State auditor’s report rates Whitcom books inadequate

A state audit of Whitcom, the Whitman County Regional Communication Center, found that internal controls over accounting and financial statement preparation are inadequate to ensure timely and accurate reporting. The audit covers a four-year period Jan. 1, 2009, through Dec. 31, 2012.

The state report was finished Oct. 6 and released Monday. Whitcom management is responsible for designing and following internal controls that provide reasonable assurance regarding the reliability of financial reporting. The audit identified deficiencies in internal controls that adversely affected the center’s ability to produce reliable financial statements. Prior audits also identified weaknesses in the financial statement preparation process that were reported to management.

For the years ending Dec. 31, 2009, 2010 and 2011, Whitcom used Whitman County as its treasurer and auditor and prepared its financial statements based on the county’s accounting system. Whitcom became its own treasurer and prepared its own accounting records beginning Jan. 1, 2012.

The state audit identified deficiencies in internal controls that when taken together, represent a material weakness:

• Personnel responsible for compiling the center’s financial statement, notes and required supplemental schedules do not fully understand the state’s budgeting requirements.

• The center does not have a process, including oversight, in place to ensure its annual financial reports are prepared in accordance with current state systems and submitted in accordance with state law.

• The center lacked procedures to support the completeness and accuracy of its monthly reconciliations of bank records to its accounting records. There was no formal reconciliation between the center’s accounting records and Whitman County Treasurer’s report for fiscal year 2009 through 2011. The 2012 bank reconciliation process was not effective and resulted in inaccurate financial information.

• The center lacks an internal control procedure to review the year-end annual report to ensure it is complete and agrees to the supporting accounting and bank records.

• The center had turnover in its key accounting position during the audit period and did not provide adequate training regarding financial reporting requirements to other key personnel.

• The center failed to report beginning and ending cash and investments of more than $1 million in 2012. The 2012 annual report was filed more than 300 days late.

In 2011, the financial reports included more than $200,000 of unsupported financial activity that could not be identified in the accounting records and also failed to include more than $10,000 in cash and investments held in its Advanced Travel Fund in 2011, 2010 and 2009.

The report indicated that the center took steps to correct these errors in the financial statements.

State auditors recommended that the center provide adequate training, tools and resources to staff responsible for financial reporting; establish a control process to ensure the more current state manual is used to accurately prepare each annual report within the statutory deadline of 150 days following year end; establish and follow written policies and procedures that result in accurate, timely reconciliations of bank activity to the accounting records; establish internal controls to provide adequate oversight and review of the financial statements, notes and schedules to ensure accurate reporting.

Center officials acknowledged that staff doesn’t understand the state’s reporting requirements, but also stated that before the audit, Whitcom administrative and financial staff attended training and intend to attend training every year as long as it’s offered.

Whitcom officials said that Thurston County 911 has agreed to review their annual reports before submission for accuracy. Their operation, including finance, is very similar to Whitcom and they have a history of successful audits.

Whitcom’s system was changed in 2012 and bank records are reconciled with the accounting system monthly.

In its formal response to the auditor, Whitcom stated “we feel that the now corrected issues were largely attributed to lack of control over county procedures ...” With the current accounting software, training and cross training personnel in state regulations, Whitcom personnel will meet recommendations by the state auditor.

The state auditor’s response is that they will review the changes in the next audit.