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City audit shows clean opinion but flags weak governmental fund cash positions
Summary
Auditors delivered an unmodified opinion on Virginias 2025 financial statements but warned of low cash balances in multiple governmental funds and repeated management findings; councilors asked for follow-up detail on year-end fund transfers totaling about $3.29 million.
Tom Kelly of Walker, Drew and Hani told the council the firm will issue an unmodified—"clean"—opinion on the city's 2025 financial statements. "We will be giving an unmodified opinion a clean opinion," Kelly said, adding the city likewise met federal single-audit requirements after spending more than $1,000,000 in federal funds in 2025.
Kelly said enterprise funds performed well in 2025 while several governmental funds ended the year with very low or negative cash balances that were presented on the statements using due-to/due-from entries. He explained the practice as necessary for presentation when a fund would otherwise show negative cash, and noted the general fund had a "due from other funds" balance of roughly $3,288,000 tied to year-end reclassifications. Kelly also pointed to an ambulance fund cash decline of about $1,000,000 year over year and a total governmental fund decrease in fund balance of about $450,000 compared with a $695,000 decrease in 2024.
The audit packet included a $3,000,000 HUD grant for a public-works alley project identified as the major federal program tested under the single-audit schedule; Kelly said that grant was fully expended in 2025 and cash was received in early 2026. He summarized the audit findings as recurring but routine for a small city: segregation-of-duties limitations, control over financial reporting (standard when an external firm helps prepare statements), and an isolated contracting/bid documentation timing item. Kelly told the council those management points "need some work" and recommended budgeting and operational steps to restore healthier governmental fund balances.
Councilors asked for supporting detail and follow-up analysis, including line-item backing for the year-end transfers and the relationship between transfers recorded in 2025 and cash availability on January 1, 2026. Kelly agreed to provide more detailed backup for council review and said an extension to finalize the audit would be accommodated if the council requested it.
