City auditors give Placentia a clean opinion but note a material weakness tied to accounting system implementation

At the June 30 meeting the city’s auditor, Rob Pearl of CLA, presented the annual financial report for the year ended June 30, 2025, and reported an unmodified (clean) opinion on the financial statements. At the same time, Pearl said audit procedures identified misstatements that were corrected by management and that those corrections led to identification of one material weakness in internal control.

Pearl described the audit scope — financial statements, GANN limit procedures and attestation work — and said presumed significant risks included override of internal controls and revenue recognition. He explained some misstatements related to timing under the city’s 60‑day period of availability (modified accrual basis) and to implementation issues arising from the recent accounting system conversion. “The issuance of the financial statements was delayed due to the implementation of the city's accounting system,” he said.

Council members asked several technical questions. A recurring example was a veterans village promissory note where auditors found the principal recorded in prior periods but accrued interest had not been recorded; Pearl said management planned to record that interest in FY 2026. Pearl also reviewed changes required by the GASB implementation (compensated absences under GASB 101) and said some organizations elect not to restate beginning balances when the effect is immaterial.

After the presentation council moved to receive and file the audit; the motion passed 5–0. The auditor recommended ongoing review of internal controls and careful implementation oversight as the city continues to use the new accounting software.