City of Yakima staff sprinted to strengthen internal controls and contractor verification after the state auditor identified two findings of noncompliance with the law.
The most recent audit, published Thursday, covered the period from Jan. 1 through Dec. 31, 2018, with City Manager Cliff Moore and Yakima Mayor Kathy Coffey in the city’s leadership roles.
The first finding was that the city lacked adequate internal controls to ensure accurate reporting of its financial statements, particularly related to the classification and reporting of criminal justice sales tax revenue, tax abatements, bond refinancing, the transfer of restricted proprietary funds for capital projects, and pensions.
The city also had not used an annual independent actuary report for health benefits to adjust health benefit liability when preparing financial statements. General ledger journal entries also weren’t reviewed by anyone independent of the process.
As a result, city staff:
- Incorrectly classified $7.9 million of bond refinancing-related other financing sources.
- Incorrectly classified $2.6 million in criminal justice tax program revenue as sales tax revenue.
- Incorrectly classified $5 million for pensions as unrestricted.
- Under-reported $1 million of claims and judgments in the Employees Health Benefit Reserve Fund.
- Failed to disclose $51,477 in tax abatements.
- And inappropriately transferred $850,000 from the Wastewater Fund to the Yakima Revenue Development Area Fund. (The audit noted the use of the funds was appropriate, but that the money should have remained in the Wastewater Fund.)
Auditors noted that many of the errors resulted from turnover in the city’s finance director and accounting manager positions in 2018.
The city’s response notes that staff corrected the reporting errors and acted on the audit’s recommendation to establish effective processes for technical review of financial statements and journal entries. The city has also hired a finance director and accounting manager.
In the second finding, auditors noted that Yakima had received $2.5 million in federal funding for help with planning, maintenance and acquisition of public transport services, but had not fully complied with an obligation to verify that all contractors paid more than $25,000 were not disbarred or suspended from doing business with the federal government.
The report noted one instance of noncompliance. The city had paid Gillig, a transit bus manufacturing company, a cumulative $29,050 without properly verifying the company’s status with the federal government.
Auditors had confirmed that Gillig was, in fact, eligible to be paid through the federal funding, but recommended the city put in place additional procedures to ensure that contractors paid through multiple small purchases, which could add up to exceed $25,000 a year, were verified.
The city said the problem was a “fairly simple procedural oversight,” fixable by training and education of multiple staff members. Yakima implemented a procedure involving a routing form to be reviewed and approved by the city department director, finance director, and city attorney prior to receiving the city manager’s signature.
The auditor’s office produces more than 2,000 reports each year, an agency news release noted.