Audit of city finds ‘significant deficiency’

The 2006 audit for the city of Liberty Lake shows a “significant deficiency” in internal controls, according to a report from the Washington state auditor’s office.

The report states that the city “lacks adequate oversight and monitoring of its financial accounting.” Specific examples included the city understating its beginning cash and investment balance by $781,508 and the ending cash and investment balance by $856,508. The city’s expenditures were overstated by $75,000, according to the report.

The errors make it “reasonably possible that misstatement could continue to occur and not be prevented or detected by the City in future years,” the report states.

The explanation for the errors is simple, said Liberty Lake Community Development Director Doug Smith. “It’s because of the placement of the bond investments,” he said. “It wasn’t accounted for in the investment pool. That was where the hitch actually came.”

The city’s official response, which is included in the report, blames a new auditing standard known as SAS 112, which deals with communicating internal control-related matters identified in an audit.

“It doesn’t provide the latitude for the individual auditor to have discretion,” Smith said. “In the past, it would have been brought to the city’s attention and there would have been an opportunity to fix it without the finding.”

Liberty Lake isn’t alone in getting snagged by the new rule. “This is a finding that is very common to cities and governments this time around,” said state auditor spokesperson Mindy Chambers. The new rule made the requirements on what errors are reportable more stringent. The error the city of Liberty Lake made has more to do with writing things down incorrectly rather than not writing them down at all.

“On a big-deal scale, this is pretty common this year,” Chambers said. “It’s a bookkeeping thing. In the past, we might not have reported this, but we have to now.”

Smith said the city has since fixed the errors the state identified. During 2006 the city’s money was tracked by finance director Arlene Fisher, who no longer works for the city. “There’s a better system for software input in annual reporting,” he said.

While the errors happened under Fisher’s watch, Smith said he wasn’t going to place the blame on her. “I’m not going to throw her under the bus,” he said.

The city also has problems with its 2002 audit, which also was Fisher’s responsibility. That finding dealt with the city spending more than $1.9 million on special projects without putting in the budget where the money was coming from or what it was spent on.

The city is currently in the midst of an audit on its 2007 finances.