Auditor issues 5-page letter on report lag

In a five-page letter sent out via email on Monday afternoon, Whitman County Auditor Eunice Coker went on the defensive to county elected officials and the media.

Coker began with a timeline of events leading up to a meeting with commissioners on April 22 when she claims she was “taken to task and admonished.”

In the two-hour session county commissioners grilled Coker about the sixth-month delay in submitting the county’s 2012 financial records report. Absence of the overdue report was cited by Standard & Poor’s for pulling their rating on county bonds.

“What she wrote was spot on,” County Treasurer Bob Lothspeich told the Gazette Tuesday.

“She pretty much covered the time line.”

Lothspeich said that the county enlisted a Spokane accounting firm that assisted with the financials in 2009 through 2011 and also helped the county last year.

He said he wouldn’t call it being admonished or taken to task as Coker claimed.

“I know the commissioners had been troubled about not getting the financial records filed,” he said.

“Some outsider needs to look at our process,” Lothspeich said. “Part of the issue is the transition from accrual to cash. We’ve really worked hard to try to get this right.”

Commissioner Dean Kinzer said he felt encouraged.

“I’m glad it’s out in the public and more people can take a look at it,” he said Tuesday afternoon. “I’m encouraged that she’s thinking about it and looking at things to do. I hope she contacts some professionals.”

However, Kinzer said he didn’t appreciate all the background.

“I don’t want to dwell on the past, but I do want to look forward,” he said.

Kinzer said the commissioners will continue working on a policy concerning financials. He said the board is looking at several different entities which have financial policies, including Cowlitz and Lewis counties.

“We’ll choose what’s best for Whitman County,” he said.

Although the board is just beginning to look at policies, Kinzer said he hopes to begin serious discussions in June and have a policy in place by the end of the year.

Coker wrote, “There are two issues on the table ... Issue #1 is the proper staffing that must be addressed now, not later in the Auditor’s and possibly the Treasurer’s offices.”

Coker said the second issue is studying accounting process models and implementing a model that best fits the county.

The next two pages of Coker’s letter outline the financial history of the county from the late 1980s to the present.

Coker said that the commissioners used a loophole in state laws to create and build a finance department that is under the commissioners’ authority in the late 1980s.

From then until June 1, 2010, Coker said the commissioners continued to build the finance department until it had four employees. Coker said two of the employees were on the high end of the pay scale and two were data entry clerks. However, on that date the commissioners fired the Chief Financial Officers, and although the commissioners hired someone the following day, she quit and the office was left with the two data entry clerks.

Coker said she asked county Prosecuting Attorney Denis Tracy for an official opinion about county auditor duties. Tracy issued a 15-page opinion dated June 16, 2010, that outlined the statutory duties of the auditor and county commission.

The finance department was returned to the auditor’s office and the four staff positions were disbursed as two positions to the auditor, one new financial position in the treasurer’s office and an administrative services position to the commissioners.

Coker said in the meantime, the commissioners assigned the Internet Technology director to install and implement the new financial system, the New World system and also allowed the director to hire a highly-paid staff member to assist with the financial side of the new system.

Also in June 2010, Coker said she decided to no longer use the complicated accrual-based reporting model and opted to move to the more reasonable cash reporting model for the county.

“As we worked through it this time, it became more and more evident that some cash revenues in and expenditures out were showing at the bank, but had not been set up correctly in the county’s general ledger process flow. Quite a few transactions were (and are) being booked in and out as assets and liabilities rather than revenues and expenditures and therefore do not pull into the reporting process under the Cash Reporting model which is based on revenues and expenditures. This results in much more in and out activity showing at the bank than in the revenue and expense lines of our general ledger,” Coker’s letter said.

Coker said that cash reporting is very simple and easy to understand and is very similar to balancing a personal check book.

“Our financial system coding has been set up by the IT employee who not only ignored the BARS restructuring for so long, but also continued to set up our accounts and processes under the accrual based structure, knowing that we had moved away from that into the cash reporting structure.”

That IT employee resigned in September 2013.

Coker said the auditor and treasurer offices began to work together on the issues in the bank reconciliations.

“Hours and hours of time have been spent trying to work out what all was done incorrectly and how to make the corrections needed,” Coker said.

In January 2014, all accesses, permissions, account set up and final posting of all journal entries were officially under the auditor’s finance department that has one staff member, Coker said.

The state auditor’s office extended the financial report deadline to late February to find and fix the bank reconciliations. Coker said the county did not meet the deadline and the state auditor moved on to finalize its audit of the 2012 Whitman County Financials.

The hearing about the state auditor’s results will be May 19 at 2:30 p.m. in the commissioners’ chambers.

Coker said because the county did not have the 2012 audited financial report by March 31, the bond rating company Standard and Poor’s suspended the county’s status.

“The week of April 14-18, Commissioner Swannack stopped in my office and asked me if I would come to a workshop on April 22 to report on the repercussions of that suspended rating and to give a report on where we were at with the 2012 SAO audit.

I agreed.

I marked my calendar and set a 15 to 30 minute spot aside in order to attend.

The County Treasurer (Lothspeich) was also asked to attend.

When I arrived at the workshop, I found that a full two hours was planned for the discussion.

It soon became obvious that I was not there to bring the BoCC (commissionrs) up to speed on the issues, but that the Treasurer and I (independently elected officials who do not answer to the BoCC, but directly to the people of the county) were there to be taken to task and admonished.

That may not have been the intent of the full board, but that is what happened,” Coker said.

“We have made major inroads into moving the financial duties of the county back where they should be by law,” Coker continued in her email.

“The BoCC has asked me to write up a strategic plan for the accounting/financial future of the county, with a goal of meeting financial reporting deadlines, with clean financial reports submitted for audit.”

Coker then outlined her strategic plan that she said will consist of but is not limited to:

Digging into the structure of the financial system and working with the vendor to:

• Clean up and reduce the county’s chart of accounts

• Clear out any processes that do not meet the standards of cash reporting

• Eliminate unnecessary processes happening behind the scenes in the system

• Do away with procedures that do nothing but impede efficiencies, such as the cumbersome approval process set up currently

• Remove accesses to certain processes that currently sidestep internal controls.

Studying other Washington counties financial management models to find best practices already in place.

Finding a qualified outside agency or person to: look at the county’s accounting processes as a whole, not just the financial system in order to have an efficient flow of information without redundancy; advise the county on implementation of the results.

Reaching a level of accuracy and competency that will allow the county to provide training and clear guidance to county departmental accounting liaisons.

Attaining the needed facility and staffing levels in order to carry out the county’s mandated duties.

“As of this date, the Finance Director in the County Auditor’s Office is performing alone the job tasks that four people previously could not accomplish in the old finance department under the BoCC, in addition to clearing up the muddle created in the financial system account set up. These tasks being under the Auditor’s Office, and finally having them under the correct office is a major accomplishment that we can all be proud to say we have been a part of. But one person cannot perform these tasks alone with any sort of positive outcome,” Coker said.