A state audit of Washougal’s finances revealed two significant deficiencies in city controls.
However, neither finding indicates money is missing or any improper action was taken by an employee. One of the findings is attributed to the turnover in the finance director position. In addition, the city has already taken steps to correct some of the issues.
The annual audit, which was released Tuesday, reviewed the city’s financial records and compliance with federal regulations from Jan.1 to Dec. 31, 2009.
The Washington State Auditor’s Office identified problems with the city’s internal controls over accounting and financial statement preparation. The report also highlighted issues with the contracts related to the Highway 14 pedestrian tunnel project.
“I certainly respect the work of the state auditor and their staff, and I appreciate that they are paying close attention to Washougal,” Mayor Sean Guard said in a written statement. “I believe that we now have the individuals in place who will help the city improve our systems, implement some new policies and result in clean audits again, starting in 2011.”
The auditor’s office took issue with a couple components of the tunnel project.
In 2006, the Washington State Department of Transportation audited the overhead rate of the engineering firm hired by the city for the tunnel project. The approved rate was 150.8 percent. After the audit, the city obtained approved supplemental agreements from WSDOT and the overhead rate rose to 165.3 percent. WSDOT never audited the revised rate, according to the auditor’s office.
Guard said the city received approval from the WSDOT Vancouver office, which served as the contact for the project. Guard said the city would have obtained approval from the Olympia office, if it had known that was required.
The auditor’s office also said the city did not obtain weekly certified payroll records from all contractors and subcontractors on the project. This requirement is to ensure prevailing wages are paid, according to the auditor’s office.
The city said the consultant thought it could obtain all of the required documents by the end of the project, as opposed to every week. The city corrected the misunderstanding and will monitor all future contracts, according to the city’s written response in the report. The contractor is still collecting the required paperwork, Finance Director Jennifer Forsberg said.
The auditor’s report also identified four deficiencies in the city’s internal controls over financial reporting. When combined, the minor issues constitute a significant deficiency. The auditor’s office attributed these issues to the turnover in the finance director position in 2009.
The auditor reported the following deficiencies:
• The city had not reconciled bank statements to the general ledger since February 2009, although the city does reconcile them to internal tracking spreadsheets.
• The city does not conduct a secondary independent review of accounting journal entries to the general ledger.
• City employees do not have adequate experience with reporting requirements, specifically, those related to the American Recovery and Reinvestment Act.
• The secondary review of the city’s financial statements and supporting schedules was not performed in sufficient detail to detect and identify errors.
The city contends it has controls in place to catch material errors but plans to improve procedures to prevent future minor errors. The city has also agreed to implement several of the auditor’s recommendations, and by hiring Forsberg in July, the city believes it will be able to resolve many of the remaining issues.
In regards to the stimulus money requirements, the city was tracking ARRA money with other federal money received for the Highway 14 tunnel project. The amount of federal funding was tracked properly, however, ARRA funding wasn’t itemized on the schedule. Once notified of the requirement, the city immediately corrected the problem.
The $100,000 from city events the auditor’s office said was unaccounted for in an accountability audit last year was not part of this financial audit. Losses would have to be material to the financial statements in order for them to appear on a financial audit, Forsberg said.
The auditor’s office will likely follow up on the issue in this year’s accountability audit, which is scheduled for later this year. The criminal investigation by the Clark County Sheriff’s Office is ongoing.
