‘Management letter’ points out possible repercussions
By Ann McCreary
Following a routine audit of Okanogan County Fire District 6, the Washington State Auditor sent a letter to the district noting that the district has not submitted annual financial reports with the auditor’s office as required by state law.
The audit focused on district procurements and disbursements for the period of Jan. 1, 2011, through Dec. 31, 2013. The audit found that the district complied with state laws and regulations and with the district’s policies and procedures with regard to those specific financial activities.
However, in a management letter to District 6, the auditor found the district “has never submitted an annual report with the State Auditor’s Office up through fiscal year 2013.”
Annual financial reports are required from every local government — from cities to weed control boards — under state law (RCW 43.09.230). The reports are to be filed with the auditor’s office within 150 days of the end of each fiscal year.
“Delays in the availability of complete annual financial reports prevent District officials, the public, and other interested parties from obtaining timely information,” the management letter to the district said.
“It also hinders transparency to citizens and the efforts of the State Auditor’s Office to compile statistical and financial information for use by the State Legislature and others,” the letter said. The auditor recommended the district submit annual reports “within the statutory deadline.”
The fire district’s part-time secretary, Brian Colin, said when he started in that position four years ago, “I never got fully trained … annual reporting was one thing I never figured out how to do.”
He said he is going to attend a class later this month offered by the auditor’s office on preparing the annual reports. “The manual is 180 pages long,” Colin said.
Colin said he has worked to modernize the way District 6 maintains records. “When I took over they were doing spiral notebooks by hand,” he said.
May be consequences
A special report on government accountability published in January by the auditor’s office outlined consequences for local governments of not filing the annual financial reports. They include denial of grant funding by state and federal agencies; poor bond ratings; lack of information to develop state budgets; trouble arranging credit and loans; and constituent dissatisfaction with elected or appointed officials for lack of transparency and accountability.
Information from the annual reports is entered into the Local Government Financial Reporting System, which is a source of information for state lawmakers and financial agencies, said Thomas Shapley, deputy director of communications for the State Auditor’s Office.
“The Legislature uses that database when doing budgets, and bond underwriting agencies have been known to look at that,” Shapley said.
“It’s a data source for the Legislature, bond underwriters and creditors. And I would imagine the State Treasurer’s Office also refers to it,” he said.
“When you go to get a loan or borrow money, it’s nice to have a record in this system. It could make things more difficult” to obtain financing if the reports are not there, Shapley said.
Fire District 6 is currently looking into applying for a loan through the Washington State Treasurer’s Office to finance construction of a new fire station that the district proposes to build in Winthrop. At a district commission meeting last week, Fire Chief Don Waller said he expected to have a loan application for up to $2.5 million ready to submit to the treasurer’s office in April.
The state auditor reported that in 2012, more than 700 local government entities out of 1,956 in Washington failed to submit annual reports as required — either late, incomplete or not at all.
According to the auditor’s report, Fire District 6 did not file any annual reports in 2011, 2012 or 2013. “It’s one of our serial non-filers,” Shapley said.
Others didn’t file
A dozen government entities in Okanogan County did not file the reports, filed late or filed an incomplete report, according to the auditor’s office. Only one other government agency in Okanogan County, Fire District 7 in Riverside, filed no annual reports in 2011-2013. Other local governments — among them fire districts, hospital districts and a housing authority — filed at least one of those years, although reports may have been late or incomplete.
The auditor’s special report can be viewed online here.
The auditor doesn’t have a way to enforce compliance with filing the annual financial reports, Shapley said. “The only stick is in the hands of constituents of local government” who elect officials to represent them.
“Part of the job is to be accountable for the money,” Shapley said. “They ought to file financial reports so people can know what they’re doing with the money.”
Among the information included in the annual reports are summaries of revenues, expenditures and debt.
The recently completed audit of Fire District 6 was one of about 2,000 audits that are conducted annually by the State Auditor as part of the mission of holding state and local governments accountable for the use of public resources.
The auditor doesn’t examine every aspect of financial management in each audit, but focuses on different areas that represent the highest risk of fraud, loss abuse or noncompliance.