Milton city officials say they have improved accounting practices after a state audit found the city lacked proper internal controls, resulting in inaccuracies in financial reporting over a period of at least two years.
The audit states that city staff responsible for compiling financial statements from January 2012 through December 2013 didn’t “fully understand” reporting requirements and the city didn’t “provide adequate resources to ensure internal controls were in place.”
As a result, the city accounting and bank records were incomplete and inaccurate, according to the report. Amounts were either overstated or understated by tens of thousands of dollars, the report shows, and at times revenue wasn’t accounted for at all.
Milton Mayor Debra Perry acknowledged there were internal problems that needed to be fixed, but she disagreed that employees weren’t provided proper training or resources.
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“There have been times when the training was purchased and then people didn’t go,” she said. “Part of the problem is cities have had to deal with fewer resources every year.” Sometimes staff members opted not to go to trainings since staffing is thin, she noted.
The city will still prioritize financial training moving forward, Perry said, and she will ensure that staff attends. She stressed that an inaccurate fund balance in 2007 – due to an improperly configured software system – threw off finances for the years that followed. She said it wasn’t until the recent audit that problems were identified.
“It’s not a big problem,” she said. “It’s just a problem that continued to be carried forward.”
The audit states that reported cash and investment balances didn’t reconcile with the amounts held in city bank accounts, among other issues.
Some reporting errors outlined in the audit include:
• The reported ending cash and investment balances were understated by $38,133 in 2012 and $39,188 in 2013.
• The municipal court fund ending cash and investment balance was overstated by $36,169 in 2012 and $37,007 in 2013.
• In 2012 and 2013, the city obtained capital assets on credit. In 2012, the city incorrectly reported this as both revenues and expenditures, overstating the amounts by $90,107. In 2013, the city incorrectly reported the assets as revenues, but did not report any associated expenditure. The overstated revenues and ending cash and investments that year amounted to $273,740.
• In 2013, the city reported two separate special revenue funds but didn’t report any of the $151,551 in revenue or $96,046 in expenditures within those funds.
The auditor recommended that city staff dedicate adequate resources and training to staff in the future.
In its response, the city said it has already done so.
Perry stressed that the discrepancies weren’t major in light of the $31 million annual budget in the north Pierce County city of some 7,000 residents. She added that the discrepancies were to the positive and the city “actually had $40,000 more than we thought.”
She said the Milton City Council voted several years ago to change the accounting software system that perpetuated the problem, but the city never made the transition. That changed after this audit, she said.