Sun Valley financial statements for fiscal 2011 and 2012 accurately reflect the financial health of the city, according to its auditing firm. However, the firm listed some “deficiencies” in the city’s internal control over financial reporting during those years, including instances of city management knowingly not adhering to city policy.
“In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the City of Sun Valley,” both audits state.
The city hired the Boise office of Eide Bailly, a regional accounting firm, to conduct the state-required yearly audits. At a City Council meeting Thursday, March 7, Scot Phillips, an accountant with Eide Bailly, presented a report on the fiscal 2012 audit. Phillips had presented the fiscal 2011 audit at a council meeting in January. The fiscal 2011 audit lists about $11,145,000 in total assets, up $324,941 from the year before. The fiscal 2012 audit lists about $10,319,175, down $825,597 from the year before.
Eide Bailly spokesman Jeff Strand said in an interview that the firm generally presents audit reports to cities less than a year after the end of the fiscal year. At the January meeting, Phillips said the firm opted to wait to present its reports to the city until a recently conducted forensic audit of the city’s finances in 2009 through 2011 was completed. Phillips said Eide Bailly wanted to see the results of the forensic audit, a report on which was presented to the council in August, before releasing its city audits for those years.
According to Strand, the purpose of a city audit is to ensure only that a city’s financial statements reflect its actual assets. Mayor Dewayne Briscoe said in August that a forensic audit is a “thorough” financial analysis to ascertain whether any fraud had occurred.
The city commissioned the forensic audit in April 2012 following allegations by some city employees that other city employees had misused public assets in 2009 through 2011. The forensic audit states that some city employees had used city assets irregularly and had violated city policy during that time.
However, in November—after reviewing the forensic audit report and reports on related investigations—Blaine County Prosecuting Attorney Jim Thomas stated in a letter to the city that there was insufficient evidence to file criminal charges, though he called city management “lax” under then-Mayor Wayne Willich’s administration.
Both the fiscal 2011 and fiscal 2012 audits include recommendations that the city tighten some internal controls over financial reporting. Both audits state that the city “has not always obtained all required levels of approval prior to making payments [including credit card purchases],” a violation of city policy. The fiscal 2012 audit further states the city “has not always obtained receipts to support expense reimbursements.” The fiscal 2011 audit states that management allowed some employees to accrue compensable time off in excess of the city’s policy and some did not take a mandatory minimum of 80 hours of paid time off, choosing to cash those hours out instead.
The fiscal 2011 audit covered city management under the Willich administration, and the 2012 audit covered the end of Willich’s term and the beginning of Briscoe’s term.
The audits include suggestions that the city either ensure that its employees follow city policy or update the policy to match actual practices “as a mitigating control over potential fraud or misappropriation of City assets.” The audits state that management was aware of the city’s policies during those years, but did not always follow them. The fiscal 2012 audit states that if the city fails to enforce its policies, its resources “may be subject to misuse.”
Briscoe said at both the January and March meetings that the city has corrected or is in the process of correcting all of Eide Bailly’s recommendations in both audits. At both meetings, Phillips agreed that the city is doing so.
However both audits include a disclaimer concerning Eide Bailly’s consideration of the city’s internal controls over financial reporting.
The audits state that such city audits are not designed to identify “all deficiencies,” but that the city’s controls are taken into account only to help the auditors express their official opinions on the city’s financial statements. The audits state that Eide Bailly does not express an official opinion on the effectiveness of those controls.
Brennan Rego: brego@mtexpress.com
