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Audit finds errors in financial reports


Spokane Valley misstated its assets, debts and expenditures in 2006 and failed to catch the errors, according to a newly released state audit.

The audit says the city also mistakenly stated that all its tax revenue came from the property tax although some of the $22.9 million came from the sales tax and other taxes.

No money was lost or misappropriated, but the errors meant state and federal officials and bondholders couldn’t rely on Spokane Valley’s financial reports. Also, state auditors said, the city’s inability to catch the mistakes made it “reasonably possible” more mistakes would occur.

The inaccurate numbers have been corrected, and city officials say they have taken steps to ensure the problem doesn’t happen again.

The faulty municipal reports were prepared by the LeMaster Daniels accounting office in Yakima, but city Finance Director Ken Thompson said the firm wasn’t responsible.

“Those were errors we made,” Thompson said. “The CPA firm was just using our records to put some of the financial statements together.”

One of largest mistakes occurred when the city changed the way it calculates depreciation of its assets.

City officials switched from a computerized to a manual method of determining the value of streets and other assets Spokane Valley inherited from Spokane County when the city was incorporated five years ago.

After the change, city officials improperly began calculating depreciation from the date Spokane Valley acquired things such as streets, swimming pools and parks instead of the date they were built.

State auditors said the most significant error was a $3.05 million overstatement of infrastructure value. Long-term debt was understated by $122,382 and total expenditures were overstated by $1.5 million.

Thompson and City Manager David Mercier said they have responded to the problem by assigning people to be responsible for the accuracy of specific reports.

Also, Mercier and Thompson said, the schedule for accounting work is being moved up to give city officials and their accounting contractors more time to review their work.

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