Wednesday Aug 29 2012
New auditing firm takes on city books
By: Patty McAlpin Lincoln News Messenger reporter
Second change in five years
Lincoln officials are hoping to have a smoother audit of the city’s books this year. The new auditing firm, Smith & Newell of Yuba City, replaces Richardson & Company of Sacramento. Richardson & Company was the city’s auditor for five years. “It’s a good practice to rotate auditors every five to six years, said city financial consultant Bill Zenoni of the Municipal Resource Group. Lincoln Mayor Spencer Short said this is the second change of auditors in the past five years. “It’s important to get a fresh look at the financial information from professional auditors,” Short said. The last audit was for the fiscal year ending June 30, 2011. This year’s audit is for the fiscal year that ended June 30, 2012. The city’s adopted budget for 2011-12 totaled $46.7 million. “I am very impressed with the new firm’s greater focus on city finance work. The prior firm focused on different fields,” said the city of Lincoln’s principal accountant Emily Boyd. “This year’s will be all-electronics-based rather than making six boxes full of hard copy files.” This year’s audit will cost $58,300, according to Zenoni. The city “will see the audited financials in November or early December,” according to Boyd. Zenoni said he “expects the financials to go to the finance committee first and then the City Council in November at the earliest.” The financials become available to the public at the finance committee meeting. “We will not see as many issues as in the past,” Boyd. “The city was short staffed. There were not enough accounts to work on the audit and they were going too fast. Now we are fully staffed.” Zenoni said the issues surrounded getting the books closed in a timely manner. “There was a delay in getting the audit done last year because there were more adjusting entries than the city should have had. It’s normal to have a few adjusting entries.” Zenoni described adjusting entries as correcting an entry that is not coded to the correct account, for example, hypothetically a sales tax receipt recorded as a property tax. “This year, we should have less adjusting entries because Emily Boyd has a really good handle on closing the books,” Zenoni said. “We should get the books closed quicker with fewer auditor adjustments.” Boyd started working for the city about seven months ago. The city now has a principal accountant and two senior accounts. During the last audit, the city had two entry-level accountants and an entry level supervisor, Short said. “In the prior year’s audit, there was a large number of closing entries that had to be restated,” Short said. “When we closed the books, everything was correct but more work was created for the auditors. With the new staff that came on in the last seven months, we will diminish the adjustments to the books and streamline the audit process.” Short said the entries were in the wrong place but the overall numbers were correct. He said the mistakes could be looked at as clerical errors. For example, “if the city hypothetically bought self-contained breathing apparatus for the fire department, the item might be keyed in as an office expense rather than equipment.” “The methodology of how the accounts were debited and credited was inconsistent,” Short said. “The new firm will help us accurately reflect the city’s financial condition.” Terry Dorsey, who is on the city’s investment committee and running for city treasurer, is in favor of changing auditors every four to five years. “They can get stale and start overlooking things,” Dorsey said. “You need to bring in new blood. I think the new auditor is going to be great.” Dorsey said it was the first time he had heard anyone have a discussion. “I had not heard about any problems,” Dorsey said. “It was news to me.” The mayor said there “may still be a statement of growing concern but we have taken a great number of steps to reduce expenditures below revenue. However, with significantly reduced revenues, there are always financial challenges. Should a statement of growing concern be adopted by the auditors, we will continue to take all appropriate steps to reduce expenditures.” .