electric department to provide additional review and troubleshooting—and that management will be required to prepare a corrective action plan that auditors will verify in next year’s testing.

Beyond the finding, Todd walked the council through the main financial statements and budget comparisons. He reported an overall increase in net position of about $1.58 million (approximately $1.38 million for governmental activities and $0.2 million for business-type activities). The city’s general fund held roughly $19.5 million in cash and investments, with an unassigned fund balance of about $9.6 million (a small decrease of about $200,000 from the prior year). General fund revenues were about $17.2 million against expenditures of roughly $17.4 million, producing a $12,000 increase in fund balance compared with a budgeted loss of about $1.15 million.

Todd also summarized enterprise-fund performance, noting a notable swing in the electric fund (a loss this year of about $1.3 million compared with a prior-year gain) and a harbor fund deficit near $600,000, while the health-care facilities enterprise reported strong unrestricted net position. He explained auditor procedures for capital assets, including searches for unrecorded assets and capital‑asset listing checks, after council questions about whether some capital costs were being recorded as operating expenses.

The auditors advised the council that planned project spending tied to a shore‑power grant and other 2026 expenditures will push Seward past the federal single‑audit threshold of $1,000,000 in federal expenditures, making a federal single audit likely for the 2026 fiscal year. Todd said the firm will review those expenditures during the next audit cycle.

Todd closed by offering a shorter, roughly 10‑minute summary for the council’s upcoming regular meeting focused on internal‑control testing and the audit conclusion; staff noted the full audit PDF is already posted on the city website. The work session was adjourned and the council planned to reconvene for its 7 p.m. regular meeting.

What happens next: management will finalize a corrective action plan for the missed billing; the auditors said they will sample the missed account and repeat the 40‑transaction tests in next year’s audit to confirm remediation. The audit report and the schedule of findings are posted on the city’s website.