Auditors give Dayton a clean opinion but flag federal-grant controls and internal‑control gaps

Clifton Larson Allen principal Chris Kopic told the Dayton City Council the city’s 2025 financial statements received an unmodified, or “clean,” audit opinion, the highest level of assurance auditors can give.

Kopic said the audit surfaced a small number of uncorrected adjustments — notably a lease‑term calculation affecting one cell‑tower receivable (roughly $53,000) and a reclassification of where PFA (state) dollars were reported (about $220,000) — none of which changed the city’s bottom line. “The city received an unmodified or clean audit opinion on your financial statements,” Kopic said.

Why it matters: a clean opinion signals the financial statements can be relied on by creditors, bond markets and grantors, but Kopic emphasized that audits provide reasonable — not absolute — assurance and flagged specific control improvements the city should make.

Key findings and recommendations

- Segregation of duties: Auditors classified a material weakness in internal control because a limited number of staff handle several key financial functions. Kopic said resolving that weakness would generally require additional staffing or stronger compensating controls.

- Federal grant controls (HUD): auditors identified three federal‑grant related material weaknesses. First, documentation that the city verified contractor suspension/debarment in SAM.gov was missing the verification dates (proof the check occurred before contracting). Second, grant reporting processes lacked a formal independent review, increasing the risk of reporting errors. Third, the grant’s environmental‑review sequencing had been mishandled early in the project timeline (staff relied on erroneous guidance from a HUD representative), creating control weaknesses even though no instances of improper payments were found. Kopic recommended adding explicit self‑certification language to federal contracts and improving retention of SAM.gov checks and reviews.

- Minnesota legal compliance: auditors noted one technical omission in the city’s debt‑service levy resolution: state statute expects a city to levy 105% of principal and interest or to explain why it does not; one bond resolution missed the explanatory language and needs a simple correction.

Council response and next steps

City staff and council members asked for follow‑up to fix the documentation gaps, tighten contract language for federal projects, and pursue modest process changes to strengthen review of grant reporting. The auditors suggested working with legal counsel, engineering and procurement staff to add a contractor self‑certification clause when federal dollars are involved and to preserve verification records.

The council did not take formal action at the presentation beyond asking staff to return with any corrective steps needed for grant compliance and the levy‑resolution wording.

Ending

Kopic and his colleague Frost Bowen Bailey remained available to answer follow‑up questions; staff said they would work on corrective language for contracts, update record‑retention practices around SAM.gov checks, and report back on progress.