For three consecutive years, from 2021-2023, auditors hired by the city of Virginia to review its numbers and management process highlighted routine significant deficiencies in the finance department’s reporting capabilities.
They shifted in 2024, elevating those concerns to what accountants call a “material weakness” where there exists a real risk that a significant financial error could go undetected.
City officials earlier this year said a lack of oversight caused $3.7 million of sales tax funds to be placed into the general fund instead of a legally restricted account established for the money. The discovery prompted discussions of a wide-ranging forensic audit potentially reaching back to 2021.
Audits and financial statements over the same time period show the city heavily invested in infrastructure and upgrading equipment, but accumulated significant debt and gradually lost financial flexibility as unrestricted reserves declined.
Taken separately, the trends highlight the challenges facing city staff in smaller communities and why Virginia faces an uphill battle to keep up with the costs of operations. Collectively, the strategy and accounting controls show a city with an increasingly complex financial system and lagging investment within.
Virginia City Administrator Britt See-Benes told Iron Range Today that the elevated deficiency was due to a number of factors resulting in more work being placed on the auditors.
Internal control and oversight are commonly noted as deficiencies for smaller cities with fewer resources and employees dedicated to the financial department by the city council. Virginia was no different as noted in 2021-2023.
“The 2024 audit was affected by an unusual amount of staff turnover within the Finance Department, which resulted in more year-end audit entries, reconciliations, adjustments, and revisions to supporting schedules than we would normally expect,” she said in an email Friday. “As a result, the audit process took longer than usual.”
Auditors finished their report in August 2025 and delivered it to the council in September that year. The 2025 audit is in the process of being finalized and could be presented to the city soon.
Walker Giroux and Hahne, the auditing firm located in the city, noted the 2024 process “took a significant amount of time” from previous years. They suggested Virginia “review the accounting needs of the City and provide their staff with proper training, experience and resources.”
The 2024 audit notes that See-Benes needed to continue monitoring transactions and restructuring staff to allow for better oversight within the city’s “staffing limitations and financial constraints.” This was a common theme in previous years, as well.
Citing the material weakness in the department’s internal oversight, the firm no longer said the city was developing new policies or procedures. Instead, Virginia said the cost of training outweighed the reward.
“Management has determined that the cost of training involved to review or prepare the City’s financial statements exceeds the benefit that would result,” wrote Walker Giroux & Hahne.
The firm gave the city a clean opinion on its audit each year, and did not provide direct opinions on internal control.
“It is important to note that the 2024 audit did not identify any misuse of public funds or financial irregularities,” See-Benes said. “In addition, since that time, the City has taken steps to strengthen its financial reporting by hiring a Finance Director who is overseeing the City’s day-to-day financial operations and implementing improvements to our accounting processes going forward.”
How Virginia built its financials
Separate from the audit findings, Virginia’s balance sheets between 2021-2024 show a city whose financial flexibility steadily narrowed and helps paint the picture of the city council’s fiscal philosophy and recent scrutiny.
Long-term debt increased from $62.1 million in 2021 to $72.4 million in 2024, more than $10 million in three years and currently sits at more than $77 million. The city’s total budget is around $35 million. Virginia paid $1.05 million on interest alone in 2021 and $3 million in 2024, about 8% of its total spending.
Virginia’s focus on modernizing infrastructure and equipment placed the city in a position where it is asset-rich, but cash-poor, a dynamic highlighted by its cash flow and operation shortfalls.
The city reported more than $236 million in assets with capital assets such as buildings, construction in progress, machinery and equipment, and infrastructure making up a significant majority of the total.
But Virginia also left 2024 with a $6.7 million total unassigned deficit, which included a $1.5 million deficit from the Ambulance Special Revenue Fund, a $3.8 million deficit from the Iron Trail Motors Event Center Special Revenue Fund and a $700,202 deficit on its unassigned general fund.
City policy requires an unassigned general fund of about 35% of the budget.
The ending balance on the ambulance and event center funds totaled more than $5.2 million in operating losses. The general fund balance remained in the black at the end of 2024 by $2.4 million, but the difference accounts for funds already assigned.
Total unassigned deficits grew sharply from $1.63 million in 2021 to $5.6 million in 2022, $9.3 million in 2023, but was cut to $6.75 million in 2024. These unassigned deficits mean the city lacked flexibility within those funds to incur any unexpected spending.
Auditors noted an increase in funds categories finishing the year with deficits. Only five funds in 2021 reported end-of-year deficits, and that rose to 12 in 2023. Virginia cut the number in half in 2024, but nine funds had negative cash balances and required interfund loans.
“We recommend that the City Council implement a plan to budget for recovery of these deficit cash balances,” the auditors wrote.
Deficits were particularly notable for the ambulance and events center. They were cited by Moody’s when downgrading the city’s credit rating in 2024. Virginia also declined to seek out information on outsourcing the ambulance and police services last week.
A review of the audits show the cost of operating the city’s public safety services increased 41%, rising from $9.36 million in 2021 to $13.04 million in 2024. Public safety expenditures (38%) make up the largest chunk of spending in Virginia, but the city reported more than $148,000 in increased revenue from ambulance charges and intergovernmental revenue compared to 2023.
Accessing the Virginia City Council
Virginia City Council agenda, minutes and packets can be found on the city’s website. Recordings of the meetings can be found on YouTube. Iron Range Today is providing full copies of the city’s 2021-2024 audits.
