City of Depoe Bay Failures & Audit Noncompliance Report: FY2019–FY2025

CRITICAL WARNING – SEVEN YEARS OF FINANCIAL FAILURE

The following report is a thorough analysis by concerned citizens of Depoe Bay based on available public data, budget documents, and the limited audit information that exists.

Table of Contents

Executive Summary

The City of Depoe Bay's financial stewardship from FY2019 through FY2025 has been characterized by severe mismanagement, audit delinquencies, and internal control failures. Independent audits for FY2019 and FY2020 resulted in "Disclaimer of Opinion" findings – meaning auditors could not verify ANY financial statements due to unreliable records (1, 2). For FY2021–FY2024, the City failed to complete audits entirely, leaving citizens with only unaudited, self-reported figures (3, 4). While some progress occurred in 2025 with the receipt of delayed audit reports, the FY2020 audit wasn't completed until April 2025 – five years late (39).

The Oregon Secretary of State's Audits Division flagged Depoe Bay as delinquent and imposed penalties including withholding 10% of state-shared revenues (5, 6). Only legislative intervention in 2023 returned these funds (7). Local media dubbed the situation "Depoe Bay's fiscal abyss" (123). This report by concerned citizens documents repeated violations of Oregon Local Budget Law, material weaknesses in internal controls, and a complete erosion of public trust. Most egregiously, while failing to provide audited financials, the City imposed 43% water rate increases, 111% sewer rate increases, and doubled harbor fuel surcharges – extracting millions from citizens without transparency.

Executive Summary Key Points:

FY2019 – Audit Disclaimer, Budget Law Violations, and Internal Control Failures

Auditor's Disclaimer of Opinion: The City's independent auditor issued a "Disclaimer of Opinion" on the FY2019 financial statements – an extraordinarily rare outcome in municipal finance (1). The auditor explicitly noted that internal controls were "inadequate to safeguard assets and ensure proper recording of transactions" (8). The City's books were unauditable. This obligated Depoe Bay to file a "Plan of Action" with the Secretary of State per ORS 297.466 (2). The audit firm, Grimstad & Associates, was replaced thereafter (17, 18). The auditor notes the City migrated to new accounting software without adequate procedures, reconciliations, or supervisory review, undermining internal controls (1, 2).

Budget Law Violations: Alongside the disclaimer, the FY2019 audit report documented multiple violations of Oregon Local Budget Law. Specifically, the auditors' state compliance review found that the City had exceeded legally authorized appropriations in at least one department or fund, and that one fund ended the year in a deficit balance (9). Exceeding budgeted expenditures is illegal under ORS 294.100 and related statutes – it means the City spent more than what was approved by the budget in certain categories. The FY2019 audit noted over-expenditures in the Harbor Fund's personnel and materials line items (approximately $6,300 and $64,700 over budget, respectively) (1, 2), as well as an overrun in the Parks & Building Fund's personnel allocation (overspent by $34,209) (1, 2). In addition, a transfer that had been budgeted from the Urban Renewal Agency (URA) to the Harbor Fund was not executed, which led to the URA Project Fund finishing FY2019 with a negative $4,868 fund balance (1, 2). Oregon law prohibits any municipal fund from ending the year in deficit, so this was a clear compliance breach. These issues demonstrate that the City's budgeting controls were so lax that not only were records unreliable, but actual spending was not kept within legal limits. The City had no effective monitoring to prevent or detect budget overruns, a basic expectation of fiscal management. Such findings required immediate correction – for example, the small deficit had to be eliminated by subsequent transfers, and going forward the City would need to more closely supervise spending vs. budget. The FY2019 audit findings were forwarded to the Oregon Audits Division, which monitors local governments' compliance; Depoe Bay quickly landed on the state's radar for follow-up.

Internal Control and Staffing Breakdown: The City converted to new accounting software and lost key finance personnel. Bank reconciliations were not performed, and the auditors reported a material weakness in internal control (21). The City Recorder resigned, and records were transferred to new software "without adequate procedures, reconciliations, and supervisory review" – violating COSO framework principles (22, 23). The City hired an outside CPA consultant in 2020 to reconstruct the books (2), but the damage was done.

Financial Performance vs. Process Failures: Ironically, the chaos in Depoe Bay's financial reporting occurred during a time when, by raw numbers, the City's finances appeared robust or even improving. According to the (unaudited) data provided for FY2019, the City was solvent and building reserves: total citywide net position was $18.26 million at June 30, 2019, an increase of ~$1.4 million from the prior year (24). The General Fund (the main operating fund) ended FY2019 with an unexpectedly large surplus of $380,000, boosting its fund balance to $2.24 million (25, 26). This was achieved largely because tax revenues came in far above budget – notably the Transient Room Tax (lodging tax) which generated $877k, about 54% ($306k) over what had been budgeted (26, 27) – while expenditures were far below budget (many projects and hires were delayed or not completed) (28). In short, Depoe Bay in 2019 had a windfall of tourism-driven revenue and underspent its plans, resulting in swelling fund balances. The Harbor Fund, historically the City's problem fund, even saw its cash balance increase slightly in FY2019 thanks to a $165,000 transfer from the General Fund and deferred capital spending (29, 30). By year-end, every major fund was in the black (aside from the trivial URA project deficit noted earlier), and the City's cash and investments totaled nearly $8 million (31) – a very large liquidity cushion for a city of only ~1,600 people.

However, these positive financial outcomes were overshadowed by process failures. The lack of a credible audit means that even these healthy-looking numbers had to be taken "with a grain of salt," as the City's own Financial Condition report later admitted (32). Without reliable bookkeeping, it's possible that some revenues or expenses were misstated or misclassified. Additionally, the large variance between budget and actual results (e.g. underspending by over $1 million in the General Fund (28)) raises questions: was the City simply very conservative in budgeting, or was it unable to execute planned projects? The audit findings suggest the latter in some cases – for example, capital improvements were budgeted but not carried out, potentially due to administrative capacity issues (28, 19). Thus, while FY2019 ended with the City financially intact (even improved), the year revealed a fundamental governance problem: Depoe Bay did not have the internal controls or financial management rigor to ensure accurate reporting or legal compliance (32, 33). This set the stage for the even more troubling events in subsequent years.

FY2020 – Second Consecutive Disclaimed Audit, Continued Control Deficiencies, and Delayed Reporting

Second Consecutive Disclaimer: Depoe Bay received another Disclaimer of Opinion for FY2020 (3, 4). The new firm, Isler CPA, found documentation "insufficient to serve as evidence" (34). Two consecutive disclaimers is virtually unheard of in Oregon cities. The FY2020 audit wasn't completed until April 30, 2025 – nearly five years late (3, 4).

Missing Required Disclosures: Management omitted the required MD&A (Management's Discussion and Analysis) section entirely, violating GASB presentation requirements (40). The City also continued overspending appropriations: General Fund transferred $40,000 more than budgeted, Street Fund overspent by $72,886 (42, 44, 45).

Internal Control and Compliance Issues: The FY2020 auditor's required Oregon Compliance Report continued to identify multiple issues, many repeating the prior year's themes. Legal budget violations persisted in FY2019–20: the audit found that the City over-expended appropriations in several instances during FY2020 (10). For example, the General Fund transferred $40,000 more to the Parks & Building Fund than was budgeted (covering the prior year's over-hire in that fund) (42, 43), and the Street Fund overspent its Materials & Services appropriation by about $72,886 in FY2020 (44, 45). These are clear violations of local budget law requiring expenditures to stay within authorized limits. The Harbor Fund overspent Personnel Services in FY2020 (approximately $20,278 over budget); Materials & Services overspending was cited in the FY2019 audit (3, 4). Additionally, the auditors could not perform certain standard compliance tests – such as verifying adherence to public procurement rules – because documentation was lacking (10). This implies that basic records of bids or contracts might not have been maintained, or at least were not provided to the auditors (10, 46). In the Oregon compliance report for FY2020, the auditor states they did not identify any deficiencies in internal control that they consider to be material weaknesses, even though the audit was disclaimed due to insufficient documentation (3, 4). The auditor could not test: (1) other budget requirements; (2) public contracting/purchasing compliance; and noted excess expenditures over appropriations (3, 4). In short, none of the underlying problems had been fully fixed by 2020: the City still had unreliable bookkeeping and poor control over its processes, leading to both inability to audit and failure to comply with finance laws. Depoe Bay's governance did attempt some response – by FY2020 they had contracted an outside accounting firm to assist. Yet, given the multi-year nature of the backlog, improvements were slow to materialize.

Extremely Late Audit and State Penalties: A defining aspect of FY2020's saga is that the audit was completed over four years late, in spring 2025 (39). By state law, the FY2020 audit report should have been filed by December 31, 2020 (within 6 months of year-end). Missing that deadline by such a margin triggered enforcement actions. As mentioned, Oregon statutes allow the Department of Revenue to withhold state shared revenues when a municipality is late filing its audit without a valid extension. Depoe Bay indeed was subject to this penalty: 10% of its state revenues (such as state liquor taxes, highway gas tax distributions, cigarette tax, and state revenue sharing) were withheld during the period of noncompliance (47, 48). In the City's FY2024–25 budget message, officials acknowledged that Depoe Bay had been "penalized 10% on these funds due to noncompliance with audit requirements" (3, 4). For a small city, this meant tens of thousands of dollars that would normally support services were instead held back by the state. Depoe Bay was essentially paying a price for its audit failures. Fortunately for the City (but arguably not thanks to its own doing), the Oregon legislature in 2023 passed a temporary law change that eliminated the 10% withholding penalty for delinquent audits (49). This was a statewide relief measure recognizing that many cities were behind due to pandemic-related issues, and it allowed withheld funds to be retroactively restored (49, 7). Depoe Bay thus received a one-time boost when those monies were returned in FY2024. However, the fundamental issue remained: the City was still out of compliance until the audits were caught up. The state's removal of the penalty did not equate to forgiveness of Depoe Bay's situation; rather, it was meant to prevent further harm to citizens due to management's failures. The Oregon Secretary of State's Audits Division continued to list Depoe Bay on its "Municipal Audit Reports – Delinquent Filers" list through this period. In fact, as of December 31, 2023 (18 months after FY2020 and 6 months after FY2022), Depoe Bay was one of 91 municipal entities statewide that had audits over a year late with no filed report (50, 51). The City had not obtained any formal time extensions for these audits, further highlighting the breakdown in governance. In summary, FY2020's audit delay and resulting sanctions illustrate how Depoe Bay's internal problems translated into real financial and reputational consequences at the state level.

Fund Transfers and Financial Highlights: Despite the chaos behind the scenes, FY2020's unaudited financial data (eventually compiled and released) showed that the City's overall financial position remained strong on paper. Governmental fund balances actually increased year-over-year. The General Fund, for instance, ended FY2020 with a balance of $2.64 million, up from $2.24 million in FY2019 (52, 53). This was achieved through another year of underspending and significant inter-fund transfers. Depoe Bay relies heavily on its Transient Room Tax (TRT) revenues (lodging taxes) to fund general operations. In FY2020, even with the onset of COVID-19 in spring 2020, lodging tax revenues held fairly steady (about $910k in the General/TRT combined funds) (54). The City continued its practice of transferring large sums of TRT money to support other funds: notably, over $180,000 was transferred from tourism tax receipts into the Street Fund to help pay for street maintenance (55). Additionally, the Harbor Fund received an even larger subsidy in FY2020 than the year before. The Harbor Enterprise Fund generated only $332,000 in its own operating revenue but had $607,000 in operating expenses (56, 57), resulting in a substantial operating loss (~$275k). To cover this, the City funneled a total of $322,336 in transfers into the Harbor Fund during FY2020 (58, 59). Transfers into the Harbor Fund totaled approximately $322,336 in FY2020 (3, 4). This included a transfer from the General Fund and a one-time transfer of ~$75,000 from the Urban Renewal Fund specifically to help with harbor capital costs (58). Thanks to these infusions, the Harbor Fund ended FY2020 roughly breakeven in terms of net position (60, 61) – but this "balance" was entirely artificial, propped up by other resources. The structural imbalance of the Harbor was even more apparent in 2020: without $300k+ of help, the harbor operations would have deeply depleted their reserves. The trend was worsening; in FY2019 the harbor needed a $165k subsidy (12), and in FY2020 it required nearly double that (58, 13). This indicated rising costs (harbor personnel expenses grew, for example) and stagnant harbor revenues. The auditors again flagged that the Harbor Fund overspent its budget – exceeding its appropriations for Personnel Services just as in 2019 (62). This recurrence shows that management hadn't gotten the harbor's costs under control or aligned with the budget by 2020. The FY2020 schedules include restated beginning balances in multiple funds, indicating prior-year corrections (3, 4).

Other funds in FY2020 showed mixed results: The Street Fund needed a subsidy (as noted) and even then used about $60k of its beginning balance to cover all expenses (63, 64). The Urban Renewal Agency funds accumulated money, as no major Urban Renewal Agency projects were undertaken yet (the Urban Renewal Agency Project Fund grew by clearing out the Urban Renewal Agency Debt Service Fund into it). Water and Sewer utility funds remained profitable on an operating basis, though Sewer had a small operating loss once depreciation was counted (65, 66). It's important to emphasize that none of these figures were audited in the normal timeframe. The City was essentially operating on trust, using internal numbers to make budget decisions for FY2021 and beyond. The lack of timely audit meant there was no independent verification that, for instance, $2.64 million was truly in the General Fund or that the transfers were recorded correctly. This represents a huge information risk. In financial terms, Depoe Bay in 2020 had plenty of cash and positive net assets – but due to poor controls, no one could say with certainty that all that cash was accounted for or that liabilities were fully recorded. Such uncertainty is what the disclaimers reflect.

Summary (FY2020): The second disclaimed audit in a row cemented Depoe Bay's reputation, at least in oversight circles, as a city in fiscal disarray. By the end of FY2020 (mid-2020), the City was entering the COVID-19 pandemic period without a firm financial reporting foundation – an unfortunate scenario, as emergency conditions often require even sharper financial management. The City's books for 2019 and 2020 were finally audited only in 2025, revealing in retrospect just how unreliable the interim reports were. Yet during 2020–2021, the City Council continued to approve budgets and spend money largely on faith in staff reports. The audit and accountability function had effectively failed, placing the City outside the norms of municipal governance. It was around this time that state oversight intensified: the Secretary of State's Audits Division began formally corresponding with Depoe Bay about its noncompliance, and local media started scrutinizing City Hall's financial quagmire. City officials did begin to respond – for example, issuing an RFP for accounting services and committing to catch up on audits by hiring extra help (67, 68). However, as the next sections show, those efforts would take years to fully materialize, and in the meantime the City plunged further into an audit void.

FY2021 – Audit Not Completed, Reliance on Unverified Data, and Ongoing Systemic Weaknesses

Audit Completely Abandoned: The City did not complete an FY2021 audit. When eventually attempted years later, auditors again disclaimed opinion due to the same control failures (69, 70, 71). By 2022, the City was operating on figures three years out of date. The FY2022 budget admitted: "the two most recent fiscal years have not been audited and only adopted numbers are reflected" (3).

Reliance on Unaudited Budget Numbers: In the absence of an audit, the City relied on its budget documents and internal bookkeeping to represent FY2021's financial status. The FY2022 budget message was candid about this: it stated that "the two most recent fiscal years have not been audited and only adopted numbers are reflected" (3). This admission highlights the uncertainty baked into Depoe Bay's financial planning during this period. For instance, the FY2022 budget showed General Fund resources of about $3.5 million, but without an audit, there was no assurance that the prior year's ending fund balance (a major component of beginning resources) was accurately stated. The same applied to enterprise funds like the Harbor – the FY2022 budget assumed the Harbor Fund had about $200k in cash reserves, but this was based on internal estimates, not verified balances. This information asymmetry affected not just the City's own planning but also external parties. For example, Gleneden Sanitary District, which partners with Depoe Bay on water and sewer services, noted in its own 2023 audit that "Lack of timely and accurate reporting by Depoe Bay has left Gleneden Sanitary unaware of Depoe Bay's financial position… causing impacts on Gleneden's budget" (101, 102). In short, Depoe Bay's failure to audit FY2021 created ripple effects, making it harder for neighboring entities to plan their own finances. It also meant that any budget variances or fund transfers in FY2021 were not independently reviewed. If there were errors in recording revenues or expenditures, they would go undetected until (and if) the audit was eventually completed.

Systemic Weaknesses Persist: During FY2021, the same internal control deficiencies that plagued prior years continued unabated. The City experienced more staff turnover in its finance department, with the City Recorder position changing hands again. This ongoing instability meant that basic accounting procedures – such as monthly bank reconciliations and proper documentation of transactions – were still not consistently performed (72, 73). Without these fundamental controls, the risk of misstatement in the financial records remained high. The City did attempt to address some issues: in FY2021, it engaged outside consultants to help with bookkeeping and began the process of hiring additional accounting support (74, 75). However, these efforts were not sufficient to enable a timely audit. The backlog was growing, and the City's capacity to produce auditable records had not been restored. In the meantime, the City continued normal operations: it adopted budgets, collected taxes, and made expenditures based on internal reports. But the lack of external validation meant that all of this was happening without the accountability mechanism that audits provide. FY2021 thus represented a deepening of the crisis – not only was the City still unable to get a clean audit opinion, but it was now falling further behind schedule in even attempting audits.

Rate Exploitation Begins: Resolution 513-21 (September 7, 2021) imposed water/sewer rate increases through 2030 while already 2+ years behind on audits. Results: 43% water increase ($45→$64.61), 111% sewer increase ($32→$67.52), 64% property tax jump in one year. Citizens had no way to verify necessity – the City had produced no valid financials since FY2018.

Financial Performance in FY2021: Based on the City's unaudited internal reports, FY2021 appeared to be another year of financial stability for Depoe Bay, with some recovery from the early COVID impacts. Transient lodging tax revenues reportedly rebounded strongly in FY2021, reaching an estimated ~$1.4 million – a significant increase from the prior year and even above pre-pandemic levels (76). This tourism boom allegedly helped the General Fund maintain a healthy balance, ending the year with around ~$2.8 million in reserves (unaudited) (77). The City also received federal COVID relief funds (ARPA grants) totaling several hundred thousand dollars, which were allocated to various projects and helped pad the budget (78). Despite the ongoing audit failures, the City began implementing a 3% annual CPI-based moorage fee increase at the harbor starting in FY2021, adding to the financial burden on harbor users even as the facility continued to require massive subsidies. However, without an audit, it's impossible to know if these figures are entirely accurate or if there were any misapplications of the relief funds. The Harbor Fund continued its pattern of operating losses, requiring another large subsidy (approximately $250k) from the General Fund to balance (79). Overall, the City's liquidity remained strong – cash and investments were ample – but again, this was based on unverified data. The key takeaway for FY2021 is that while the City's finances seemed solid on paper, the complete absence of audit oversight meant there was no independent check on the numbers. This information gap persisted into FY2022 and beyond, as the audit delays compounded.

FY2022 – Governance Turmoil, Missing Public Records, and Escalating Audit Delays

Governance Collapse: The City Recorder resigned in April 2022. For months, no Council meeting minutes were produced – violating ORS 192.650 (15). Councilor Jerome Grant: "wreaking havoc with transparency and trust... the public has no idea what we're up to" (16). By FY2022's end, the City was three years behind on audits and among 91 entities statewide with audits over a year overdue (50, 51).

Continued Audit Delays: As governance unraveled, the audit situation worsened. By the end of FY2022, the City still had not completed audits for FY2020, FY2021, or FY2022. The backlog was now three years deep. The Oregon Secretary of State's Audits Division, in its March 2024 report on municipal audit compliance, listed Depoe Bay as one of the most delinquent filers in the state (92, 147). The report noted that as of December 31, 2023, Depoe Bay had not filed its FY2022 audit (due by June 30, 2023) and was among 91 entities statewide with audits more than a year overdue (50, 51). This placed Depoe Bay in a small group of chronic non-filers, highlighting the unusual severity of its situation. The City's FY2023–24 budget message acknowledged the ongoing delays but offered little concrete progress: it mentioned that the City was working with accountants to complete the audits but provided no timeline (93, 94). In practical terms, by FY2022 the City was operating entirely on unverified financial data. Budgets were adopted based on prior year estimates, but without audits to confirm those estimates, the risk of compounding errors grew. For example, if FY2020's ending fund balances were overstated in the internal reports, then FY2021 and FY2022 budgets would have been built on faulty foundations. This created a house-of-cards scenario where each year's unaudited numbers fed into the next, with no external check to correct course.

Internal Control and Compliance Risks: The governance turmoil in FY2022 exacerbated the already weak internal controls. With the City Recorder gone and minutes missing, it's reasonable to infer that financial record-keeping also suffered. The high staff turnover meant that institutional knowledge continued to evaporate, and new personnel (if hired) faced a steep learning curve in a dysfunctional environment. Basic controls like segregation of duties and timely reconciliations were likely still not in place, as the City had not demonstrated improvement in these areas from prior years. Without proper documentation of transactions or decisions, the risk of errors or irregularities increased. For instance, if interfund transfers were made during this chaotic period, they might not have been properly authorized or recorded, leading to potential compliance issues that would only surface later in an audit. The missing minutes also meant that public input on financial matters was effectively silenced – citizens couldn't even know what was discussed, let alone participate meaningfully in budget decisions. This combination of poor internal controls and transparency failures created an environment ripe for mismanagement.

Financial Performance Amid Chaos: Despite the governance meltdown, Depoe Bay's financial position appeared to remain stable based on internal reports. The FY2023 budget (adopted in 2022) projected strong revenues, particularly from the rebounding tourism sector. Transient lodging taxes continued to climb, reaching record levels in FY2022. The City also benefited from property tax growth and maintained healthy cash reserves across most funds. However, all of this was reported without independent verification. The Harbor Fund continued to require subsidies, and the City's heavy reliance on transfers from the General Fund persisted. In a more functional city, these trends would have been analyzed in an audited financial report with management's discussion of the implications. In Depoe Bay, they were simply noted in budget documents without external scrutiny. The key issue in FY2022 was not necessarily the financial numbers themselves, but the complete lack of accountability surrounding them. The City was, in effect, asking taxpayers to trust its self-reported figures without any independent validation – a request that became increasingly untenable as the audit void extended.

FY2023 – Deepening Audit Void, Stakeholder Impacts, and Early Signs of State Concern

Complete Audit Void: By FY2023, four years without any audit. Gleneden Sanitary District reported: "Lack of timely and accurate reporting by Depoe Bay has left Gleneden Sanitary unaware of Depoe Bay's financial position... causing impacts on Gleneden's budget" (101, 102). Media dubbed it "Depoe Bay's fiscal abyss" (123).

Impacts on Stakeholders: The prolonged audit failure began to have tangible impacts on other entities that depend on Depoe Bay's financial information. A prime example is Gleneden Sanitary District, which shares water and sewer infrastructure with the City. In Gleneden's own FY2023 audit report, management explicitly noted the problem: "Lack of timely and accurate reporting by Depoe Bay has left Gleneden Sanitary unaware of Depoe Bay's financial position… causing impacts on Gleneden's budget" (101, 102). This statement illustrates how Depoe Bay's accountability failure created real-world consequences for neighboring governments. Gleneden Sanitary needed accurate information about Depoe Bay's finances to plan shared services and infrastructure investments, but without audited statements, they were operating in the dark. This is a concrete example of how the City's internal problems rippled outward, affecting regional cooperation and planning. It also highlights the broader public interest: when one municipality fails in financial transparency, it can hinder coordinated governance and resource allocation in the area.

State Oversight and Media Scrutiny: As the audit delays mounted, state oversight intensified. The Oregon Audits Division began formal correspondence with Depoe Bay, pressuring the City to comply. While specific communications may not be public, the inclusion of Depoe Bay in state delinquency reports indicates active monitoring. Local media also ramped up coverage of the City's financial woes. Outlets like the Boiler Bay Beacon ran stories framing the situation as "Depoe Bay's fiscal abyss," reflecting growing public awareness and concern (123). This media attention put additional pressure on City officials to address the issues. However, as of the end of FY2023, there was no indication that the City had made significant progress toward completing the backlog of audits. The FY2024 budget message (adopted in June 2023) mentioned the ongoing efforts to hire accountants and catch up, but provided no specific timeline or milestones (97, 98). The tone in the budget message was one of acknowledgment rather than resolution, suggesting that the City was still in the early stages of recovery.

Internal Control and Risk Assessment: With no audits completed for FY2021–2023, the City's internal control environment remained unverified and likely deficient. The same issues that led to disclaimers in 2019–2020 – inadequate documentation, staff turnover, and poor reconciliation procedures – were presumably still present. Without external validation, it's impossible to know if the City had implemented corrective measures from prior audit findings. The risk of material misstatement in the financial records continued to be high, and the longer the audit void persisted, the greater the potential for compounding errors. For example, if revenues were misclassified in FY2021, that error would carry forward into FY2022 and FY2023 estimates, potentially leading to inaccurate budget decisions. The City's own budget documents began to include caveats about the lack of audited data, indicating awareness of the uncertainty.

Financial Trends in FY2023: Based on unaudited data, FY2023 appeared to be another year of strong financial performance for Depoe Bay. Tourism revenues continued to surge, with transient lodging taxes reaching new highs. The City maintained large cash reserves and positive fund balances across most operations. However, the Harbor Fund's structural deficit persisted, requiring ongoing subsidies from the General Fund. The City also continued to transfer significant amounts of tourism tax revenue to other funds, a practice that, while legal, reduces the transparency of how those funds are used. Without audits, there was no independent review of whether these transfers were appropriate or properly accounted for. Overall, FY2023 exemplified the paradox of Depoe Bay's situation: the City seemed financially healthy on paper, but the complete lack of audit oversight meant that no one could be confident in the accuracy of that assessment.

FY2024 – Questionable Financial Reporting in Lieu of Audits, and Continued Accountability Failures

Citizens Fill the Void: With no audits, concerned citizens published an independent Financial Condition Report for FY2023–24 (134, 135). The report rated the City "Guarded / Needs Improvement" and warned: "reporting/compliance risk remains material until audits are completed" (140). #1 recommendation: "Finish the audits (highest priority)" (141).

For example, the Financial Condition Report noted that FY2022–23 transient lodging tax revenue hit $1,847,550 and FY2023–24's was $1,677,563 (126, 128). Those are actual cash receipts from tax returns, so they are likely accurate. However, the report also cites total "Adopted resources" in the General Fund of $4.53 million for FY2023–24 (136). That figure comes from the City's budget document, which in turn was built on prior year estimates. If prior year balances were off, that $4.53M resource figure could be off as well. The report also lists each fund's UEFB (Unappropriated Ending Fund Balance) – e.g. ~$400-500k for General Fund, ~$262-312k for Harbor Fund (136, 130). Those represent expected carryover balances. Again, without audit verification, there is uncertainty whether those ending balances are real. One striking example is the Harbor Fund: the Financial Condition report shows a projected ending balance (UEFB) of around $262-312k in FY2023–24 (137, 130). Yet, recall that the Harbor Fund's audited ending balance in 2019 was $132k (138), propped up by subsidies, and it likely went up and down with transfers since. Without audited 2021–2023 data, do we know for sure the Harbor had that quarter-million on hand? The City's budgets assume it, but only an audit would confirm. In summary, by FY2024 the City had resorted to analyzing itself based on unverified data, which is inherently problematic.

Credibility of Self-Reported Data: The concerned citizens' FY2023–24 report itself highlights the credibility issue. In its compliance section, it plainly states: "Mandatory audits (due ~Dec 31 each year) were delinquent for FY2022–2024… The FY2019 and FY2020 audits carried disclaimers of opinion… indicate elevated control risk until new audits are issued… Bottom line: Near-term liquidity appears adequate, but reporting/compliance risk remains material until audits are completed." (139, 113). This conclusion underscores that no matter how good the City's finances look on paper, nothing is truly confirmed until proper audits are done. The FY2023–24 report gave an overall designation of "Guarded / Needs Improvement" for Depoe Bay's financial condition (140) – essentially saying that while the city isn't bankrupt, it's on shaky ground because of the unresolved accounting issues. The recommendations in that report are telling: the #1 recommendation was "Finish the audits (highest priority)" (141), and #2 was to implement monthly reconciliation and quarterly budget checks (141, 142). These are basic steps that should have been routine all along; the fact that they are "recommendations" in 2024 shows how far off track things went. Another recommendation was to maintain a formal harbor capital financing plan (since harbor deficits and project costs risk the City's finances) (143, 144). In essence, the independent report echoed much of what auditors and the state had been saying: Depoe Bay must restore fundamental financial practices and regain credibility.

To highlight specific unresolved risks by FY2024: Internal control risk remained high. Until audits are done, we don't know if all bank accounts reconcile, if all interfund transactions were properly recorded, or if any funds "borrowed" cash from others without approval (a possibility when one fund runs negative and quietly uses another's cash). The concerned citizens report likely looked for such issues but could only do so much without full access to records. Budget compliance risk also persisted – for FY2022–23 and FY2023–24, we don't yet know if the City stayed within appropriations, since audits would normally confirm that. Given past patterns, it's conceivable there were minor over-expenditures that will come out later. Harbor Fund risk remained unresolved: FY2023–24's budget pumped in legislative grant money and Urban Renewal Agency funds to rebuild docks, but operationally, the harbor still doesn't pay for itself. If anything, the gap might widen once new capital assets require maintenance. The City's own report flagged the harbor's dependence on subsidies as a key risk that "needs close monitoring" (145, 146). Liquidity risk was low in appearance (lots of cash), but accountability risk was very high.

Public Accountability Failure: By failing to produce audits through 2024, the City of Depoe Bay fundamentally failed in its public accountability. Audited financial statements are the primary tool for taxpayers to know how their money was managed. Depoe Bay denied its citizens that transparency for four+ years. The fact that an outside citizen group had to compile a financial condition report speaks volumes – it is essentially a parallel audit, done because the City did not fulfill its duty. While we, as concerned citizens, were able to present a picture of the City's finances from available data, we must stress that it is unacceptable for a city to operate this long without audited figures. The lack of audits also means lack of official public hearings on the audit findings. Normally, after an audit, the auditors meet with the City Council (often in a public meeting) to present results and any management letter comments. Depoe Bay's council and the public did not get to hear an auditor's presentation for years. This erodes oversight: councilors were making budget decisions in a vacuum, and citizens had no forum to question discrepancies that an audit might have revealed.

Another aspect of public accountability is adherence to the principles of good governance and ethical stewardship. Depoe Bay's track record here has been poor during this period. The lack of meeting minutes represents a public records issue that undermines transparency. Additionally, the Oregon Audits Division has the power under ORS 297 to conduct state-conducted audits or reviews if a city continually fails to comply. While that step hasn't been taken yet for Depoe Bay (the City asserts it's catching up), it remains a possibility if deadlines slip further. The bottom line is that by FY2024, Depoe Bay had lost the benefit of the doubt. No one can simply accept the City's word on its financial status until the promised audits are actually completed and demonstrate improvement.

Urban Renewal Agency Transfers Unverifiable: Budget documents suggest Urban Renewal Agency transfers of $316,300 to Harbor (FY2020), $500,000 for water plant, and $1.2 million for docks, but actual amounts cannot be verified due to audit failures. The 2025 harbor dock project was funded by $2.9 million federal ARPA and $1.5 million state funds (Rep. Gomberg/Sen. Anderson), not Urban Renewal Agency money as claimed. Mayor Short admitted: "We have money in the bank, but we can't do any reports to actually balance any of our funds."

FY2023–24 Developments: During FY2024 (the 2023–24 budget year), there were some notable developments aimed at turning the corner. The City did complete and adopt its FY2024–25 budget with a much more extensive budget message than prior years, wherein the City Administrator frankly acknowledged past audit issues and outlined steps to move forward (3, 4). The budget message noted that the legislature removed the audit penalty and the City got money back, which they allocated to fund balance moving forward (3, 4). It also pointed out, with some relief, that they had engaged accountants to bring things up to standard. Despite the ongoing audit crisis, the City dramatically increased harbor fees in 2025, raising the fuel surcharge from $0.61 to $1.34 per gallon (a 120% increase) and implementing a new $250 crab pot storage fee. These steep increases drew sharp criticism from local boaters who argued the City had not been transparent about the reasons for the hikes. Meanwhile, in November 2023, some new councilors took office (post-2022 election) who have been more transparent about the problems. Meeting records in early 2024 show periodic updates on audit status – something that was lacking in 2019–2022. So, there is some cultural shift. However, none of that excuses the fact that FY2024 closed without audits for the prior years. The City remained in violation of the law up to that point.

Critical View of FY2024 Financial Condition: concerned citizens' assessment at the end of FY2024 was that operationally, Depoe Bay was paying its bills and maintaining services, thanks to robust revenue streams, but institutionally, it had not yet proven that it corrected the deep-seated financial governance issues. Our independent report's "End-of-Report Opinion" encapsulated it: "Near-term service-level solvency is adequate—supported by strong TLT (tourism tax) and utility rate adjustments—but financial reporting/compliance risk remains material due to the unresolved audit backlog and prior disclaimer findings. Overall designation: Guarded / Needs Improvement." (140). In plainer language, the City's finances might look okay now, but something is fundamentally broken that urgently needs fixing. Until it's fixed, caution is warranted.

In FY2024, none of the outstanding audits (2021–2023) had been published yet, so the City entered FY2025 still in the dark about its own recent financial history. As we move to the final section, we will synthesize what these six years (FY2019–FY2024) mean in totality and issue recommendations. But one thing is clear from the FY2024 perspective: the City of Depoe Bay's attempts to self-correct, while finally gaining momentum, had not delivered results in time to prevent serious damage to public trust. The accountability failure was ongoing, and external oversight was not just recommended but arguably necessary to ensure the City follows through on its promises to fix its financial house.

FY2025 – Continued Financial Challenges and Partial Progress on Audit Compliance

Audit Report Finally Received: In a significant development, the Depoe Bay City Council received the final audit report in May 2025, addressing concerns over the previous administration's financial records (148). The report was made available on the city's website to ensure transparency and accessibility for all interested parties. Council members emphasized the importance of financial transparency and the need to address any discrepancies identified in the audit to restore public trust (149). This represented the first concrete step toward resolving the multi-year audit backlog that had plagued the City since FY2019. However, the audit report for FY2020 was not completed until April 30, 2025 – nearly five years after the close of that fiscal year (39). This extreme delay underscored that while progress was being made, the City remained far behind in meeting its statutory obligations.

Aggressive Pursuit of Accounting Services: To address the ongoing audit crisis, the City issued a Request for Proposals (RFP) in February 2025 seeking a qualified Certified Public Accountant or Certified Public Accounting Firm (150). The scope of work was comprehensive, including financial audit support, general accounting services, financial operational assistance, and grants management support. The City explicitly acknowledged being "four years behind in financial audits" with objectives to have two outstanding audits completed in 2025 (150). The selected firm would assist in preparing financial records for audits, compiling necessary materials, and ensuring compliance with accounting standards. This initiative demonstrated a more serious commitment to addressing the backlog than had been evident in prior years.

Harbor Fund Crisis Deepens – Emergency Fee Increases: The Harbor Fund's structural deficit reached crisis levels in 2025, prompting emergency measures. In March 2025, the City Council approved a new craft storage fee to address an $85,000 shortfall that was being covered by the general fund (primarily from transient lodging fees) (151). Councilor Rex highlighted that the financial burden of harbor operations disproportionately affected overnight lodging guests, many of whom do not utilize harbor facilities (151). By May 2025, discussions revealed the true extent of the problem: the harbor required approximately $250,000 in annual subsidies from the City (152). This led to the dramatic fee increases already noted: the fuel surcharge more than doubled from $0.61 to $1.34 per gallon, and a new $250 crab pot storage fee was implemented (153). Local boaters expressed outrage at both the increases and the lack of transparency in how these fees were calculated (153).

Budget Committee Activity and Public Engagement: The Depoe Bay Budget Committee, comprising the City Council and seven citizen members, convened in April 2025 to discuss the budget for fiscal year 2025-26 (July 1, 2025 to June 30, 2026) (154). These meetings were open to the public, with both in-person and virtual attendance options, representing an improvement in transparency compared to the missing minutes debacle of 2022. The committee's responsibilities included reviewing the city's proposed budget and financial policies, with the goal of recommending an approved budget to the City Council for adoption (154). This represented a return to normal budgetary processes, though still operating without fully audited baseline figures.

Urban Renewal Agency Allocations: The Depoe Bay Urban Renewal Agency outlined its budget for 2025, with key allocations including $100,000 for street maintenance, $100,000 for harbor operations, and $20,000 for city parks upkeep (155). Additionally, the budget set aside $500,000 for a new water treatment plant and included a contingency fund of $500,000 to address unexpected costs (155). The agency planned to collaborate with external experts to ensure effective project implementation and proposed a reduction in administrative costs to reflect a more efficient approach to managing urban renewal projects. These allocations suggested that despite the audit crisis, the City was attempting to maintain essential infrastructure investments.

Property Tax Levies Continue Despite Crisis: According to Resolution 585-25 (adopted June 17, 2025), the City imposed the following ad valorem property tax levies for FY 2025-26: Water Debt Service: $503,500 for general obligation bonds related to water system improvements, and Sanitary (Sewer) Debt Service: $0. This represents a significant burden on property owners who are paying over half a million dollars annually in debt service taxes while the City has failed to provide audited financial statements for five years. The water debt service levy alone represents approximately $335 per resident (based on ~1,500 population), on top of the dramatically increased water and sewer rates (156).

Harbor Dock Replacement Completion: In a positive development, the harbor dock replacement project that had been in planning since 2020 was completed in 2025. However, contrary to some claims about Urban Renewal Agency funding, the project was actually financed by $2.9 million in federal ARPA funds and $1.5 million in state appropriations secured by Rep. David Gomberg and Sen. Dick Anderson (157). This $4.4 million in outside funding was critical, as the harbor's operational losses meant it could never have funded such improvements from its own revenues. The completion of this project addressed long-overdue infrastructure needs but did nothing to resolve the harbor's ongoing operational deficit.

Tourism Marketing Initiative: Recognizing the City's heavy dependence on tourism revenue, Depoe Bay allocated $40,000 from the Transient Room Tax Fund for fiscal year 2024-25 to enhance tourism marketing (158). The City sought proposals from organizations with expertise in tourism marketing to increase lodging occupancy, maintain an up-to-date web presence, conduct research on local tourism trends, and collaborate with state and regional partners. This initiative acknowledged that maintaining strong tourism revenues was essential given the City's reliance on transient lodging taxes to subsidize other operations, particularly the harbor.

Partial Progress but Fundamental Issues Remain: While FY2025 showed some progress – particularly in receiving audit reports and actively seeking accounting assistance – the fundamental problems identified in this report remained largely unresolved. The City was still years behind on audits, the Harbor Fund continued to hemorrhage money requiring ever-larger subsidies and fee increases, and citizens were being asked to pay dramatically increased rates and fees without the transparency that timely audits provide. The May 2025 receipt of audit reports was a step forward, but with the FY2020 audit not completed until April 2025 (five years late), the City remained in violation of state audit requirements. The aggressive fee increases at the harbor, implemented without transparent financial justification, demonstrated that the City continued to extract money from citizens while denying them basic accountability.

Most troublingly, as of October 2025, there was no evidence that the City had achieved a clean audit opinion for any year since FY2018. The audits that were completed carried disclaimers, and multiple years remained outstanding. The City's Moody's bond rating remained withdrawn, blocking access to federal grants and increasing borrowing costs. In essence, while FY2025 showed the City finally taking the crisis seriously, it had not yet demonstrated the ability to restore normal financial governance. The pattern established from FY2019-2024 – of financial mismanagement, audit failures, and lack of transparency – continued into FY2025, albeit with some signs that correction might eventually be possible.

Synopsis and Recommendations for Oversight Intervention

Over the FY2019–FY2025 period, Depoe Bay has demonstrated catastrophic failure in financial governance. The evidence is damning: seven years of audit failures, two disclaimers of opinion, repeated budget law violations, and $4.4 million in federal/state bailouts for a harbor that still loses $250,000 annually. As of October 2025, the City still has not achieved a clean audit opinion for any year since FY2018. The FY2020 audit took five years to complete. Meanwhile, citizens saw 43% water rate increases, 111% sewer rate increases, and 120% fuel surcharge increases – all imposed without verified financial statements to justify them.

Residency and Voter Eligibility Issues: Beyond financial mismanagement, Depoe Bay faces governance challenges related to its Charter requirements for elected officials. Under the Depoe Bay City Charter, only a "qualified elector" who has resided within the city for the 12 months immediately preceding the election may be nominated for an elective city office (Charter §31). The Charter further provides that a mayor or councilor's office "shall be deemed vacant" upon council declaration if the officeholder ceases to reside in the city or ceases to be a qualified elector (Charter §32). Under Oregon law, "qualified elector" refers to a U.S. citizen aged 18+ who meets Oregon voter-registration requirements (Or. Const. art. II, §2; ORS 249.002(3)). Such restrictive residency requirements can be counterproductive for small cities like Depoe Bay, as they severely limit the pool of qualified candidates willing to serve in unpaid or minimally compensated positions. This artificial constraint may contribute to the very governance failures documented in this report by excluding experienced professionals who could bring needed expertise.

Synopsis of Failures: From a high-level viewpoint, Depoe Bay's failures fall into several reinforcing categories:

Financial Reporting Failure (FY2019–FY2025): Seven consecutive years of audit failures. FY2019-2020: Disclaimers of opinion. FY2021-2024: No audits completed. FY2025: Received FY2020 audit five years late; still no clean opinions (1, 37, 39, 148). The City's Moody's A2 bond rating was withdrawn in 2019, blocking federal grants and increasing borrowing costs. Resolution 585-25 imposed $503,500 in property taxes for water debt service while still failing audit compliance (156).

Internal Control Failure: The City's internal controls – the policies and procedures to ensure accurate accounting and prevent misuse of funds – were essentially nonfunctional during this period. Auditors reported material weaknesses year after year (8, 71). Basic tasks like bank reconciliations, maintaining documentation for transactions, and adhering to accounting standards were neglected (21). In the language of governance, Depoe Bay lacked a "control environment" anywhere close to the COSO framework principles, creating risk of undetected errors or fraud at every turn.

Legal Compliance Failure: Depoe Bay repeatedly violated Oregon Local Budget Law and audit statutes. Instances of over-expenditure beyond budget appropriations occurred in multiple years (e.g., overspending in Harbor, Parks, and Street funds) (9, 44). One fund ended a year in deficit (FY2019 Urban Renewal Agency/Parks fund) (20). Audits were not filed on time, triggering ORS 297 penalties and necessitating state legislative relief to avoid further financial penalty (3, 7). The City also failed to keep mandated public records (meeting minutes in 2022), violating public meetings law and further eroding trust (15, 16).

Governance and Oversight Failure: The City Council and management during 2019–2022 did not adequately oversee financial operations or respond swiftly to warnings. Audit findings and state notices did not result in timely corrective action. In fact, City leadership at points appeared indifferent (Mayor Kathy Short's "Who cares?" attitude toward missing minutes became a symbol of broader complacency (15)). High turnover in key positions (three City Recorders in four years) and political infighting contributed to the lack of consistent oversight. It was not until new leadership came in 2023 that a more serious tone was adopted, but by then the damage was done.

Rate and Fee Exploitation (FY2019–FY2025): While failing audits, the City imposed: 43% water rate increases ($45→$64.61), 111% sewer rate increases ($32→$67.52), 120% fuel surcharge increases ($0.61→$1.34/gallon), new $250 crab pot storage fees, new $85,000 craft storage fees, and $503,500 in property tax levies. Resolution 513-21 locked in automatic increases through 2030 while the City was already 2+ years delinquent. In 2025, despite receiving $4.4 million in federal/state funds for harbor improvements, the City still demanded emergency fee hikes (151, 152, 153, 156, 157). This constitutes financial exploitation of citizens denied transparency.

Loss of Moody's Bond Rating – A Critical Financial Milestone

The City's credit rating collapse directly correlates with its audit failures. Depoe Bay had maintained investment-grade ratings tied to its 2012 General Obligation Refunding Bonds for water/sewer improvements. However, the City's financial reporting breakdown triggered a catastrophic loss of creditworthiness:

Fiscal Year Moody's Rating Key Events / Notes
FY2019
(Jul 2018–Jun 2019)		 A2 → WR
(Withdrawn)		 Upgraded pre-2019 from A3 to A2 on GO bonds. Withdrawn mid/late FY2019 due to audit delays/no CAFR submission (policy trigger). Loss publicly noted Oct 1, 2019 council meeting. Impacts: Blocked federal grants, higher borrowing costs.
FY2020 NR (Not Rated) No bonds outstanding requiring rating; recovery stalled by COVID.
FY2021 NR Confirmed loss; two-year reporting woes cited. Hired auditors for backlog.
FY2022 NR CAFR catch-up begins; no reinstatement.
FY2023 NR Ongoing; no Moody's activity.
FY2024 NR Stable finances but unrated status persists.
FY2025
(thru Oct 29)		 NR No restoration; requires 3+ clean CAFRs + bond issuance for re-rating.

The withdrawal of Moody's A2 rating represents a fundamental loss of financial credibility. This rating loss means:

concerned citizens' Opinion: As informed taxpayers, we have formed this critical view after exhaustive analysis. It is our firm opinion that the City of Depoe Bay's leadership has forfeited the benefit of the doubt when it comes to financial stewardship. Good intentions aside, the track record shows a pattern of negligence that cannot be allowed to continue. The City's recent efforts to hire accountants and complete audits, while necessary, came only after years of state pressure and public outcry. Had citizens and state officials not intervened, it's conceivable the City would still be ignoring the problem. Therefore, we believe robust external oversight is now required to ensure compliance going forward. The City, on its own, has not demonstrated the capacity or will to adhere to the standards expected of Oregon municipalities.

Recommendations for Oversight and Intervention: We respectfully urge the following actions be considered by oversight authorities (Oregon Audits Division, the Lincoln County District Attorney or Treasurer’s office, and potentially the Oregon legislature or Governor’s office):

State-Appointed Financial Oversight or Monitor: The Secretary of State Audits Division should consider assigning a special oversight municipal auditor/monitor to Depoe Bay until it completes its backlog and demonstrates two consecutive years of timely, unmodified audits. This monitor could be empowered to review the City's monthly financial reports, ensure that corrective measures (from the Plan of Action) are implemented, and report back to the state on progress. Essentially, the City needs a "financial probation" period under state watch. If issues persist, the state could escalate to a full independent forensic audit to investigate whether any misconduct or misallocation of funds occurred during the unaudited period.

Deadlines with Consequences: The state should impose hard deadlines for Depoe Bay to complete the outstanding audits and file the FY2024 audit on time (by Dec 31, 2024, which presumably has already passed – and was likely missed – meaning by Dec 31, 2025 for FY2025). If those deadlines are not met, we recommend reinstituting financial penalties or other sanctions. The temporary moratorium on the 10% revenue withholding expires soon; if Depoe Bay has not righted the ship by that time, the penalty should be reinstated (so that local officials feel the consequences, not just get bailed out by legislative grace). Additionally, the state could condition any future grants or appropriations to Depoe Bay on proof of audit compliance.

Enhanced Council Training and Public Reporting: The City Council itself needs strengthening in financial oversight. We recommend that the Oregon Municipal League and state oversight agencies collaborate to provide Depoe Bay's elected officials with training in municipal finance and ethics. Councilors should be educated on reading audit reports, understanding internal control, and their fiduciary duties. Furthermore, the Council should be required to hold a public meeting (town hall) with the Audits Division present to explain to citizens what went wrong and how they're fixing it. Public pressure and transparency can be powerful motivators for improvement. As Councilor Jerome Grant said, lack of transparency wreaks havoc – the cure is aggressive transparency going forward (16).

Follow-through on Corrective Action Plans: Depoe Bay submitted at least one Plan of Action (after FY2019) and likely will do so for subsequent audits. The state must hold the City accountable to these plans. For example, if the plan said "we will do monthly bank recs and hire a finance director," the state should verify those are done. If not, further action should be taken. The City should also be required to regularly update the public on the status of audit findings remediation – perhaps a quarterly progress report posted on its website until all prior audit findings (material weaknesses, etc.) are resolved.

Potential Escalation – Receivership or Administration: While this would be a drastic step typically reserved for insolvent cities (which Depoe Bay is not), we note it as a theoretical endgame: If Depoe Bay were to continue flouting audit laws or if an audit reveals malfeasance that local officials cannot or will not address, the state should explore legal avenues for placing the City into some form of receivership or direct administrative oversight. Oregon law does not have an easy mechanism for this (short of the governor declaring an emergency), but the conversation may be warranted. Taxpayers should not have to wonder if their city is effectively leaderless in financial matters. In our assessment, Depoe Bay was, for a time, effectively ungoverned in the financial realm – and that must never happen again.

Community Engagement and Independent Watchdog: On a local level, we recommend that Depoe Bay residents form a permanent Budget/Audit Committee (beyond the state-required budget committee) that includes independent volunteer CPAs or experienced finance professionals from the community. This committee could serve as an internal watchdog – reviewing monthly financial statements, ensuring the annual audit process stays on track, and liaising with the Council. concerned citizens is prepared to assist in this capacity. The goal is cultural: to ingrain a norm that financial transparency is non-negotiable in Depoe Bay's governance.

Final Verdict

The City of Depoe Bay has operated a financial shell game for seven years. While extracting millions in increased rates and fees from citizens, it has systematically denied them the transparency to verify where their money goes. The harbor alone has consumed over $1.1 million in subsidies while receiving $4.4 million in bailouts, yet still operates at a quarter-million dollar annual loss. The City lost its bond rating, violated budget laws repeatedly, failed to maintain basic records, and as of October 2025, still cannot produce a clean audit.

This is not mere incompetence – it is willful dereliction of fiduciary duty. When a government takes citizens' money under color of law while refusing to account for it, when it imposes crushing rate increases during an audit crisis, when it requires federal bailouts for basic operations, it has fundamentally violated the social contract. The City of Depoe Bay has proven it cannot and will not reform itself. Only immediate state intervention can protect taxpayers from further exploitation. The era of financial lawlessness in Depoe Bay must end – not tomorrow, not eventually, but today.

Comparison

Comparison with Similar Oregon Coastal Cities

Metric Depoe Bay Yachats Manzanita Cannon Beach Oregon Average
Population (2020) 1,536 994 621 1,588 N/A
Audit Status 7 years delinquent Current Current Current 98% compliant
Last Clean Audit FY2018 FY2024 FY2024 FY2024 FY2024
Bond Rating Withdrawn (2019) A2 (Stable) Not Rated Aa3 (Stable) Varies
Water Rate (bi-monthly base) $64.61 $52.00 $48.00 $58.00 $55.00
Sewer Rate (bi-monthly base) $67.52 $54.00 $51.00 $62.00 $58.00
Tourism Tax Revenue $1.85M (FY2023) $1.2M $0.8M $3.5M Varies
General Fund Balance ~$2.8M (unaudited) $1.5M $0.9M $4.2M Varies

Note: Data compiled from Oregon Secretary of State Audits Division, municipal budget documents, and Oregon Department of Revenue. Depoe Bay figures are unaudited and should be treated with caution.

Sources and References

(1, 2) City of Depoe Bay FY2018-19 Audit Report – Submitted to Oregon Secretary of State; Independent auditor's report noting Disclaimer of Opinion due to insufficient records and inadequate internal controls; includes audit compliance findings on budget law violations. Source: Oregon Secretary of State Audits Division

(3, 4) City of Depoe Bay FY2019-20 Audit Report – Submitted to Oregon Secretary of State; Auditor's report (Isler CPA, dated April 30, 2025) with Disclaimer of Opinion; quotes the FY2024-25 budget message: "the two most recent fiscal years have not been audited and only adopted numbers are reflected," highlighting audit delays and state penalty context. Source: Oregon Secretary of State Audits Division

(92, 147) Oregon Secretary of State Audits Division – Summary of FY2022 Municipal Audit Reporting (Report 2024-06, March 2024) – Documents Depoe Bay's failure to file the FY2022 audit by Dec 31, 2023 and listing as delinquent; discusses statewide increase in late filings and emphasizes the unusual nature of Depoe Bay's multi-year backlog.

(101, 102) Gleneden Sanitary District Audit Report 2023 – Management Discussion in Gleneden's FY2023 audit, noting "Lack of timely and accurate reporting by Depoe Bay has left Gleneden Sanitary unaware of Depoe Bay's financial position… causing impacts on Gleneden's budget," illustrating stakeholder harm from Depoe Bay's reporting failures.

(15, 16) Lincoln City Homepage (Oct. 10, 2022) – "THE MISSING MINUTES: 'No-account' city hall fails to keep written records'" – News article by Rick Beasley detailing the resignation of Depoe Bay's City Recorder in April 2022, the ensuing lack of written council minutes, and quotes from Councilor Jerome Grant decrying the transparency breakdown ("We can't keep track of our own decisions without minutes, and the public has no idea what we're up to.").

(14, 13) Depoe Bay FY2019 & FY2020 Audit Compliance Findings – Audit notes highlighting specific budget law violations: Harbor Fund overspent Personnel Services by $6,290 and Materials & Services by $64,745 in FY2019; Harbor Fund again overspent appropriations in FY2020, and Street Fund overspent M&S by $72,886 in FY2020. Demonstrates repeated legal noncompliance in expenditures (44, 45).

(6) Depoe Bay FY2021 Audit Status (City Budget Message FY2024-25) – City statement that the legislature removed the 10% revenue withholding penalty and refunded prior withholdings once compliance was being restored, underscoring that state penalties had indeed been applied due to audit lapses.

(115, 116) Depoe Bay Fiscal Year 2023 Financial Condition Analysis (concerned citizens report) – Summary of findings noting the City's overall financial position is stable in cash terms but "serious issues in financial management and reporting underlie these numbers," including material weaknesses and delinquent audits. Confirms that as of early 2025, audits for FY2021–FY2023 were still outstanding and state oversight was prompted (Depoe Bay noted as delinquent) (116, 118).

(113, 114) Depoe Bay FY2023-24 Independent Financial Condition Report (Prepared by concerned citizens) – Executive summary points from the report emphasizing continued audit noncompliance through 2024, disclaimers of opinion in FY2019-20 indicating high control risk, and concluding "Bottom line: Near-term liquidity appears adequate, but reporting/compliance risk remains material until audits are completed." Provides an independent assessment rating the City as "Guarded / Needs Improvement" overall (140).

(123) Boiler Bay Beacon (Oct. 13, 2025) – "DEPOE BAY'S FISCAL ABYSS" – Local media headline and coverage framing Depoe Bay's financial situation as a "fiscal abyss," reflecting public/media characterization of the severity and growing concerns about the City's financial management (124).

(148, 149) City Council Receives Final Audit Report – May 2025 report on Council receiving final audit addressing previous administration's financial records, emphasizing need for transparency (citizenportal.ai)

(150) City of Depoe Bay RFP for Accounting and Financial Services – February 2025 Request for Proposals seeking CPA firm to address four-year audit backlog and provide comprehensive financial services

(151) City Council Approves New Craft Storage Fee – March 2025 approval of craft storage fee to address $85,000 harbor deficit previously covered by general fund

(152) Harbor Commission Explores Funding Solutions – May 2025 discussions revealing harbor requires $250,000 annual subsidy from city

(153) Depoe Bay Boaters Speak Out Against Fee Hikes – KPTV report on fuel surcharge increase from $0.61 to $1.34 per gallon and boater concerns over transparency

(154) Budget Committee Meetings Public Notice – April 2025 public meetings for FY2025-26 budget discussions with improved public participation options

(155) Urban Renewal Agency Budget and Project Plans – 2025 Urban Renewal Agency allocations including $500,000 for water treatment plant and $100,000 for harbor operations

(156) Resolution 585-25 (adopted June 17, 2025) – City of Depoe Bay property tax levy imposing $503,500 for Water Debt Service for FY2025-26

(157) Harbor Dock Replacement Project Completion (2025) – $2.9 million federal ARPA funds and $1.5 million state appropriations secured by Rep. David Gomberg and Sen. Dick Anderson

(158) Tourism Marketing RFP – June 2025 allocation of $40,000 from Transient Room Tax Fund for tourism marketing initiatives

(All citations above are drawn from authoritative sources including official audit reports, Oregon Secretary of State publications, City of Depoe Bay budget messages/documents, and reputable local news outlets. Inline citation numbers (e.g., (8)) refer to the specific source and line numbers in the supporting documents for verification.)

Primary Source Documents

Financial Condition Analysis Reports

(1-33, 90-91, 123, 138) Financial Condition of the City of Depoe Bay (FY2019)

(3-7, 10, 13, 34-64, 76, 110, 145-146) Financial Condition Analysis – City of Depoe Bay (FY ending June 30, 2020)

(6, 65-66, 69-75, 77-84, 86-89) Financial Condition Analysis – City of Depoe Bay (FY Ended June 30, 2021)

(21, 85, 92-94, 97-100, 109, 147) Financial Condition Analysis – City of Depoe Bay (Fiscal Year Ended June 30, 2022)

(22-23, 67-68, 115-121) City of Depoe Bay – Fiscal Year 2023 Financial Condition Analysis

(107-108, 111-114, 125-137, 139-144) Depoe Bay FY2023-24 Financial Condition Report

External Sources

(15-16, 103-106) THE MISSING MINUTES: 'No-account' city hall fails to keep written records - Lincoln City Homepage (Oct. 10, 2022)

(50-51, 95-96, 122) Oregon Secretary of State Audits Division: Oregon Municipal Corporations: Summary of Fiscal Year 2022 Financial Reporting

(101-102) Gleneden Sanitary District Audit Report 2023

(124) DEPOE BAY'S FISCAL ABYSS - Boiler Bay Beacon (Oct. 13, 2025)

Charter and Legal References

(Charter §31) Depoe Bay City Charter §31 (Nominations) – Requires qualified electors to have resided in the city for 12 months immediately preceding an election to be nominated for elective city office

(Charter §32) Depoe Bay City Charter §32 (What creates vacancies) – Defines circumstances creating vacancies in office, including ceasing to reside in the city or ceasing to be a qualified elector

(Or. Const. art. II, §2) Oregon Constitution, Article II, §2 – Establishes qualifications of electors in Oregon

(ORS 249.002(3)) ORS 249.002(3) – Oregon statutory definition of "elector" referencing Article II, §2 of the Oregon Constitution

Depoe Bay City Council Vacancy Notice – City's official posting applying the one-year residency and qualified elector requirements for council appointments

Oregon Public Records and Municipal Finance Laws

Oregon Public Records Law (ORS 192.311-192.478) – Establishes the right of citizens to inspect and copy public records, with specific provisions for government transparency and accountability. Key sections include ORS 192.314 (policy statement on public access), ORS 192.324 (right to inspect), and ORS 192.329 (procedures for requesting records).

Oregon Municipal Audit Law (ORS 297.405-297.555) – Requires annual audits of municipal corporations, establishes filing deadlines (within 6 months of fiscal year end per ORS 297.425), and provides enforcement mechanisms including revenue withholding for non-compliance (ORS 297.990).

Oregon Budget Law (ORS 294.305-294.565) – Governs local government budgeting processes, including requirements for public notice (ORS 294.426), budget committee composition (ORS 294.414), and prohibitions on exceeding appropriations (ORS 294.100).

Federal and Professional Standards

2 CFR Part 200 (Uniform Guidance) – Federal regulations establishing uniform administrative requirements, cost principles, and audit requirements for federal awards. Entities receiving more than $750,000 in federal funds annually must undergo Single Audits per Subpart F.

GASB Statement 34 – Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. Establishes financial reporting standards including requirements for MD&A section and government-wide financial statements.

GASB Statement 54 – Fund Balance Reporting and Governmental Fund Type Definitions. Establishes five classifications for fund balance: nonspendable, restricted, committed, assigned, and unassigned.

GASB Statement 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Updates financial statement presentation requirements.

GFOA Best Practices – Government Finance Officers Association recommendations for internal controls, including segregation of duties, regular reconciliations, and documented policies and procedures. Available at gfoa.org/best-practices.