Audit finds cash-management failures, repeated state reporting lapses in Blue Ridge

An independent auditor told the Blue Ridge council on Monday that while the city received an unmodified ("clean") opinion for its 2024 financial statements, the audit uncovered multiple material weaknesses, significant deficiencies and instances of noncompliance with state and federal rules.

Tacy Jo Bracken, the audit presenter, said the city's governmental funds showed a combined loss of roughly $2.5 million for 2024, with a general-fund deficit of $652,004.92. "We tested, vouched and confirmed these numbers," Bracken said, adding that the firm had issued what she described as the best opinion an audit team can give.

The nut graf: The report identified three principal problem areas that officials must fix to restore routine financial controls: (1) failure to reconcile and manage cash activities, (2) material adjustments made to the general ledger during the audit, and (3) repeated state-law reporting violations tied to special local option sales tax accounts and hotel-motel (tourism) funds. Those weaknesses prompted both internal-control and legal findings in the published audit.

On cash management, Bracken said bank reconciliations had not been performed timely, transactions were posted in the wrong period or omitted, and vendor invoices were duplicated (one example: a $29,000 double payment caught by the vendor). She singled out roughly $146,445 in local-option sales-tax receipts that were not recorded on the general ledger and about $16,323 in customer deposits that went uncollected after being rejected. "Cash management was a significant problem in 2024," Bracken said.

The audit also flagged repeat state-law noncompliance involving special local option sales tax (SPLAS) proceeds: $70,583 in SPLAS receipts were deposited into the operating account instead of the segregated SPLAS account and remained there for about a month; state rules require that SPLAS proceeds be kept separate and reported. Bracken said the city also failed to publish a required SPLAS schedule in the local paper within the required timeframe.

Federal compliance testing under the single-audit revealed additional issues: the city drew roughly $900,000 in October and $210,000 in November and held those federal funds in pooled city cash for months before remitting payment to the vendor in February 2025. The auditor estimated $7,486 in interest had been earned on those federal draws and said the city must ask the federal program manager (JIFA in the discussion) whether that interest is payable to the vendor or the U.S. Treasury.

Council members pressed on timing and next steps. Bracken said audit staff are working with city finance staff to complete a "proof of cash" and hoped to issue the 2025 report before the December statutory due date; she told the council the team was "off to a good start" but emphasized the pace depends on what the accountants find in 2024 and 2025 records.

The audit letter also included management comments urging staff to investigate withheld-deduction discrepancies from employee paychecks (e.g., gym memberships and insurance) and to pursue collection from the housing authority for payments in lieu of taxes, which staff said have not been collected since 2022.

Mayor and councilors responded that recent policy changes and new staff hires were intended to address many of the problems. The audit presentation closed with an admonition that several findings are repeat items and will likely appear again in the 2025 audit until corrective steps are completed.

The council did not take formal action at the workshop; staff were directed to continue reconciliations, research management comments and follow up with federal program authorities about interest earned on held draws.