March 6, 2023
FOR IMMEDIATE RELEASE
Washington State Auditor Releases 2021 Audit for Jefferson County
PORT TOWNSEND - The Washington State Auditor has just released its audit of the Jefferson County financial statements for calendar year 2021. The County is generally pleased with the audit results although the audit contained a repeat finding.
Notably, the audit found:
The County has taken substantial corrective action since the prior audit:
- Federal Compliance – fully corrected
- Financial Statement Controls – partially corrected
1. Internal Control and Compliance over Financial Reporting:
- Significant deficiencies in internal controls with no deficiencies that are considered to be material.
- No instances of noncompliance that were material to the financial statements.
2. Federal Grant Compliance Audit:
- No significant deficiencies in internal control.
- No deficiencies considered to be material weaknesses.
- No instances of noncompliance.
The audit also praised our implementation of the Munis Financial Management Software Suite that was completed during 2021 with a go live date of June 1, 2021 – in the midst of the Covid-19 pandemic. This was a Herculean task and an impressive achievement for a small rural county. The State Auditor cited our implementation as one of cleanest they had seen, saying “the system conversion was well thought out, well planned and well documented.”
The State Auditor report contains a repeat finding regarding internal controls over preparing financial statements. The lack of internal controls led to certain inaccuracies in the County’s financial statements.
Specifically, they found that:
- The County didn’t perform a global reconciliation to ensure the financial statements agreed to the general ledger and bank statements;
- The County didn’t understand and correctly implement certain changes to the BARS manual regarding accounting for fiduciary activity;
- The County didn’t perform a secondary review to detect errors in the financial statements before submitting them for audit.
The errors discussed below found during the audit were corrected during the audit, and the financial statements available for review by the public correctly reflect the financial status of the County.
- The audit found that general fund revenue and expenditures were overstated by $531,579. The overstatement related to a General Fund transfer to the Parks & Rec Fund. When preparing the financial statements, the Parks & Rec Fund was correctly made part of the General Fund for reporting. The General Fund transfer to Parks should have been eliminated. This was a simple oversight that was corrected. A procedure has been developed to ensure this doesn’t occur again.
- Investment Trust Fund activity was misclassified in the Custodial Funds, understating Investment Trust Fund activity and overstating Custodial Fund activity in equal amounts. Although the $187,102,238 over and understatements appear to be serious it’s a simple reclassification error – much like calling a turnip a parsnip. In truth, all the funds are accounted for – they were simply mislabeled. The error was corrected in the final statements. We are 100% confident that we’ll classify these transactions correctly in the 2022 Financial Statements.
- Asset retirement obligations for the Hadlock underground fuel tanks were not on the Schedule of Liabilities. This involves estimating the cost of retiring the fuel tanks in thirty years and reporting that estimate. Any estimate of cost for such a retirement in 30 years will necessarily be wildly inaccurate since we don’t know what would be involved in such a retirement or the inflation rate to be used in making such an estimate. Nevertheless, the County will provide an estimate for inclusion in our 2022 Financial Statements.
- Investment Trust Fund ending cash and investments were $436,461 less than the reconciled bank statements. While still a significant sum, this understatement is less than half what it was in 2020. The County has a task force working on this and is confident this can be resolved in the 2022 Financial Statements. It is important to note that no fraud or missing funds are involved. This is a reporting issue, not a banking issue.
The County is confident that as we continue to refine our processes and provide a better documented review of its financial data for the 2022 Financial Statements, we will have a clean audit free from findings related to financial internal controls.
For 2022, the County will have one system – Munis – which will simplify the reporting process compared to 2021 when we migrated to Munis on June 1st from our two legacy systems – the AS400 and GEMS. In addition, we implemented the State Auditor’s recommendation to add additional financial staff: the County now has a full time Finance Manager, and the Treasurer is working to hire a financial analyst. Both of these positions will facilitate the global reconciliation and second review processes the State Auditor recommends.
For more information, please contact:
Stacie Prada, Jefferson County Treasurer 360-385-9150
Brenda Huntingford, Jefferson County Auditor 360-385-9115
The full report can be found here: https://portal.sao.wa.gov/ReportSearch/Home/ViewReportFile?arn=1032105&isFinding=false&sp=false