Council Audit Committee Examines City Audit; Considers Audit Firm for Coming Years

The City Council held a meeting examining the city audit for the budget year that ended last June and discussed requests for proposals for the current budget year.

The auditor, CliftonLarsonAllen, found a “Significant Deficiency in Internal Control over Financial Reporting”, reporting that,

The financial close process of the City did not include a timely final review of funds to record adjustments to account balances in accordance with generally accepted accounting principles. This lack of final review caused delays in audit work and a number of client entries being prepared during the audit process as well as audit adjustments processed.

The deficiency, according the the auditor, created an, “Increased risk of material misstatement within the financial statements.”

“Generally accepted accounting principles (GAAP) requires that revenue be recognized when it is both measurable and available and receivables and revenue within an Enterprise Fund should be recorded in accordance with full accrual basis of accounting,” the Council said. The cause noted was a, “Shortage in staffing within the finance department to review balances and lack of a formal financial close process.”

The city agreed with the auditor’s recommendation that, “the City develop a formal financial close process to ensure each fund’s year-end balances are analyzed timely and corrected appropriately.”

The audit did not include the “Material Weakness in Internal Control over Financial Reporting,” reported in the audit that had been done for the 2022-2023 budget year. That problem, and others, were unresolved from the report for the year before that. The auditor had said that, “The City’s bank reconciliations were not properly prepared and completed timely.” The auditor said that the problem created, “Increased risk of material misstatement within the financial statements.”

The Council’s Majority Leader, Ald John McNamara (D-4) asked a number of questions for the city Finance Department and audit firm about the audit, but added that progress was being made, with the resolution of Material Weakness found in previous audits.

City Finance Director Jonathan Perugini said that he is hoping to address the Significant Deficiency finding in the most recent audit before the next city audit.

The most recent audit, for 2023-2024 budget year, was completed three months after deadline of December 31, 2024, making it the third year in a row that city has been late in filing its required audits under the administration of Mayor Erin Stewart (R). The report for the city budget year that was from July 1, 2022 to June 30, 2023, due by the end of December of 2023, was submitted nearly six months late. That followed even later audit report for the budget year that was from July 1, 2021 to June 30, 2022. That, fiscal year 2022, report was due in December of 2022 and was nearly a year late, filed in December of 2023.

Discussing the hiring of an audit firm for coming years, Perugini said that only CliftonLarsonAllen had responded to the city’s request for proposals.

The committee recommended to the full Council that CliftonLarsonAllen be continued as the auditor for the next two budget years, with three possible one year renewals.

The Council has been acting to reassert its statutory authority over city budget audits, after years of that function being under the executive branch of the city government.