La Verkin's fiscal 2025 audit reports a $370,557 deficit in its capital projects fund

La Verkin's Capital Projects Fund ended fiscal 2025 with a negative $370,557 fund balance, according to the city's audited financial statements for the year ended June 30, 2025. The auditors reported it as the audit's only state compliance finding. ^[1][2]

"Utah law prohibits negative fund balance accumulation for governmental entities," Rees CPA wrote in its letter of findings, dated Jan. 30, 2026. ^[1]

What the finding says

The finding, numbered 2025-01, says the negative balance "arose from the lack of reimbursing the fund for expenditures incurred on behalf of other funds for projects capital in nature." ^[1]

It says that once a negative fund balance has been incurred, Utah Code 10-6-117(2) requires the budget to include a line item of appropriation to begin removing it. "Management did not contain such an appropriation within the budget established for fiscal year ending June 30, 2026," the finding says. ^[1]

The auditors recommended that management review the budget, identify funds available to begin removing the negative balance, and then amend the budget. ^[1]

How the balance went negative

The Capital Projects Fund began fiscal 2025 with a $203,333 balance. During the year it recorded $597,864 in expenditures, $1,050 in interest and a $22,924 transfer in, for a net decrease of $573,890. ^[3]

The general fund's transfers out for the year totaled $115,424, which was $22,924 more than the $92,500 in its final budget. The interfund transfer table lists the Capital Projects Fund as receiving $22,924. ^[4][8]

On the governmental funds balance sheet, the Capital Projects Fund shows negative $370,557 in cash and no liabilities. The general fund shows $2,258,330 in cash, and governmental funds together show $1,889,272. ^[2]

Note 2-B

Note 2-B of the same audit, titled "Deficit fund balance or net position," says: "None of the City's funds carries a deficit fund balance or net position." The balance sheet and the findings letter both report the Capital Projects Fund deficit. ^[6][2][1]

The compliance opinion

The auditors tested La Verkin's compliance with state requirements in seven areas, including budgetary compliance and fund balance, and said the city complied in all material respects. They wrote that their opinion "is not modified with respect to these matters." ^[5]

What came next

The agenda for the City Council's June 3, 2026, meeting listed a public hearing on "Amending FY 2025-2026 Budget" and consideration of Resolution No. R-2026-10, "a resolution opening and amending FY 2025-2026 Budget." ^[7]

In the June 3 public hearing, the city's staff said $485,500 of revenue remained in the budget and that $390,000 of it was the auditor's finding, money that was not being moved out of savings into capital projects. Staff said $383,000 was transferred into fund 45 and $7,000 into fund 48 on the auditor's recommendation, and that capital accounts 45 and 48 were added. No one commented. The council then voted 5-0 for Resolution R-2026-10, which opens and amends the fiscal 2025-26 budget. ^[9]

That is the minutes' account of staff's explanation. It is not a reconciled transfer ledger, and it does not show that the capital projects deficit was eliminated or that the auditors reviewed the change. ^[9]

The city's fiscal 2026 audit, which would report the Capital Projects Fund balance at June 30, 2026, has not been published.