Auditors flag qualified opinion over Crescent City police pension valuation; commissioners press for fixes

Auditors presenting Crescent City's FY24 financial statements told the commission on Thursday that they issued a qualified opinion limited to the city's police pension net pension liability because the actuarial valuation needed to determine the liability could not be obtained for the plan as it currently stands.

"We do have what's called a qualified opinion related to the police pension plan specific for this net pension liability," the auditor said, describing discussions with the plan actuary and the difficulty of valuing the still-open plan. The presenter said that outside of that single qualification, the audit showed unmodified opinions for the city's other funds and no findings in the single-audit testing related to federal expenditures over $750,000.

Why it matters: a qualified opinion narrows the scope of financial assurance the city can offer to lenders, grantors and the State, and it has complicated Crescent City's ability to file the audit on time in recent years. Commissioners said the audit's other communications — including material audit adjustments, missing payroll authorization documentation and a debt covenant calculation shortfall tied to a restricted fund — also need follow-up.

During questions, commissioners focused on what the city can do to remove the qualification next year. "How are we going to resolve the problem with the police pension plan?" one commissioner asked, noting the audit has been late in consecutive years. The auditor said the main complication was the timing of post-fiscal-year changes to the plan (purchase of annuities for some participants near the end of fiscal 2023) and that if the plan were closed with appropriate documentation the valuation issue would likely be resolved. The auditor added the state auditor general will accept the qualified opinion but may request follow-up information.

The audit presentation included several figures commissioners asked about: the general fund decreased about $360,000 in FY24; the government-wide assigned/unassigned fund balance in FY24 equaled about 52% of expenditures (well above a common minimum threshold of two months, 16.7%); and the auditors noted a restricted cash balance of roughly $172,000 in a bond-related fund tied to covenant calculations.

Commissioners also pressed staff on internal controls and documentation: the auditors reported missing support for some payroll rates and insufficient backup for a sample of disbursements, and they recommended written procurement and approval procedures with clearer thresholds and supporting invoices or purchase orders.

Next steps: staff and auditors agreed to prioritize resolving the police pension valuation and cleaning up documentation so the FY25 audit can proceed on an on-time schedule. The commission asked staff to return with a work plan that identifies responsibilities and a timeline to close the open control items and to explain any budgetary impact from corrective actions.