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Debits and credits trip up Sunnyside city staff

Putting financial data into the wrong ledger column is at the heart of a finding the Washington State Auditor's office reported against the city of Sunnyside on Monday, Dec. 24.

The Christmas Eve news came as more than 40 other municipalities in the state joined Sunnyside in receiving a slap on the wrist because of tighter audit guidelines.

Interim City Manager Mark Kunkler said under previous guidelines auditors did not report findings against municipalities when bookkeeping errors amounted to less than 10 percent of the budget. This year, he added, auditors are now charged with producing automatic findings for anything over 2 percent of the budget.

Though the bottom line numbers checked out, auditors took exception to errors in which Kunkler said the city's finance department "transposed" numbers when entering them into the 2006 financial report.

The state's hit list on the Sunnyside books included more than $2.2 million in "business-type activities" that were actually listed in the city's debt service maturity schedule.

Also, a miscue of more than $540,000 occurred when the 2006 statement reflected funds in the capital assets account that should have been listed as construction work in process.

Also in the mix was that Sunnyside failed to report a $55,520 prior period adjustment to the beginning fund balance.

Information on inter-fund loans payable did not reconcile between the statements and the notes. Kunkler said that issue arose with auditors because of the city's process in paying back the $2.5 million to city coffers that had been used to purchase the Monson property. The city used bonds to pay back the funds.

In admitting that errors were made, Kunkler noted that the mistakes were corrected prior to submission of the final statements for publication with the 2006 audit report.

The city disagreed, though, with the state's report that the audit "identified significant deficiencies in controls that adversely affect the city's ability to produce reliable financial statements" since the errors did not impact the bottom line reporting of the city's finances.

At the state's recommendation, Sunnyside will set up an internal control process in which another set of eyes will examine the books to make sure things add up.

Kunkler said the state will supply a checklist form to help troubleshoot any inconsistency in future financial records.

The question, he said, is finding an independent set of eyes to offer another review of the books. Kunkler indicated he may actually be the one that takes on the task when it comes time to produce the 2007 financial statement.

The city is also returning to cash basis accounting, which Kunkler said the city had employed until a change to accrual-based accounting in around 2004 or 2005.

"I'm not sure why the decision was made," Kunkler said of departing from a cash-based procedure.

Sunnyside Mayor Ed Prilucik said the city had a run of six straight years without a finding from state auditors. Kunkler indicated that was during a time the city used the simpler cash basis procedure. "It's a lot simpler to account for transactions," Kunkler said.

Noting the city had two findings from state auditors in 2004 prior to the one issued recently for 2006, Prilucik looked forward in hopes the city can get back on the right track with its bookkeeping.

"It has always been my expectation that the city will have no findings by the State Auditor's office," said Prilucik, who leaves office at the end of this year.

"I encourage the city council and the city manager to again make this expectation a reality," Prilucik added. He said that could happen by "setting high financial expectations for the organization and cooperating with the State Auditor's office in order to assure that we have no future audit findings."

1 - John Fannin • December 28, 2007 • 4:47 PM

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