The Holbrook City Council convened Monday, Jan. 23, during which the council received the results of the city’s annual fiscal year audit. Scott Graff, an auditor at Colby & Powell based in Gilbert, presented the audit.
Graff informed the council that the audit was given what he called a “clean opinion.” A clean opinion is desirable and states that the city’s financial condition, position and operations are fairly presented in the financial statements.
Graff clarified that the auditors prepare information to provide an opinion, but it’s city management’s responsibility to present the financial statements. “The auditors are just assisting the city in the preparation and putting it together, but management takes full responsibility for its contents.”
There were three findings in the audit, which are areas that need improvement. “The first finding is related to the purchase policy and we discovered not in just this year, but in prior years that the city had not been following the policy for purchasing as it relates to the written policy that’s been approved.”
The city’s current purchase policy states that any type of payments, even recurring monthly ones, require an approved purchase order requisition. “For a lot of different other cities and towns that will have a purchasing policy, it would have certain exclusions to those requirements for purchase orders,” stated Graff.
The second finding relates to preparedness and being more audit ready with accounting. “We recommend that the city look at what adjusting entries that we’ve done in the prior year and identify the entries that were required. And before the next audit, make sure for the most part that those entries are done before the auditors arrive.
“The third finding is also related to policy and your written accounts, policies and procedures. They just are nonexistent right now. It’s important to have good policies and procedures that are current and up to date and can be followed.” It was recommended that the city institute a program to methodically identify and document its significant account processes.
Another part of the audit was an additional report called a single audit. “Anytime an organization spends federal funds greater than $750,000, that requires additional audit procedures and reporting procedures to take place over those federal monies,” explained Graff. Funds received that were greater than $750,000 were American Rescue Plan Act (ARPA) funds. The single audit is to ensure that the city is in compliance with the requirements of the federal ARPA program. “There were no audit findings related to the single audit. So, congratulations.”
Graff noted that financials are just a part of the whole. “We can only look at financial numbers and typically this only shows part of the picture. You know the actual infrastructure of the city, is it improving as well? How are the roads, how are sidewalks, how are sewer and water lines?” explained Graff, stating as an example, “I cannot paint my house for 50 years but it doesn’t mean that we’re improving just because my bank account does show it. The fact is we just didn’t spend enough money on maintenance.”
Finance Director Randy Sullivan provided a midterm financial report to the council as well. While most expenditures were at the anticipated level for halfway through the fiscal year, a few surpassed their anticipated amount.
“There is a little bit of concern in the Parks Department. That utilities fund is way overspent compared to budget. We need the city manager look at that and see what that is, and why it’s why those numbers look like it,” stated Sullivan, referencing the expenditure of $29,958 in utilities half way through the fiscal year when the amount budgeted for the year is just $5,565, effectively over budget by 484%.
Another area he noted that will be watched is the Police Department, which has gone through 50.6% of the budget for wages so far, possibly due to the amount spent for overtime wages due to the officer shortage but that was not noted in the presentation.
Sullivan explained that city managers add budget contingencies and amendments to help with overbudgeting as well. “As long as the budget doesn’t go over what you guys’ (the council) rubber stamped on it for the budget at the beginning, you have options to play with that.”
Sullivan also reminded the council this is only half of the year financials. “This is just six months, so we got six months to catch up. It’s just a snapshot of the direction of what we’re doing so far this year.”
