The Auditor Couldn’t Sign Off on a Single Fund
In 2025, residents petitioned for an independent audit of the City of Rivergrove's finances. That audit is now complete. This post covers two things: what the auditor found, and how the Council has publicly characterized those findings.
What "qualified" means
When an independent auditor examines a city's books, the best possible result is an unmodified opinion—sometimes called a clean opinion. It means the auditor can vouch for the financial statements.
A qualified opinion is different. It means the auditor found something significant enough that they could not give the city a clean bill of health. It is a formal reservation, stated in writing, by a licensed professional.
The City of Rivergrove received a qualified opinion on all five[1] of its opinion units:
- Governmental Activities—Qualified
- General Fund—Qualified
- Highway Fund—Qualified
- Heritage Park Maintenance Fund—Qualified
- System Development Fund—Qualified
Five for five.
The language here is undramatic on purpose. Audit vocabulary is built to be measured, not alarming—so it's worth translating. An unmodified opinion is the clean result cities want. A qualified opinion on one fund is a serious reservation. A qualified opinion on every fund is not something you explain away in a paragraph. An auditor either vouches for the numbers or flags that they can't—and here, on all five funds, they flagged that they can't.
Why the auditor qualified the opinions
The auditor, Merina+Co, explained the reason plainly. They wrote that they were unable to obtain sufficient evidence to verify the city's beginning fund balances, and that they could not determine whether historical amounts had been recorded in the correct funds.
We were unable to obtain sufficient appropriate audit evidence regarding the accuracy of the beginning fund balances and net position as of July 1, 2024.Independent Auditor's Report, "Basis for Qualified Opinions"
In plain terms: the auditor could not confirm that the city's money is accounted for correctly, or that it is sitting in the funds where it belongs. For a city whose road money is constitutionally restricted to roads, "we can't confirm the money is in the right buckets" is not just a technicality.
And it wasn't hypothetical. At the June 2024 budget meeting, a resident caught a state transportation grant that had been deposited into the General Fund—money the state restricts to roads. There was no direct response to the resident. I brought it up again so it might be addressed. The Mayor then conceded the error:
Correcting a misplaced grant, June 4, 2024 Budget Meeting
The four compliance findings
In addition to the qualified opinions, the auditor listed four specific compliance findings:
- The FY2024–25 budget was not properly noticed to the public.
- The city spent more than its budget allowed in two funds—the General Fund (over by $39,815) and the Heritage Park Maintenance Fund (over by $1,095).
- The City Manager's fidelity bond lapsed one month into the fiscal year under audit and stayed unrenewed for the rest of it. This is the insurance that protects city funds; specifically, the policy that would protect Rivergrove if our City Manager absconded with our funds. So the only person handling the city's money was unbonded from August 2024 until it was reinstated effective July 1, 2025.
- An "arbitrary" overhead transfer involving the Highway Fund could not be confirmed as legal. The auditor found the transfer was not supported by any documented methodology, time studies, or other evidence, and stated they could not determine whether it complied with the Oregon Constitution's restrictions on how highway money may be spent. In the city's own budget, this appears as a transfer from the Highway Fund to the General Fund—road-restricted money moved into general operations, with no documented basis for the amount.
The auditor's own word for the Highway transfer was arbitrary.
And despite that finding, the city's plan is to keep making the transfer. As covered later in this post, the council declined to pause it—and intends to document a justification after the fact.
One resident caught the same failure three times
The budget's notice problem was raised in public while it was happening—and not just once. A month before the budget was adopted, at the May 13, 2024 council meeting, resident Landon Gentry told the council he had emailed the city that the budget meeting had not been properly noticed:
"I sent an email around the same time noting that the budget meeting was not held with the proper notice. The notice that was provided did not meet the notice required in Oregon Revised Statute 294.426."[2]
The council did not respond; the meeting moved on to approving the April minutes. Gentry raised it again a month later, at the June 10, 2024 budget hearing—citing Oregon budget law (ORS 294.438) by number:
"You actually did not meet the notice requirements for this budget hearing."[3]
Warned twice, the council adopted the budget anyway. Nearly two years later, the auditor reached the same conclusion (finding #1).
The audit records that the problem was "corrected for the following year." It was—but the correction was not the council changing how it works. In June 2025, the same resident caught the same failure again: the next year's budget hearing had not met Oregon's five-day notice requirement. The council had to reschedule the hearing to June 18, 2025 to comply.[4]
In November 2025, Council President Bill Tuttle acknowledged two of them on the record: "two instances in which [Gentry] questioned whether the budget meeting was properly noticed."[5] The city's budget notice improved the following year not because it reformed its process, but because the same resident kept watching—and kept having to point out the same failure.
Three internal-control deficiencies
Separately, the auditor identified three deficiencies in the city's internal controls. Two were classified as material weaknesses—the most serious category short of an adverse opinion—and one as a significant deficiency. A material weakness means there is a reasonable possibility that a significant error could occur and go undetected.
The audit report names these findings[6] but states that the substance is set out "in a separate letter to management dated June 3, 2026." That letter—the auditor's AU-C 265 communication—is where the actual problems and recommendations are described. It was emailed to city councilors, but not included in the public council packet for the meeting where the audit was accepted.
The public was also not presented with the auditor's AU-C 260 governance letter, the Exit Memorandum, or the city's Plan of Action to the Secretary of State (that's the document in which the Mayor and Council President formally told the state how the city intends to fix the findings). It was not developed with or run by the full council. The packet did include the audited financial statements and the corrective resolution, but that resolution only named the auditor's letters without including them, and made no mention of the Plan of Action.
Residents were given the labels; the letter explaining what the labels meant, and the city's written promises to the state about fixing them, stayed out of the public packet.
So here they are:
AU-C 265—Communication of Internal Control Deficiencies
The three findings in full—criteria, condition, cause, effect, and the auditor's recommendations.
June 3, 2026 · Merina+Co
AU-C 260—Letter to Those Charged with Governance
The auditor's governance communication, including why the opinions were qualified.
June 3, 2026 · Merina+Co
Exit Memorandum
The auditor's additional comments and recommendations to management.
June 3, 2026 · Merina+Co
Plan of Action to the Secretary of State
The city's corrective-action plan, signed by the Mayor and Council President.
June 17, 2026 · City of Rivergrove
How the results were described to the public
At the July 13, 2026 Council meeting, Council President Bill Tuttle presented a written summary of the audit and read it aloud. His summary walked through the findings and concluded:
"So basically, all the issues mentioned in the audit have been addressed and fixed."[7]
There are a few problems with "addressed and fixed" (hence my objections in the clip).
First, the written summary that reached this conclusion made no mention of the five qualified opinions—the single most significant result in the audit. A reader of the summary would not know the audit was qualified at all.
Second, the same summary that says everything is "fixed" also states, of the finding on unverifiable fund balances:
"Unable to correct for past failures, our new processes will address this."[8]
Addressed and fixed and unable to correct appear in the same document, about the same audit.
Third, the corrective measure the summary points to[9] did not take effect until July 1, 2026. As of the meeting, no new control had operated for any meaningful period. In audit terms, a material weakness is not "fixed" when a policy is adopted; it is remediated only after the new controls have actually operated over time and an auditor has tested them. That determination belongs to the auditor, at the next audit—not to the body that was audited.
The contradiction was not only in the written document—it was spoken aloud. Moments before concluding that everything was "addressed and fixed," Tuttle said of the beginning-balances finding: "We can't correct that for past failures." When I responded, on the record, that the "addressed and fixed" characterization was inaccurate, the Council President's reply was "Don't interrupt."[7] The characterization was not corrected, and the meeting moved on.
A note on procedure. It's worth acknowledging that I'm still sharpening my command of Robert's Rules. Our charter doesn't name a parliamentary authority—but Section 13 does require that the council "adopt rules for the government of its members and proceedings," and Sections 17 and 20 both assume those rules exist, treating them as the source of the mayor's authority to preserve order and set the order of business. In a collaborative, consensus-driven council, informality costs nothing. In a meeting where the public record is being set and the council is not operating collaboratively, procedure is what protects that record.
I've raised Requests for Information—what older editions called Points of Information—where a Point of Order would have been the better device. In the moment, with inaccuracies going onto the record live, getting the wording exactly right is difficult. A cleaner approach would have been to ask, through the chair: "Would the member identify where the audit report states that the beginning balances finding has been resolved?" That puts the burden of substantiation where it belongs, in their own words, rather than leaving the characterization unchallenged.
The Highway transfer: a request to pause, declined
The clearest illustration of the gap between "addressed and fixed" and what the city actually did came earlier in the same meeting.
Reviewing the June financials, Councilor Doug McLean noticed that the roughly $10,800 annual transfer out of the Highway Fund appeared to be missing from the month's records. That opened a discussion about the transfer itself—the same transfer the auditor had just flagged as unsupported and possibly unconstitutional (finding #4).
The Highway Fund transfer, July 13, 2026 Council Meeting
Barhyte then moved to approve the June financials, even though that meant repeating the exact behavior the audit had just flagged as arbitrary and needing justification. McLean seconded, and the financials were approved 4-1.
The core of the disagreement is the difference between having a reason and having a documented methodology—and it's worth setting the Mayor's characterization of the finding directly against the finding itself.
What the Mayor said the finding was:
"The finding was we need to do a study to verify it, but it wasn't that we couldn't do it."
What the finding actually says:
"We noted the City budgeted for and transferred an arbitrary budgeted amount for general overhead to the Highway Fund. The allocation was not supported by a documented cost allocation methodology, time studies, or other evidence demonstrating benefit to highway related activities. As a result, we could not determine whether the charge complied with constitutional and statutory restrictions governing the use of highway revenues."
Those are not the same statement. "We need to do a study" describes future homework. "We could not determine whether the charge complied with constitutional and statutory restrictions" is a present-tense finding that the legal basis for the transfer is, right now, unestablished. The auditor called the transfer arbitrary and not supported. The city's response was to keep making it.
Notice, too, what the Mayor's own words concede. "We need to do a study to verify it" is an acknowledgment that the required justification does not yet exist. That was the entire premise of the request to pause: not that the city is forbidden from ever allocating overhead to the Highway Fund—cities do that legitimately—but that this transfer, as made, has not been justified, and the auditor could not confirm it is legal.
"We're allowed to do it" does not answer "this particular transfer isn't supported yet." Councilor McLean's "we have a reasoning… it's been explained" is exactly the gap the auditor identified: an explanation is not the documented methodology the finding requires. The comparison to system development charges is the point—for an SDC, the city has to show the calculation behind the number, not merely assert that a number has a reason.
The figure wasn't the product of a cost study, either. Asked about the transfer at the June 2024 budget meeting, the Mayor described it as a flat monthly amount:
Setting the Highway transfer, June 4, 2024 Budget Meeting
One more detail settles the matter. The transfer the auditor examined stood at $7,200 in the audited year. In the budget the city adopted for FY2026-27,[10] that same Highway-to-General transfer is set at $10,800—a 50% increase. The operating levy that would have funded the larger budget failed at the ballot on May 19, 2026; the city adopted the $10,800 transfer anyway on June 17, in the version of the budget built without the levy. Told by its auditor that it could not justify a $7,200 transfer of restricted road money into the general fund, the city's response was to raise it to $10,800 and keep it there even after the levy failed.
Where this leaves things
The audit substantiated the concern that prompted the petition: an independent professional could not verify that the city's finances are accurately recorded or correctly classified, and concurred with my recorded historical concerns about a lack of basic internal controls in our finances. It's all on the record again here, in writing, this time from a licensed auditor.
My sincere hope for this process was that the City would take the findings seriously, and that the Council would be transparent with residents about what the audit actually said. Instead, the Council has publicly characterized the audit as "addressed and fixed," even though the auditor could not sign off on a single fund, and the Council has indicated plans to continue making the transfer the auditor found to be unsupported and possibly unconstitutional.
Just the same, I'll keep working to keep the council honest, and the public record accurate. I encourage my fellow councilors to start doing the same, and encourage our constituents to keep speaking up if any of us don't.