Watertown City Council Accepts Clean 2024 Audit; Financial Strength Highlighted
- Steve Jurrens
- Oct 7
- 3 min read
Northeast Radio SD News - Watertown, SD - During the latest meeting, the Watertown City Council gave its official approval to the 2024 financial audit, following a thorough overview from Eide Bailly LLP, the city’s new external auditing partner.
The report, delivered by partner Brian Stavenger, confirmed that the city received a clean, unmodified audit opinion, the highest level of assurance, affirming the accuracy and compliance of the city's financial statements for the calendar year ended December 31, 2024.
Stavenger noted that Eide Bailly is the new auditing firm for the city, and the presentation served as an executive summary of the extensive Annual Comprehensive Financial Report (ACFR).
Clean Audit Opinion on City and Federal Funds
The audit's objectives and outcomes demonstrated a high degree of fiscal accountability.
· Financial Statements: The city received a clean, unmodified opinion, meaning the financial numbers are materially accurate and adhere to all required governmental accounting rules.
· Federal Funds: The city's expenditure of $10.9 million in federal funds in 2024 triggered a separate federal audit. This also resulted in a clean, unmodified opinion on controls and compliance regarding the use of those federal dollars.
Procedural Findings and Prior Year Adjustments
The audit identified two key items that led to restatements of the beginning fund balances for 2024, as well as three procedural findings for management to address.
Restatements:
1. New Accounting Standard: A new accounting standard was implemented for reporting compensated absences, requiring a change in how various forms of employee leave, such as sick and military leave, are measured and reported.
2. Correction of Error: An adjustment was made to correct an error from prior years related to naming rights and sponsorship agreements. Revenue from these agreements, which had previously been recognized in a single year, was adjusted to be recognized appropriately over the life of the agreement.
Procedural Findings:
1. Two findings were related to the year-end financial statement preparation, citing adjustments made by auditors and a lack of segregation of duties around year-end account reconciliations and general entries, primarily falling under the finance director's responsibility.
2. One finding related to federal awards noted that a report for ARPA funding was submitted without a formal review by a second individual, a necessary internal control measure.
Stavenger confirmed that city management has a plan in place to address and mitigate these procedural findings going forward.
Detailed Financial Position
The audit highlighted the strong reserve position and positive operational outcomes across the city's core financial areas.
General Fund Performance
The General Fund, which is the main operating fund, showed a net change of $695,693 in 2024, significantly outperforming its budgeted deficit. This favorable outcome was driven by actual revenues exceeding the budget by over $733,000, and actual expenditures coming in nearly $709,000 under budget.
General Fund Summary | Actual (2024) | Budget (2024) |
Revenues and Other Sources | $20,389,786 | $19,656,202 |
Expenditures and Other Uses | $19,694,093 | $20,402,933 |
Net Change in Fund Balance | $695,693 | ($746,731) |
The Unassigned Fund Balance (unrestricted reserves) for the General Fund at year-end was $6,038,475. This figure represents approximately 30.66% of annual General Fund expenditures, which translates to about eight months of operating reserves. Auditors stated this is a "good strong position" and within the national average for local governments.
Watertown Municipal Utilities (WMU)
The combined WMU funds (Electric, Water, and Gas) are operated like a business and continue to generate strong positive results.
· Operating Income: The combined WMU funds generated an operating income of about $10.8 million in 2024, with a positive operating income consistently demonstrated over the past eight years.
· Net Position and Debt: The WMU's total net position (equity) at the end of 2024 was $105.8 million. Furthermore, the utilities' operating philosophy, which utilizes cash for capital projects rather than external debt, was cited as a fiscally responsible practice. Auditors estimated that the WMU’s current cash position could sustain operations for about one year.
· Sewer Fund: The Sewer Fund, which has some associated debt, operated in the black for 2024. Its net position at year-end was over $70 million, with approximately 87% of that tied up in infrastructure.
Council Vote
Following the presentation, a motion was made by Councilman Schutte and seconded by Councilman Peters to accept the 2024 audit as presented by Eide Bailly. The motion passed by a unanimous vote of the City Council.
