Audit of 2022-23 fiscal year sees two funds given qualified opinions

JOHN DAY – The long awaited audit of John Day’s finances during the 2022-23 fiscal year found governmental activities and the urban renewal agency receiving qualified opinions while eight other funds received unmodified opinions.

Zwygart John & Associates CPAs based in Nampa, Idaho, conducted the audit. An unmodified opinion is the opinion cities strive for and indicates the auditor found no misstatements or errors in financial statements. A qualified opinion indicates the auditor finds the financial statements are fairly represented but have exceptions or limitations.

Three funds: the URA, community development fund and information technology fund had negative balances totaling $895,489, with the urban renewal agency’s negative balance alone at $544,943.

The audit also revealed a pair of funds whose expenditures were over the city’s initial appropriations. The city spent $78,242 more out of the general fund on administration than the budget called for and $7,694 more than anticipated for capital outlay for the urban renewal agency.

The city had $1,583,201 in cash and cash investments in June of 2023.

IT Fund

The city’s contract recorder, Rob Gaslin, said the IT fund was negative during the 2022-23 fiscal year due to just more than $1.8 million in grant funds that were budgeted for but not obtained. Gaslin said the city decided to pass on the grant funding due to the city needing a $200,ooo match to obtain it.

Gaslin said normal operating costs and the acquisition of the John Day cybermill also contributed to the negative fund balance.

Community development

Gaslin said everything related to the pool project ran through the community development fund, which contributed to the fund’s negative balance. The city anticipated receiving a grant for the pool and the city continued under the assumption the pool bond would pass, Gaslin said.

Urban Renewal Agency

Gaslin said the URA’s negative fund balance is due to the city paying the URA’s costs while no recordable income came into the fund.

The city has taken out half of a $1.8 million loan for the URA from Business Oregon but is holding off on the second half of that loan. Gaslin said the city has the money to cover the costs without the second half of the Business Oregon loan.

Gaslin said the URA changed in 2021-22 with three agreements with developers that saw the city pay $1.8 million in development costs for The Ridge, Ironwood Estates and Holmstorm Heights, the three developments within John Day’s URA.

Gaslin said he thinks the URA will get to a point where it can pay for itself even with its difficulties.

Gaslin said the URA fund will struggle for the next five or so years before balancing out if things go as planned. He said to meet projections, right around two homes a year would need to be constructed within the URA.

Gaslin highlighted that the URA is already ahead of projections despite the fund’s negative balance in 2022-23.

Auditor’s report

The report said the city of John Day lacked oversight of federal payroll tax liability recording. That lack of oversight caused the city to fail to make required payments from the quarter ended Dec. 31, 2022, leading to significant penalties and interest charges to the city, according to the report.

In response, the city has hired new accounting staff and engaged an external CPA to provide assistance with accounting and payroll functions. Existing policies and procedures have been reviewed and updated to ensure future compliance.

The city needs to have an audit of the 2023-24 fiscal year to catch up on its required audits. State law mandates yearly audits for municipal corporations with expenditures exceeding $1 million.