The city of Richmond’s budget surplus for the fiscal year that ended in June of 2025 came in substantially lower than a previous estimate provided to the City Council last fall by Mayor Danny Avula’s administration.

Instead of the $22 million surplus given as a legally required early estimate last year, the administration told the Council last week that the actual audited surplus will be $12.6 million.

The revised number was reported to the Council in a Feb. 27 memo from Chief Administrative Officer Odie Donald II. That memo also said delivery of the city’s Annual Comprehensive Financial Report (ACFR) for fiscal 2025 — the document the surplus figure is based on — would be pushed into March. The administration previously said it should be finished by the end of February.

Donald’s memo said the report has been submitted to the city’s external audit firm, CliftonLarsonAllen, for its final review. The administration is working with the firm to clear up some outstanding questions about the city’s “opioid settlement reporting,” Donald’s memo said.

“The Administration is responding promptly to these requests and will provide City Council with an updated expected issuance date once the review is complete,” Donald wrote.

Though delays with local government audit reports are fairly common, the latest delay in Richmond means the FY25 audit likely won’t become public until the city is so far into FY26 that Avula is proposing a budget for FY27.

Avula will present his budget on March 11. The administration said it expects to be able to publish the financial audit online by March 16, with a Council presentation to follow on March 20.

The audit report offers a final look at how the city collected and spent money in a given budget year. The surplus is a closely watched number that shows how much revenue the city took in beyond what it planned to spend. A small surplus can be a sign of responsible budgeting. An excessively large surplus can fuel accusations officials are taxing beyond what the government needs to fund its operations.

The city’s budget surplus is a frequent point of contention in the debate over whether Richmond can afford to cut property owners a break from tax bills that have risen rapidly due to the city’s spiking home values. Some Council members have argued the city’s budget has grown so rapidly the city could slow down the bill increases without jeopardizing core services. Because the city’s costs are also rising due to things like inflation and collective bargaining obligations, the Avula administration has argued the city can’t afford to go without additional tax revenue.

Donald has repeatedly cautioned Council members and the public not to put too much stock in the estimated number he provided Nov. 15, saying it was likely to change.

The exact reason the final number fell by almost $10 million is unclear. The city indicated a combination of factors caused the change.

“As part of the ACFR closeout, revenues and expenditures are fully reconciled, accruals are finalized, outstanding liabilities are recorded, and audit adjustments are incorporated,” city spokesperson Mira Signer said when asked for an explanation. “These include items such as final revenue true-ups, expenditure accruals, encumbrance clean-up, year-end liabilities, and other required accounting adjustments. Once those reconciliations and audit entries were completed, the final audited surplus appropriately reflected the city’s true year-end position.”

Donald’s memo said the city had sent “formal written responses” to clarify two issues for the outside auditors. One dealt with legal responsibility for a bond issuance associated with a “city-related authority.” The other was a comment about the delayed timing of the audit’s completion.

“The delay was influenced by leadership transitions, staff absences, limited financial reporting capacity and the timing of year-end reporting from certain component units,” Donald wrote. “This is exemplified by wholesale changes at the top levels of leadership at the close of FY2025, as the city’s Chief Administrative Officer, DCAO — Finance, Finance Director and Revenue Director all left the city.”

The delay on when the Council will receive a solid, expert-reviewed snapshot on the city’s financial status has frustrated some members.

Councilor Kenya Gibson (3rd District) said it “isn’t ideal” for the Council to be getting the information after the mayor has presented his next budget.

“Equally concerning is the fact that we were given a preliminary estimate of the surplus and now we’re told it’s $10 million less,” Gibson said. “My ask is that the city administration provide us with a clear picture of why the audit is delayed and why the city’s numbers were so off. $10 million is definitely more than a rounding error.”

Because most of the city’s surplus money is required to go into reserves, the lower surplus won’t have a significant real-world impact on city services. Instead it will mostly mean less money going into reserves than anticipated.

A Council committee had been set to receive a presentation on the ACFR at a meeting Monday, but the item was taken off the agenda. At that meeting, the Council was shown a chart on City Hall vacancies that indicated more than a third of the jobs in the city’s Finance Department are unfilled.

“All of these things indicate that we have a Finance Department that is not functioning in a healthy way, in a way that our residents expect,” Councilor Stephanie Lynch (5th District) said at the meeting.

Administration pushes back delivery of winter storm report

Under Richmond’s city code, the administration has to submit a report to Council after a local emergency has been declared for events such as the winter storm that left the city frozen in ice in late January. 

That report is supposed to be a full accounting of city funds spent during the emergency. By law, it has to be delivered within 30 days after an emergency ends.

Because the winter storm emergency was lifted Feb. 2, Donald previously told the Council the administration would provide the report by March 2.

On March 2, he sent the Council an email saying the deadline was being pushed back to March 11 after further review of the city code. 

Because the Council didn’t pass a resolution officially declaring an end to the emergency until Feb. 9, Donald wrote, the administration is interpreting the law to mean the 30-day countdown began on that date instead of Feb. 2. The city issued a news release on Feb. 2 with the headline “State of Emergency Lifts in Richmond” that announced, among other things, the deactivation of the city’s emergency shelter.

“While it is the intent of the administration to always exceed expectations, I believe it important to appropriately state the official date of delivery in line with city and state requirements,” Donald wrote.

Contact Reporter Graham Moomaw at gmoomaw@richmonder.org