Juneau gets clean audit despite control gaps, three-month delay

The City and Borough of Juneau received an unmodified opinion on its fiscal year 2025 financial statements, but auditors flagged two material weaknesses and one significant deficiency in internal controls and issued the report in late March instead of the usual mid-to-late December timeframe.

Karen Tarver, a partner with LG Rayfield, told the Assembly Finance Committee on June 3 that the audit was issued March 31, 2026. Delays stemmed primarily from Bartlett Regional Hospital's audit timing, staff turnover in the finance department, and accounts that had not been fully reviewed or reconciled at the start of the audit.

"So with two different audit firms and it being a first time through for Bartlett's auditors, they had additional time that was needed for them to complete their audit," Tarver said. "And because of that, because we did not get Bartlett's final issued financial statements, then CBJ was not able to finish out some of their final allocations, specifically the internal service allocations, until we have both Bartlett and school district financial statements."

Auditors found a $10 million bond timing error, an $8.6 million harbor lease valuation error, and a $2.7 million sales tax calculation error. All were corrected during the audit. "We did have what we call some material misstatements that were corrected as a result of our audit," Tarver said.

Two material weaknesses identified

The first material weakness related to insufficient review of reconciliations for debt issuance, tax accruals, and unearned revenue. "The reconciliations for debt issuance, tax accruals, and unearned revenue had not gone through sufficient review and had not been tied out," Tarver said. "We call it tied out, but had not been reviewed and made sure that they agreed to the account balances in your system prior to providing them to us to audit."

The second material weakness involved harbor lease receivables. "We found that communication between Harbors and Finance was not sufficient and that there had not been adequate review of the variable leases," Tarver said. Auditors found that variable leases, those with adjustments every three to five years tied to appraisals or CPI, had been valued incorrectly under GASB guidance.

Auditors also identified a significant deficiency related to the compliance schedule preparation, which is used to reconcile grant information.

Despite the findings, Tarver emphasized improvement. "The overall preparation has really improved," she said. "And so I do not want you to dwell on this. I want you to think about that you have an unmodified opinion, and that is what you want, right? So nothing led us to conclude that amounts were wrong in the financial statements as they were issued. It is just what we see is that there is some improvement that can be done over the reconciliation and review process."