By Harry Gatjens
Representatives from the State Auditor’s Office and the City of Edmonds held an introductory meeting Monday to explain the objectives and methods of the upcoming annual city audit.
Representing the State Auditor’s Office (SAO) was Audit Lead Courtney Craft and Audit Manager Casey Dwyer. Representing the City was Interim Finance Director Jim Tarte, Finance Department employee Debra Sharp, Mayor Mike Cooper, Economic Development Director Stephen Clifton and City Councilmembers Lora Petso, Diane Buckschnis and Strom Peterson.
The purpose of the meeting was to describe what the audit entails and define the scope of it. The audit is comprised of two parts, an Accountability Audit and a Financial Statement Audit.
In the Accountability Audit, the auditor’s office examines financial records to evaluate whether public funds are handled properly and are in compliance with laws and regulations. This is where they determine how well the city is watching after its finances. Does it have effective internal controls and are city officials meeting reporting requirements both internal and external?
They do this work by examining several departments and functions, concentrating on those with the greatest risk and or those in which they are aware of significant changes during the year. For example, they will examine the financial workings of the Transportation Benefit District this year.
The Financial Statement Audit checks the reliability of the City’s financial statements and if they comply with governmental auditing standards and general accounting principles.
The SAO does not evaluate whether the City’s financial policies are sound (i.e., how large should the General Fund reserve be) but rather, detemines whether they are in compliance with whatever standards the city has set.
The work on the reports has already begun, and reports are expected to be completed by October.
Both Councilmembers Petso and Buckschnis asked questions about whether the SAO evaluates our accounting policies and regulations. The answer was that the auditors will evaluate compliance but do not take a poistion on whether those policies and regulations are the best way to do things. That is up to the city to determine.
Petso and Mayor Cooper asked abut the timing of budget amendments — whether they should be approved before any expenditures are made or if they can be done after. For the most part, budget deviations should be disclosed before the fact, but sometimes that is not always possible on items such as cost overruns, the auditors said.
Petso also asked if the SAO would make judgments on whether items like individual salary adjustments should be brought before the council. The response was that these kind of items should be brought up at whatever level of detail was specifically approved in the budget. If the council approves a salary line total for a department, it is not required to notify the auditors of individual adjustments within that category. The same goes for all other categories of expenditures.
Other items were also discussed, such as who should be directly communicating with the auditors, the cost of the audit and what kinds of reports to expect.
As this was a preliminary meeting, not much was expressed in terms of detailed findings of evaluations, but Petso and Buckschnis did bring up several areas they thought should be examined. The auditors took those comments and will consider them when developing the audit reports.