State audit calls for strengthening financial controls
July 9, 2008
By Emily Keller
Sammamish’s Financial Services Department is keeping better track of its books after a state auditor’s report found “significant deficiencies” in its internal accounting controls in 2006.
Washington State Auditor Brian Sonntag identified six accounting errors that he called minor and immaterial in a June 16 report while cautioning that “deficiencies in internal controls” make it possible that significant misstatements could occur in the future.
Those errors included a misclassification of more than $3 million of land as a depreciable asset, which loses value over time, and a $222,210 understatement of expenses that resulted from transferring funds to the wrong account.
The mistakes also included an under-estimation of the General Fund by $27,560.79, two over-statements of $57,707.13 in both a parks construction fund and a transportation construction fund, and an overstatement of $6,231.30 in the Surface Water Management Fund.
Sonntag recommended that the city establish and follow an internal control process that would catch errors like these early on so they are corrected sooner, and that the city makes sure to reflect current costs in its financial statements.
Lyman Howard, the city’s director of finance, attributed the findings to the adoption of more stringent accounting standards than were used in the past.
The American Institute of Certified Public Accountants issued new accounting rules for internal control matters, called the Statement on Auditing Standards 112, in 2006. The new rules broaden the definition of deficiencies or findings.
Howard said the city appreciates the audit and is working to increase accountability.
“It has some benefits in that we’re being held to a high standard, which we don’t necessarily disagree with, but it comes at a cost. We’ve had to hire new staff,” he said.
Howard said some of the errors were the result of a time lag between when King County collected property taxes on the city’s behalf and when the finance department actually received that money and entered it into the computer system.
The city has improved its internal controls by hiring an accounting manager, Chris Gianini, this spring and changing its recording practices to put all accounting adjustments into the financial software system, Howard said.
Under the old method, staff sometimes made adjustments on paper but did not enter them into the computer system.
“We knew that we needed to fix some of these issues so we were working on that,” said Howard, who said he received word of the 2006 findings in April 2008.
However, there are differences in opinion about whether the auditor’s findings are significant. Stan Finkelstein, executive director of a non-profit state lobbying group called the Association of Washington Cities, recently told the Sammamish City Council that he thinks Sonntag is digging too deep for city government errors.
Finkelstein noted his lack of support for Sonntag at a June 10 meeting to prepare the council for upcoming budget discussions by explaining the state’s financial landscape.
“The current state auditor is into a gotcha mode,” Finkelstein told the council. “What you have is an auditor who really wants to find minutiae for the front page of newspapers.”
Mindy Chambers, a spokeswoman for Sonntag, said the auditor is abiding by new accounting standards and disagreed with Finkelstein’s characterization.
“We work with people very hard to make good recommendations and give them suggestions for how they can make improvements,” she said.
Reporter Emily Keller can be reached at 392-6434, ext. 242, or ekeller@isspress.com.
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