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W A S H I N G T a N, U.S.A.
July 15, 2014
Mr. Alexander Beherndt
Assistant State Auditor
Team Port Orchard
WA State Auditor's Office
600 Kitsap Street, Suite 201
Port Orchard, WA 98366
RE: Management Letters
Dear Mr. Beherndt:
Thank you for the opportunity to respond to the Audit Findings included as part of the 2013
Audit for the City of Port Angeles. We have prepared separate responses for the two Audit
Findings as noted below:
Suspension and Debarment Requirements:
The City greatly appreciates the efforts of the State Auditor's Office regarding the
auditing and review of federal grant funded projects. We concur with the Audit
Finding and have already taken steps to prevent re- occurrence of the issue in the
future.
All construction contract awards will be processed through the City's Department of
Public Works and Utilities. They have modified their procedures and checklist to
include checking for suspension or disbarment regardless of the source of funding to
pay for the construction contract. By requiring checking on all construction contract
awards, we should be able to eliminate any confusion regarding whether or not the
funding source required checking for suspension, or disbarment of the proposed
contract recipient.
For non - construction contracts, we will be instituting a training program for all other
departments that will highlight the requirement to check for disbarment or
suspension for all contract awards greater than $25,000, regardless of funding
source. Departments will be required to submit to the Finance Department proof of
the checking for suspension and disbarment as part of the contract approval process.
The training should be complete by the end of August 2014.
Letter to State Auditor Oitiee
Response to Audit Findings
July 15, 2014
Page -- 2 --
Financial Reporting:
There are three components to this audit finding, and it is important to note that the City of
Port Angeles self - disclosed the problems related to two of the three components. In
addition, the City would also note that there was no impact to the Citywide financial
statement bottom line for items #1 and #2.
1) $10 million Wastewater fund long -term debt misstatement. When researched
online, the SAO site advises the auditee to ask onsite auditors if immediate
assistance is needed and this was done. City staff requested information from
auditors on site, and were told how it was represented was correct prior to
submission. Unfortunately, the answer received was incomplete causing the
misstatement. This item has been corrected.
— Resolution: Staff will more fully investigate the amounts prior to submission
and will double check with the GFOA and SAO when questions arise. In the
future, staff will be more reluctant to ask onsite auditors if we need
immediate assistance, despite the advice given on the SAO website.
2) Solid Waste Collection Utility understatement. This matter was brought forward
by City staff and disclosed to the Auditor's office, it was not discovered by the State
Auditor's Office personnel. This was also an overstatement in the Water fund by the
same amount, caused by a typographical error when fund number 402 was entered
into the journal account rather than fund number 404. Again, it is important to note
that the Citywide bottom line was correct. In addition, net proprietary was correct.
This item has been corrected.
- Resolution: Staff will do a more thorough investigation and review of
individual line amounts and double -check journal entries prior to entry.
3) GF liabilities understatement. This was an overstatement of liabilities in the
Governmental Capital Improvement fund; however, Citywide information was
correct on both the State of NA and Changes in Revenues, Expenditure. Cash was
received and posted on 12/31/13 as pending by Customer Service into the General
Fund, rather than the Capital fund. The amount was not discovered as being posted
in the incorrect fund until after the reconciliation of the AR amounts, and
presentation of the financial statements. A question was asked concerning liabilities
in the General Fund. Upon further review and research, City staff disclosed to the
Letter to State Auditor Office
Response to Audit Findings
July 15, 2014
Page -- 3 --
Auditor's Office that the amount should have been cleared and posted to the Capital
Fund. This time has been corrected.
- Resolution: Staff will do more thorough investigation of individual pending
amounts to ensure they are recorded to the correct fund.
The City does appreciate the efforts of the State Auditor's Office and looks forward to
continuing a positive and fruitful relationship going forward for the benefit of the citizens of
Port Angeles.
If the Auditor's Office would like to have further discussion, or clarification, regarding the
City's response, please contact me at your earliest convenience.
Best regards,
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Byro: Olson
Chief Financial Officer
Cc: City Council
Dan McKeen, City Manager
William Bloor, City Attorney
Nathan West, Director of Community & Economic Development
Craig Fulton, Director of Public Works & Utilities
Terry Gallagher, Chief of Police
Ken Dubuc, Fire Chief
Corey Delikat, Director of Parks & Recreation
Trina Nevaril, City Treasurer