City audit issues material weakness but shows strong fund balance

The city's independent auditor told the Helotes City Council that the FY25 financial statements received an unmodified opinion but that the audit also identified multiple significant journal adjustments that amount to a material weakness in internal controls.

"We did issue what's called an unmodified opinion," Kimberly Roach of Armstrong Von and Associates told the council. She added that the audit required several significant journal entries and that the volume of adjustments "did lead to what we have to refer to as a material weakness in internal controls." She said the firm also recorded one written finding and had discussed corrective actions with management.

Roach outlined key numbers: the general fund had a positive change in fund balance of about $2 million for FY25, bringing the ending general fund balance to roughly $13.1 million (about 17.4 months of average operating expenditures based on FY25 actuals). She said revenue gains included about $435,000 in water credits tied to the Brycewood subdivision, plus higher-than-expected sales tax and court fines. The city's ARPA balance was reported at about $283,000 remaining and projected to be spent in FY26 to meet reporting deadlines. Roach also noted a roughly $119,000 increase in the tree mitigation fund related to Brycewood Unit 5.

Council members asked about reserve policy and whether some of the growing balance should be earmarked for specific purposes; the auditor said policy decisions about spending excess reserves are outside the auditor's scope and are management or council decisions. When asked about restricted funds, Roach said the $13.1 million was unassigned fund balance and therefore available for general spending; she advised that other funds with restrictions are tracked separately.

The council approved the audit-related consent item after questions were answered. Council members requested follow-up on corrective action plans to address the material weakness and confirmed staff would bring more detail on recommended internal-controls improvements.