Albion disagrees with state audit

The Washington State Auditor’s Office has conducted an audit of the Town of Albion and found that the town lacks internal controls over operations, among other things.

The audit, which examined a three-year period between Jan. 1, 2012 and Dec. 31, 2014, found the town had made some improvements since previous audits, but there are still areas where improvements could be made.

“During the past two audits, we have reported concerns to the Town management and elected officials related to internal controls over key financial operations; documentation of official actions taken during Open Public Meetings and retention of public records,” the report read. “For fiscal years 2012 through 2014, we found similar conditions continue to exist. In addition, citizens also reported concerns in some of these areas.”

The town, as noted in its response, did not agree with many of the findings.

“The town would like it noted that great improvements have been made since the preceding audit in all areas up to and including financial accounting,” the response read. “All records were accurate and the financial analysis indicated no discrepancies.”

Starr Cathey, town clerk/treasurer, told the Gazette there were many discrepancies during the audit period.

“I really thought that we nailed this audit until a couple things came up,” Cathey said. “There were a lot of discrepancies. We spent a lot of our time fighting those discrepancies.”

Mayor Carolyn Emerson-Farr, who began her term in January, said the audit did not acknowledge that the town had already fixed many of the findings.

“Most of the stuff identified had been corrected before the audit ever happened,” she said. “2015 was not part of the audit. Technically, they don’t even know about it because they don’t look at 2015.”

Emerson-Farr said there were also items taken out of the final published audit and the audit noted the town could not produce some requested items, but Emerson-Farr said this was an error from the auditor’s office.

“The auditor’s office requested some specific items, and then sent an e-mail that said those items were not needed anymore, so the town filed them away,” she said. “Those items were not requested again until the very last day right before they left when they were on their way out the door.”

Emerson-Farr noted it takes time to produce documents, so the items could not be produced as the auditors were leaving, leading the office to put in the report that documents could not be produced.

“They said that we could not produce items, which is in fact untrue,” Emerson-Farr said.

Cathey told the Gazette the items requested were receipts, specifically a receipt for which the auditor’s office had listed the wrong vendor.

“We have thousands of receipts, so it’s difficult to go through all the receipts and say, ‘here you go,’” Cathey said. “Every single receipt they asked for was there and accounted for, but there were some instances where they had the incorrect vendor listed.”

Cathey said it took her two weeks to find a Wal-Mart receipt the office had requested, which was actually a receipt for Pullman Building Supply. She added she normally requests a five-day period for public records requests in order to have time to find the appropriate information.

The audit findings, in regard to payroll, noted the town council does not approve payroll expenditures as an official action, the superintendent of public works in May 2014 was not paid according to the salary rate approved by resolution and overtime is being accrued each day for any hours over an eight hour shift versus after 40 hours.

Additionally, all 2014 leave balances were tested, resulting in a number of errors identified. These errors include six instances where beginning leave balances did not agree to the prior month’s ending leave balances without support for the adjustment, six instances where the amounts of leave earned did not agree to those approved in the resolution and two instances where the leave recorded as used did not agree with supporting time sheets. According to the audit, these errors “created leave balance errors ranging from an understandment of 2.5 hours to an overstatement of 14 hours.”

The town responded to this portion of the audit in the town response section of the audit by stating the time sheets used by the town require any hours above eight per day be noted, but overtime calculations do not accrue until more than 40 hours have been reached.

Cathey said the town, for the most part, agreed with this portion of the audit.

“The parts we agreed with were the payroll issues, but not all of them,” she said. “We agreed with council not approving payroll, that the superintendent of public works was shorted and I agree with leave balances not matching.”

Cathey noted the leave amounts would be fixed and added the town council has now been approving payroll since 2015, but this was not noted in the audit since it was not a period audited.

“On our next audit it will reflect for 2015 and 2016,” she said.

In regard to the Open Public Meetings Act, the audit noted improvement but also indicated that town council meeting minutes did not document the purpose of executive sessions and council approval of town expenditures is not documented in the meeting minutes as prescribed by the Budget Accounting and Reporting System Manual. The town responded to this finding, too, and stated part of the findings disagree with approvals from a prior audit.

“All minutes reflect announcement of executive sessions and the times. The purposes of executive session were always publicly announced but not noted in minutes. Procedural rules regarding this matter have been addressed,” the response stated. “All expenditures are part of the minutes and are approved in full. Each month, the check register, which includes all voucher numbers, is attached to all minutes. This procedure was changed with approval for the previous auditor. Payroll checks were not included because they were not individually approved by council.”

The audit also stated the cause of the condition, noting “the Clerk-Treasurer, Mayor and the Town Council did make efforts towards addressing prior recommendations; however not enough improvements have been made to ensure appropriate written policies and internal controls exist.”

The audit went on to state the town does not have adequate written policies which outline responsibilities and expected practices for processing payments; does not have adequate monitoring of all expenditures to validate their legal and allowable purpose; does not have policies for its credit cards as required by state law and the Budgeting, Accounting and Reporting Systems manual; did not have policies to formally approve payroll rates until December of 2013, and did not have monitoring controls to ensure compliance with town policies.

The town, in its response to this section, agreed with this portion.

“It is the responsibility of senior administration to ensure all policies are followed and the mayor did not perform these duties adequately,” the response read. “New administration is approving and performing check and balances. Newly elected council members are ensuring needed policies and procedures are in place and being followed.”

Cathey said Mayor Emerson-Farr and the council are looking over items and being proactive.

“It’s our council that is taking it very seriously, and they are very proactive,” she said. “They are making everyone accountable, and the mayor is very responsive.”

The auditor’s office outlined the effect of the findings, noting the findings are unable to demonstrate compliance with records retention laws, the town cannot support validity of financial activities or provide requested information to the public, the lack of control and oversight over finances could lead to an increased risk of misappropriation or misuse of funds which may not be able to be detected in a timely manner, or at all, and the town’s ability to conduct business in a transparent manner with citizens is compromised.

The town pointed out a lack of staffing in its response to the effect. The Town of Albion employs two full-time staffers and two part-time staffers, as well as other employees who are hired on a seasonal or temporary basis.

“The Town of Albion is small and does not have the resources to provide requested records as quickly as larger municipalities who have employees and resources dedicated to the cause,” the response read. “Further, the town was able to produce all records and any indication otherwise is inaccurate.”

The town also noted the audit was “an undue burden.” This was noted by the town with four reasons as to why, including that it was performed by three separate auditors; financial statements for neighboring municipalities were present in the audit notebook, making it difficult to determine if audit results were inadvertently interchanged; interpersonal relations between town staff, elected officials and the auditor’s office has deteriorated due to clarification requests for assistance made by the town, leading to undue hardship, and recommendations made in this audit oppose recommendations made in previous audits.

“At times, the difficulty experienced in receiving assistances or clarification has created undue hardship. Due to these relations, the town would like to note a certain apprehension that audit results are accurate and not influenced by negative interpersonal relations,” the town responded. “...The town would like to note that many current recommendations do not meet RCW requirements but seem to be opinions issued by the auditor in question. The town intends to implement each recommendation currently made so as to follow ‘best practice’ rather than strictly following RCW requirements.”

Cathey told the Gazette someone from Olympia had to fly to town in order to address discrepancies with the audit and also that one auditor involved in the process no longer works for the state auditor’s office.

Emerson-Farr told the Gazette the discrepancies have been addressed, and the town staff and council will be proactive as things do come up.

“I have every confidence that between the town council, town staff and mayor that the next audit will be different,” she said.