By Marcy Stamper
The final state audit presented to Okanogan County commissioners last week uncovered several problems with the way the county kept records and categorized funds in 2014, although all the issues had already been caught and corrected by county financial and administrative staff before the auditors completed their work.
The audit — a standard annual review of the county’s financial statements and operations — determined that the county had not reconciled the statements. This double-checking is traditionally done by both the treasurer’s and the auditor’s office to be sure that everything matches, according to Jake Santistevan, assistant audit manager for the state review.
In a finding of a “significant deficiency” issued with the audit, the state auditors noted that county staff had not consistently reviewed fund balances, done a monthly reconciliation of financial statements, nor reviewed grant worksheets in 2014. At the auditors’ exit conference with county commissioners and financial staff on April 27, the auditors said that for four decades the county had consistently done these reviews, but that there had been a few-month lapse in 2014.
The lapse was connected with turnover in county staff, according to the county and the auditors. The county’s long-serving chief accountant had retired and her replacement performed the required review at first, said Santistevan in an interview after the meeting. But at some point the new staff person stopped doing the regular checks of financial statements, he said.
During this gap in 2014, the county treasurer and auditor discovered that the reconciliation wasn’t being done, became very concerned, and initiated the review themselves before the audit was complete, said Santistevan. They did not find any mistakes in the balances, although they did identify areas where funds had been misclassified.
About six months ago, the county hired a new financial manager, who has been diligent in performing the required reviews, said the auditors. In fact, the review of the county’s 2015 financial statements was completed early and submitted to the state auditors about 30 days before the deadline. Only 350 out of 2,000 financial statements from jurisdictions around the state have been turned in this early, the audit team said.
The other problem identified by auditors had to do with how taxes collected on lodging — which are used for tourism promotion — were tracked and classified. The county levies two separate taxes on lodging and the monies are distributed to the Okanogan County Tourism Council and to nonprofits such as The Merc Playhouse and Methow Trails to attract tourists to the county. A portion of the tax is used to pay off the construction bond on the Agri-Plex.
The auditors faulted the county for mingling the tax revenues in one fund, meaning that it was not possible to track the restricted funds — for the Agri-Plex bond — separately from the funds distributed to nonprofits. Furthermore, the county had taken a percentage of the fund to pay the Agri-Plex debt, rather than the flat $30,000 that was owed, said Santistevan.
These problems had been resolved in December 2014 when the county restructured the two boards that handled the lodging tax. The commissioners merged the two boards, forming the Lodging Tax Advisory Committee, which takes applications before awarding all tourism-promotion grants. In the past, not all grant recipients had been required to submit applications.
The management letter presented by the auditors notes that the problems had been addressed but recommends that the county should be sure to track the lodging-tax funds to ensure they are not unintentionally mixed with other revenue.
A finding, which the auditors issued with their review of the financial statements, indicates the most serious level of concern for the state auditors. A management letter, which was issued on the lodging tax, is less serious.
Every year, the state auditors look at the county’s financial statements, handling of grants, and procedures for protecting assets. They also do an overall review of the year’s finances and a more detailed examination of selected areas based on that review, or of areas not examined recently, said Santistevan. They don’t weigh in on management decisions by elected officials unless there is evidence of abuse, such as funds diverted for personal gain, he said.
The audit for 2015 will begin this summer.