State Audit Flags Persistent Financial Oversight Issues in New Sharon’s City Accounts
The Iowa Auditor of State has released a new financial report on the City of New Sharon, identifying a series of ongoing accounting and oversight deficiencies — several of which have been repeated for consecutive years. The agreed-upon procedures report, covering the fiscal year ending June 30, 2025, found seven areas of concern involving the management of public funds, documentation practices, and compliance with state requirements.
According to the Auditor’s Office, six of the seven findings were carried over from the previous year, indicating that the city has not yet taken corrective action. The issues included weak internal controls, incomplete recordkeeping, and deficit fund balances.
The report emphasized that the findings do not allege criminal activity or intentional misuse of funds, but rather administrative and procedural weaknesses. No violations of Iowa criminal law were identified, and there is no indication that law enforcement involvement is warranted at this time. The deficiencies are classified as matters of internal control and compliance — problems that can expose a municipality to financial risk if left unaddressed.
Key Findings from the Audit
Auditors reported that the City of New Sharon ended the fiscal year with two funds in deficit:
• $172,785 in the Special Revenue – Employee Benefits Fund
• $3,130 in the Enterprise – Water Fund
In addition, the audit cited six other findings that require attention from city officials:
• Lack of Segregation of Duties – One individual controlled multiple financial functions, including cash handling, deposits, and reconciliations. This lack of separation increases the risk of error or fraud.
• Unclaimed Property Reporting – The city did not forward long-outstanding obligations, such as uncashed checks, to the State Treasurer’s Office as required by Iowa Code Chapter 556.11.
• Sales Tax Payment – One vendor payment included sales tax, which the city should not pay because of its tax-exempt status.
• Investment Recordkeeping – The city did not maintain complete accounting records for its investments, omitting information such as interest rates, maturity dates, and identifying numbers.
• Bank Reconciliation Variances – Accounting software did not fully align with bank balances, and discrepancies were not reviewed or resolved.
• Voided Receipts Oversight – Canceled receipts were not independently reviewed or signed off by a separate official.
The Auditor’s Office recommended that city management strengthen its review procedures, maintain detailed investment records, reconcile accounts monthly, and ensure independent oversight is documented.
Pattern of Oversight Weaknesses
The state report underscores what auditors describe as a continuing pattern of administrative shortcomings in New Sharon’s financial operations. While such findings are common in small Iowa municipalities with limited staff, the recurrence of unresolved issues has drawn attention to the city council’s role in oversight and accountability.
The report notes that local officials are responsible for safeguarding public funds and ensuring compliance with state law. Auditors described the council’s duty as one of “watchful and responsible care,” meaning elected officials must actively verify the accuracy of financial records rather than rely solely on staff reports.
Next Steps and Public Access
The audit did not recommend referral to law enforcement or any form of criminal review. Instead, it calls for internal corrective action by the city council and clerk’s office to strengthen accounting controls and restore financial health to the deficit funds.
The report, dated September 12 and released publicly on October 24, is available through the Iowa Auditor of State’s website under municipal audit reports.
For residents, the findings serve as a reminder that public accountability often depends on process as much as policy — and that small cities must take ongoing steps to ensure financial integrity, even when no laws have been broken.
Based on the Iowa Auditor of State’s “Agreed-Upon Procedures Report” for the City of New Sharon, fiscal year July 1, 2024 – June 30, 2025.
