State Auditor’s Office Update Presented to the Puget Sound Finance Officers Association

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State Auditor’s Office Update Presented to the Puget Sound Finance Officers Association December 14, 2012. 1. Topics. 1. Transitioning to a new State Auditor 2. Audit frequency 3. Local government financial condition - PowerPoint PPT Presentation

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State Auditor’s Office UpdatePresented to the Puget Sound Finance

Officers Association

December 14, 2012

1

Chuck Pfeil, CPADirector of State and Local Audit

Topics

1. Transitioning to a new State Auditor

2. Audit frequency

3. Local government financial condition

4. Public Development Authorities (PDAs) and Public Facilities Districts (PFDs)

5. On call contracting

6. Receiving payments through a vendor

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Topics

7. Electronic BARS

8. Online filing requirement

9. Single Audit reform

10.SEC

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Transitioning to a new State Auditor

Troy Kelley, State Auditor-elect

Doug Cochran, chief of staff

Ruta Fanning, transition team leader

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Audit Frequency Budgets and cycles regularly reviewed at team

level

State Auditor’s Office reassessing Accountability Audits in schools, cities and counties.

Current school cycles: 85 annual 120 two year 41 three year 49 limited-scope accountability audits (audit

assessments)

110 offered less frequent audits; 61 accepted

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Audit Frequency

Current city & town cycles: 110 annual 117 two year 40 three year 40 limited-scope accountability audits (audit

assessments)

123 being offered less frequent audits

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Audit Frequency

Current county cycles: 30 annual 9 two year

4 being offered less frequent audits Budget reductions from $3,300 to $33,000

being made

Plan on annual statewide review

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State Auditor’s Office

Audit Summary on Local Government Financial Condition

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Local Government Financial Condition

Our audits evaluate financial condition at least once every three years.

Small but growing trend of distressed governments: 88 governments reported on since 2006

28 cities, two counties, 16 schools and 42 special purpose districts

Reported 22 governments in 2008 and 37 in 2010

Growing state and national interest.

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Local Government Financial Condition Government types most affected

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Local Government Financial Condition

Government types most affected

In 2006 we found most financial condition issues in hospitals and school districts.

School districts showing signs of distress have declined.

We continue to see distress in hospitals and a growing frequency in entities like cities, counties, risk pools, public development authorities and public facilities districts.

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Local Government Financial Condition The state has limited authority to step in

The Superintendent of Public Instruction can intervene when school districts are faced with distressed financial condition or the prospect of insolvency.

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Local Government Financial Condition

Where are these governments?

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Local Government Financial Condition

Resources

State Auditor’s Office Client Support Portal/Local Government Performance Center

State Treasurer’s 2010 report on financial health of cities and counties

Association of Washington Cities “Red Flag Checklist”

Government Finance Officers Association “Fiscal First Aid Resource”

Future Tool: Enhancements to the State Auditor’s Local Government Financial Reporting System

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State Auditor’s Office

Audit Summary on Public Development Authorities (PDAs) and Public Facility Districts (PFDs)

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PDAs & PFDs

We audit PDAs and PFDs at least every three years.

Many do an effective job.

We have found recurring audit issues with some.

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PDAs & PFDs

What are they? Public corporations formed by cities, towns or counties.

Established to carry out a specific function.

PDA purposes vary widely: Convention center Sports facility Museum Housing Economic development Tall ships Public market

PFDs are formed to acquire, create or operate certain public facilities: Convention center Museum Sports, recreation and entertainment facilities17

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PDAs & PFDs

What have we found?

Common audit issues fall into four areas:

1. Inadequate monitoring by the creating entities.

2. Inadequate governance by the appointed boards.

3. Declining or distressed financial condition.

4. Non-compliance with laws and regulations.

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PDAs & PFDsRecommendations to creating entities Ensure appointed officials receive training and

guidance on applicable laws and regulations.

Ensure appointed board members take an active role in monitoring operations.

Attend audit entrances and exits.

Monitor their financial health.

Inform the State Auditor when new PDAs and PFDs are created.

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PDAs & PFDsRecommendations to the Legislature

Change state law to require creating entities to:

Monitor the PFDs they create. (This requirement is already in PDA law.)

Receive annual reports from the PDAs and PFDs summarizing operations.

Notify the State Auditor of new PDAs and PFDs.

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On Call Contracting

Some government use what they refer to as on call contracting

Bid for a type of service for a period of time. Vaguely specified.

Not specifically authorized in state law

But we are not saying they aren’t legal

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On Call Contracting

Concerns center around public works. Early warning based on interactions with L&I and MRSC.

Make sure you are in compliance with applicable laws (bidding, contracting, prevailing wage,…)

Questions? Cindy Evans, Manager, Legal Services

cindy.evans@sao.wa.gov

Scott Bills, Asst Audit Manager scott.bills@sao.wa.gov

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Receiving payments through a vendor

Growing number of entities accepting payments through a vendor

Often appears to citizen that payment is being made to the government

Legal concern Funds not transferred to government timely

Funds sitting in vendors bank; not a qualified public depository

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Electronic BARS

Have published 15 BARs manuals/reporting packages in .pdf and paper

Consolidated those into 10 manuals

2012 is last year for paper BARS

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Electronic BARS

Creating manual that combines web-based and .pdf….indexing our .pdf

Will be released in January

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Online Filing Requirement

Online filing done by most governments 1,000 of 1,700 filers in 2012

Will be working to encourage greater use in 2013

Incentive will be f/s creation for cash basis filers

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Proposed Federal Audit Changes

 

OMB considering Federal Audit changes:

Higher audit threshold Fewer compliance requirements Focus on improper payments,

fraud, errors and waste Higher questioned cost threshold

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Securities & Exchange Commission Report on Municipal Securities Market

July 31 report issuedhttp://www.sec.gov/news/studies/2012/munireport073112.pdf Seeking expanded authority including:

Setting issuer disclosure requirements(timeframe, frequency, content)

Establishing the form and content of financial statements

Questionnaire in Fall 2012

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Auditor’s Office Contacts

Brian Sonntag, CGFMState Auditor(360) 902-0360Brian.Sonntag@sao.wa.gov

Chuck Pfeil, CPADirectorof State and Local Audit(360) 902-0366Chuck.Pfeil@sao.wa.gov

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