Clean Audit, Unfinished Business: Freeport Earns Top Audit Opinion While Longstanding Issues Remain
July 06, 2026 | Freeport, IL
At first glance, tonight's Fiscal Year 2025 audit presentation appears to be nothing but good news for the City of Freeport.
The City received an unmodified audit opinion—commonly called a clean audit—the highest opinion an independent auditor can issue. It also completed its first-ever Annual Comprehensive Financial Report (ACFR), a significant milestone that expands financial disclosures and positions Freeport to seek national recognition for excellence in governmental financial reporting.
Those accomplishments deserve recognition.
But buried beneath the positive headlines is another story.
While auditors found the City's financial statements to be fairly presented, they also repeated several recommendations from prior years, identified multiple funds that continue to fall short of City policy, reported departments that exceeded their adopted budgets, and urged officials to strengthen cybersecurity before a problem occurs.
Tonight's presentation is likely to include both praise and uncomfortable questions.
What Does a "Clean Audit" Actually Mean?
One of the biggest misconceptions surrounding government audits is that a clean audit means everything is perfect.
It doesn't.
A clean audit simply means the City's financial statements accurately represent its financial condition in accordance with Generally Accepted Accounting Principles (GAAP). It is an opinion about the accuracy of the financial reporting—not an endorsement of every financial decision made during the year.
In other words, a city can receive the highest audit opinion available while still being told it needs to improve.
That is exactly what happened in Freeport.
A Stronger Financial Picture
There is no question the City's overall financial position improved during 2025.
According to the audit:
Total net position increased approximately $26.1 million, reaching $110.5 million.
The General Fund closed the year with approximately $31.6 million in fund balance.
Auditors concluded the City's financial statements fairly present the City's financial condition.
Those numbers indicate Freeport remains on much stronger financial footing than it was only a few years ago.
The City's First Comprehensive Financial Report
Perhaps the biggest accomplishment highlighted this year is one that most residents may never notice.
For the first time, Freeport completed an Annual Comprehensive Financial Report (ACFR).
Unlike the standard audit required under Illinois law, an ACFR includes expanded disclosures, management analysis, historical trend information, and statistical data intended to give taxpayers, investors, and elected officials a much clearer picture of the City's finances.
City staff plans to submit the report to the Government Finance Officers Association for its nationally recognized Certificate of Achievement for Excellence in Financial Reporting.
If accepted, it would place Freeport among governments recognized for producing one of the highest standards of public financial reporting.
Some Problems Were Fixed...
The auditors also acknowledged meaningful progress.
A prior recommendation involving business inventory controls has now been fully resolved after the City implemented annual physical inventory counts and reconciliation procedures.
The long-troubled Landfill Closure Fund also improved significantly.
Its deficit dropped from approximately $5.16 million to $2.73 million in one year—a reduction of nearly 47 percent.
Those are measurable improvements.
Several Problems Remain
The clean audit did not erase every concern.
In fact, auditors repeated three recommendations from previous years because they have not yet been fully corrected.
That means these issues will likely continue appearing in future audits until the City resolves them.
Reserve Policies Continue to Be Missed
One of the most significant findings involves the City's own fund balance policy.
Several funds remain below the reserve levels established by City policy, including:
Grant Fund
Pre-Disaster Mitigation Grant
Pretzel City Transit
Water Department
Landfill Closure Fund
The Water Department stands out in particular.
According to the audit, it ended 2025 with a negative unrestricted fund balance of approximately $481,000, placing it more than $2.1 million below the City's reserve target.
While management notes that grant funds often operate differently because they are reimbursement-based, auditors nevertheless repeated the recommendation for another consecutive year.
Budgets Were Still Exceeded
Auditors also reported that several City funds spent more than the budgets approved by the City Council.
Those included:
Drug Forfeiture
Fire Capital Improvements
Water Department
Sewer Department
Budget amendments exist precisely so elected officials—and ultimately taxpayers—can understand when spending plans change.
Auditors again recommended stronger budget monitoring throughout the year to help ensure spending remains consistent with Council-approved appropriations.
Management agreed improvements are still needed.
Cybersecurity Moves to the Top of the List
One of the newest concerns raised by auditors has nothing to do with dollars.
It involves cybersecurity.
Although auditors found no evidence of a breach, they warned local governments continue to face increasing threats from ransomware, phishing attacks, and vendor security vulnerabilities.
Among their recommendations:
Mandatory multi-factor authentication
Stronger backup and recovery procedures
Employee cybersecurity training
Vendor security reviews
A formal incident response plan
For many municipalities across the country, cyberattacks have proven far more expensive than any accounting error.
Auditors are encouraging Freeport to prepare now rather than respond later.
Questions We Should Expect
As City Council considers receiving the audit, several questions deserve discussion:
Why do several funds continue to fall below the City's own financial policies?
Do we need to amend the policies?
What caused certain departments to exceed their adopted budgets?
Who authorized the overspending?
How quickly can the Water Department return to compliance with reserve targets?
When will the City formally adopt its cybersecurity policy?
What benchmarks should taxpayers expect before next year's audit?
Receiving a clean audit is an important achievement.
Ensuring the same recommendations don't continue appearing year after year is the next challenge.
Chairman's Analysis | Joshua T. Atkinson
A clean audit is something every city should strive for, and Freeport deserves credit for earning the highest audit opinion available. The Finance Department should also be recognized for completing the City's first Annual Comprehensive Financial Report—an accomplishment that required significant additional work and demonstrates a commitment to greater financial transparency.
But taxpayers shouldn't confuse a clean audit with a perfect report.
One issue that deserves particular attention is the auditors' finding that several City funds exceeded their Council-approved budgets during 2025. This recommendation wasn't new. It appeared in last year's management letter and has now been repeated because it remains unresolved.
That should concern every taxpayer.
The City Council is elected by the people of Freeport to establish priorities and approve how public money will be spent. The annual budget is not a suggestion or a rough guideline—it is a policy document that often takes months of workshops, committee meetings, public discussion, and Council debate to develop and approve.
When City departments spend beyond those adopted budgets without first obtaining Council approval through a budget amendment, it undermines the very purpose of the budgeting process. Budget amendments exist for a reason. Circumstances change, emergencies happen, and priorities shift. But those changes should be brought before the elected representatives of the people in a public meeting—not simply reflected after the fact in an audit report.
This isn't merely an accounting issue. It's an issue of governance, transparency, and respect for the legislative authority entrusted to the City Council by the voters. If budgets can be exceeded without timely Council approval, taxpayers are left to question whether the budget they watched elected officials spend months crafting is truly being followed.
The encouraging news is that many of the audit's findings are fixable. The City has already demonstrated it can correct longstanding issues, as evidenced by the removal of the inventory control finding and the substantial improvement in the Landfill Closure Fund. The same commitment should now be applied to budget compliance, reserve policies, and cybersecurity.
Good government is measured not only by clean financial statements but by faithfully carrying out the policies adopted by the people's elected representatives. Tonight's discussion should celebrate the City's progress while also making it clear that following the budget approved by the City Council is not optional—it's a fundamental responsibility of every department and every member of City administration.