Department of Finance
Reference: 2024 Financial Audit Report
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Finance Director
Date Prepared: July 8, 2025
PURPOSE
To present the results of the 2024 annual financial audit.
BACKGROUND
The City is required by the Brighton Municipal Code to have an audit completed by an external auditor appointed by City Council within six months of year end (June 30th). An RFP to select an auditor was completed in 2023 and staff recommended selection of RubinBrown. At that time, City Council accepted the recommendation and appointed RubinBrown as the City’s financial auditor for the 2023 audit, with the option to renew the contract for up to 4 additional years. Audit services are competitively procured at least every five years.
A financial statement audit is an in-depth examination of the organization’s financial information and documentation, including internal controls. Financial statement audit procedures are designed to provide reasonable assurance about whether the financial statements as a whole are free from material misstatement. The City’s financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP), which includes accounting standards established by the Governmental Accounting Standards Board (GASB).
SUMMARY OF RESULTS
The audit of the 2024 Annual Comprehensive Financial Report (ACFR) was completed on June 9, 2025. The audit opinion issued by the auditors was unmodified, meaning that the financial statements fairly represent the financial condition of the City.
Auditors are required to communicate certain information to the City’s governing body (City Council) and the attached presentation includes all required communications.
Findings
An audit finding means that the auditors identified a financial reporting discrepancy or a compliance requirement wasn’t completed properly. Three findings were identified in the 2024 audit. These were all related to adjustments identified by City staff through thorough reviews of historic information completed as part of preparation for the implementation of a new financial system.
The adjustments staff identified and related findings are summarized below:
Impact Fee Revenues
The City frequently commits to reimbursing developers for improvements made up to the amount of impact fees collected for a specific development. If improvements are not made, the City retains those funds. All improvements eligible for reimbursement must be open to and usable by the general public, such as a public park.
In some cases, the City had recorded impact fees collected related to these agreements as a liability for future payment to the developer rather than as revenue. However, those fees are still revenue for the City and any reimbursement paid would be an expense when incurred (when the developer meets the requirements to receive reimbursement). By recording these fees as a liability, the revenue hadn’t been recognized in the financial statements. The adjustment staff identified was to recognize the revenue held as liabilities which increased revenues and therefore fund balance by $1.4M. This did not impact cash balances as the cash payments had already been received.
Water Rights Assets
The City often receives water rights dedications from developers. When received, the City receives a certificate, but no cash changes hands. For many years, water rights received were recorded and managed by departments receiving them but not recorded in the financial system. In 2024, the Finance Department worked with Utilities staff to verify the water rights owned by the City and update the financial system records to reflect rights owned but not recorded. This resulted in increase to the capital asset balance in the Water Fund of approximately $39M. This did not impact the actual water rights held by the City.
Cash and Liability Balances for BURA Rebates
BURA has agreements with several other entities for rebates of property tax revenues in the North BURA area. Each year, staff calculates the rebates available for each entity and moves those funds to separate investment accounts managed by the City/BURA. The funds are not paid out to the third parties until they have eligible project spending for which they can be reimbursed.
These rebates had previously been recorded as an expense and liability when moved to separate investment accounts. However, this action is simply a restricting of cash and doesn’t result in an expense or liability until the entities have an eligible reimbursement and the cash can be distributed. The adjustment made to the North BURA fund reclassified $444K from liability and expense to restricted cash, increasing net position in the fund by that amount.
Management Letter Comments
Auditors provide Management Letter Comments to highlight areas where internal controls or other processes should be reviewed and improved to avoid findings in the future. One comment was provided related to the 2024 audit which is summarized below:
Interfund Activity Review
The City has numerous activities and transfers that occur between funds. In one instance, there is a loan from the General Fund to the Storm Drainage Fund that was made in 2021 to finance an outfall project. It was intended to be repaid over time with payments starting in 2024 and continuing for 15 years. The loan does not bear interest.
It was decided in 2024 that the loan should be forgiven due to the limited resources of the Storm Drainage Fund. The accounting entry to reflect the loan forgiveness recorded the balance sheet (receivable and payable) but erroneously omitted the income statement impact (transfer in and out). This was corrected and in order to limit budgetary impacts, the loan will be forgiven annually over the original repayment period.
Staff have made note of this and will ensure interfund transactions of this nature incorporate the income statement components of the transaction in the future.
The full ACFR is available on the City’s website at www.brightonco.gov/acfr <https://cityofbrighton.sharepoint.com/sites/FinanceManagers/Shared%20Documents/Council%20Items%20and%20Presentations/2025.7.8%20-%20Contract%20Listing,%20Audit/Audit/www.brightonco.gov/acfr>.
Attachments:
Ø 2024 Annual Comprehensive Financial Report, including the Audit Opinion
Ø Presentation, including all required communications