Pierce County libraries misclassified nearly $16M in 2022 and 2023, state audit finds
A state audit report published on Dec. 18 found that the Pierce County Library System didn’t have adequate controls to ensure it reported its financial statements accurately, resulting in the misclassification of nearly $16 million in 2022 and 2023.
In 2023 the Pierce County Rural Library District misclassified fund transfers in financial statements by nearly $4.4 million and understated pension liability assets by $5.7 million in 2022 and $5.9 million in 2023, the Washington State Auditor’s report said.
The library system also submitted incomplete financial statements that required specific information by the Governmental Accounting Standards Board in 2022 and 2023 which “also resulted in errors in the applicable notes to the financial statements,” according to the report.
In summary, the state’s audit found deficiencies in internal controls over accounting and financial reporting that affected the Pierce County Library System’s ability to produce accurate financial statements. The state Auditor’s Office determined that was a result of inadequate staff training and an ineffective review process for ensuring fund transfers were correctly recorded.
Kathleen Cooper, director of communications for the Washington State Auditor’s Office, clarified Friday that the audit showed no money missing in the library system, rather it was categorized incorrectly.
Cooper said audits are important to ensure government expenditures and revenues are accounted for and accurately represent a government’s financial position. Annual audits are important to provide independent checks on government agencies and ultimately give residents faith and confidence in the way their local governments are operating, Cooper said.
“That is why we do these audits, because when there are mistakes in those financial statements, it raises a question about whether or not those statements are reliable for anybody looking at them,” she said. “When governments need to borrow money, or when they need to do other things on the public’s behalf, their entities, ratings, agencies, banks, other things like that, they look at financial statements and audits to determine credit worthiness and things like that. So it’s really a good foundational principle of good governance that the financial statement audits are accurate.”
Pierce County Library System acknowledged and agreed with the audit report and said the library’s finance department was understaffed in 2021 through 2023.
“As noted in the auditor’s report, all of the errors have been corrected,” the library system said in the report. “Regardless, the Library takes seriously the recommendations the auditor has offered, and will address them by strengthening training, reviews and verification processes. We appreciate the work of the State Auditors and we look forward to your visit for audits in future years.”
Cooper said the library system district took steps to fix the problems identified, which is “the best outcome you could hope for.”
“When governments do make mistakes and they receive a finding like the one that the district did here, it’s often related to just lack of experience on the part of the people preparing it,” she said. “These are complicated things, it can be tricky, and there’s a lot of requirements that governments must follow ... with the accounting standards and things like that.”
The state auditor will review the condition of the violations in its next audit.
This story was originally published December 20, 2024 at 12:28 PM.
