Rapid City SD – Rapid City’s outside auditor gave the city’s FY2025 financial statements a clean bill of health overall — but flagged the same internal-control problem it flagged the year before, tracing this year’s version to a correction involving one of the city’s tax increment districts.
By The Numbers
Ketel Thorstenson, LLP, the Rapid City CPA firm that audits the city’s books, issued an unmodified — meaning clean — opinion on the City of Rapid City’s financial statements for the year ended December 31, 2025.
No instances of noncompliance material to the financial statements were disclosed.
On the federal award side, the city’s major programs for 2025 — Coronavirus State and Local Fiscal Recovery Funds, Federal Transit, and the Airport Improvement Program — also came back with an unmodified compliance opinion and no material weaknesses.
The city was not determined to be a low-risk auditee, meaning its federal programs face a lower testing threshold than a “low-risk” designation would allow.
The one blemish: a material weakness, disclosed under Government Auditing Standards, in the audit of the financial statements themselves.
What the Auditor Found
The finding is numbered 2025-001 and titled “Audit Adjustments.” No federal program is affected, and there are no questioned costs attached to it — this is a finding about the city’s own internal accounting controls, not about misused grant money.
Per the auditor’s write-up, the city needed “significant audit adjustments” during the audit process.
Other proposed entries weren’t recorded because they were judged immaterial to the financial statements overall.
The most significant adjustment was to reclassify a tax increment district fund’s receivable and expenditures. A second significant adjustment involved the city’s other post-employment benefit (OPEB) deferred outflows.
The auditor’s stated concern is a structural one: the city’s financial statements go out to “numerous granting agencies and lenders,” and management is responsible for internal controls that ensure transactions are recorded accurately and account balances are properly reconciled and reviewed.
Because that didn’t fully happen here, the auditor found “a reasonable possibility that a material misstatement of the financial statements could occur and not be prevented, or detected and corrected, on a timely basis” by the city’s existing controls.
The auditor’s recommendation: year-end adjustments should be reviewed by the Finance Director.
Not the First Time
This is a repeat finding.
The 2025 schedule lists it as a continuation of 2024’s finding 2024-002 — same title, “Audit Adjustments.” And the city’s own summary of that prior finding doesn’t treat it as a two-year problem: it lists the finding’s original issue year only as “originally issued years ago,” without giving a specific year.
That’s notably different from how the city’s other 2024 findings turned out.
Three other findings from the 2024 audit:
One over general internal controls
One over suspension-and-debarment requirements
One over grant “period of performance” reviews
All listed as resolved in this year’s report. The audit-adjustments finding is the one that didn’t get fixed.
The city’s own accounting of why it recurred, filed alongside the finding: “The Finance Office agrees that both material and immaterial audit adjustments were subsequently recorded in order to accurately report account balances/transactions.”
The proposed fix — again — is implementing “year-end reconciliation checklists and process modifications” recommended by the auditor and identified internally.
Who is Responsible?
The corrective action plan names two officials directly: Daniel Ainslie, the city’s Finance Director, and Dave Yuhas, Deputy Finance Director for Grants and Financial Reporting.
Their stated timeline: the Finance Office says it does not expect the 2026 audit to turn up adjustments material to the financial statements as a whole.
Money behind the TIF’s
The finding doesn’t name which tax increment district’s fund needed the receivable/expenditure correction.
But the audit’s own numbers show how much is moving through that part of the city’s books.
At year-end 2025, the City of Rapid City carried $260,590,291 in total long-term obligations — revenue bonds, tax increment district debt, financing obligations, and other liabilities — an increase of $36,334,623 over 2024, across both its governmental and business-type activities.
The tax increment district piece of that grew the fastest of any category on the city’s books this year.
TID debt went from $27,535,960 at the start of 2025 to $42,372,585 by year’s end — an increase of $14,836,625, or about 54%, driven by $18,491,008 in new additions against $3,654,383 in payoffs. Of that year-end balance, $5,975,276 is due within the next year.
Eight tax increment districts carry the bonded debt that adds up to that $42.4 million balance, per the city’s own long-term debt note:
| TID | Project | Created | Expires | Outstanding (12/31/25) |
|---|---|---|---|---|
| 72 | East Saint Joseph Street | 2012 | Feb. 2032 | $1,993,494 |
| 76 | Buffalo Crossing | 2016 | Feb. 2036 | $2,622,650 |
| 77 | Rushmore Gateway Corridor | 2016 | April 2034 | $4,282,920 |
| 80 | Promise Road | 2017 | Dec. 2037 | $3,080,688 |
| 81 | Park Hill | 2018 | Dec. 2038 | $807,228 |
| 84 | East Anamosa Street Water Main Extension | 2021 | June 2030 | $13,447,763 |
| 85 | Block 5 Project | 2022 | Dec. 2042 | $10,793,863 |
| 90 | Sagebrush Flats Affordable Housing | 2023 | Dec. 2042 | $5,343,979 |
- TID 72 — East Saint Joseph Street — created 2012, expires Feb. 2032 — $1,993,494 outstanding
- TID 76 — Buffalo Crossing — created 2016, expires Feb. 2036 — $2,622,650 outstanding
- TID 77 — Rushmore Gateway Corridor — created 2016, expires April 2034 — $4,282,920 outstanding
- TID 80 — Promise Road — created 2017, expires Dec. 2037 — $3,080,688 outstanding
- TID 81 — Park Hill — created 2018, expires Dec. 2038 — $807,228 outstanding
- TID 84 — East Anamosa Street Water Main Extension — created 2021, expires June 2030 — $13,447,763 outstanding
- TID 85 — Block 5 Project — created 2022, expires Dec. 2042 — $10,793,863 outstanding
- TID 90 — Sagebrush Flats Affordable Housing — created 2023, expires Dec. 2042 — $5,343,979 outstanding
TID 84 — East Anamosa — carries the single largest outstanding balance of any district on that list, at nearly $13.5 million, and is also the one with the shortest runway to its 2030 expiration.
A handful of other, smaller TID funds — 90, 91, 92, 93, 94, 99, and 101 — appear separately in the city’s nonmajor governmental funds statements without carrying bonded debt of their own; several of those, including TID 94, show only a few thousand dollars in total fund balance, suggesting largely wound-down activity.
What isn’t in the Record
The audit doesn’t identify which specific TID fund needed the receivable-and-expenditure reclassification that the auditor flagged as the most significant adjustment behind this finding.
That detail isn’t in the Schedule of Findings, the corrective action plan, or anywhere else in the financial statements as filed.
Whether it’s one of the eight bonded districts above, one of the smaller ones, or something else entirely isn’t established by this document — a question that stays open rather than guessed at here.
Audit Report
Sourcing
- City of Rapid City, Financial Statements, Draft, year ended Dec. 31, 2025 (9/9/2026 draft) — LF091626-05 on the Sept. 16, 2026 Legal & Finance Committee agenda
- Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters, Ketel Thorstenson, LLP
- Independent Auditor’s Report on Compliance for Each Major Federal Program, Ketel Thorstenson, LLP
- Schedule of Findings for the Year Ended December 31, 2025 (Sections A and B)
- Summary Schedule of Prior Audit Findings, December 31, 2025
- Corrective Action Plan, December 31, 2025
- Note 7, Long-Term Financing Arrangements, and Table A-4, Outstanding Debt and Obligations — City of Rapid City FY2025 financial statements
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