By Don Nelson
The Washington State Auditor’s Office recently released an audit report for the Town of Winthrop, covering calendar year 2015, which includes an “adverse opinion” on how the town handles its books — but it doesn’t mean the town is doing anything wrong.
The report concluded that the audit found no “material weaknesses” or “instances of non-compliance” in its review of the town’s operation.
“We reported no deficiencies in the design or operation of internal control over financial reporting that we consider to be significant deficiencies,” the report said.
So why the “adverse opinion?”
As explained by Town Clerk Michelle Gaines, Winthrop uses a cash accounting basis for its books — which is allowed under state guidelines, as the auditor’s office acknowledged in its report.
“The Town of Winthrop has prepared these financial statements to meet the financial reporting requirements of Washington State statutes using accounting practices prescribed by the State Auditor’s Budgeting, Accounting and Reporting System (BARS) manual,” the report says.
“In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position and results of operations of the Town of Winthrop, for the year ended December 31, 2015, on the basis of accounting described,” the report says.
But Winthrop’s accounting practices, although perfectly legal and effective, don’t meet what’s know in the accounting field as GAAP: generally accepted accounting principles.
Because the town doesn’t use GAAP, the auditor’s office is required to say so in its report, Gaines said.
“Auditing standards issued by the American Institute of Certified Public Accountants (AICPA) require auditors to formally acknowledge when governments do not prepare their financial statements, intended for general use, in accordance with GAAP,” the auditor’s report said. “As a result, we are required to issue an adverse opinion on whether the financial statements are presented fairly, in all material respects, in accordance with GAAP.”
Gaines said other small towns also use cash-based accounting for the same practical reasons that Winthrop does.