Auditor: financial reporting needs to be improved at port

By Rolf Boone, August 21, 2014, The Olympian

 

HOW BAD IS IT?

 

• A “significant deficiency,” according to the state Auditor’s Office, is “less severe than a material weakness, yet important enough to merit attention by those charged with governance.”

 

• A “material weakness” is thought to be bad enough that a material misstatement of an entity’s financial statements will not be “prevented, detected or corrected on a timely basis.”

 

A recent state Auditor’s Office report on the Port of Olympia has uncovered “deficiencies in internal controls over financial reporting,” and that those deficiencies, when combined, represent a “significant deficiency.”

 

But the port also included a strongly worded response, which disputes the state Auditor’s Office report.

 

The rebuttal was written by port finance director Jeff Smith.

 

“The port has had the same internal controls in place as in prior years, when no findings were made,” Smith wrote. “Indeed, during 2013 the port strengthened its review process and put in place many of the exit conference suggestions made by the state Auditor’s Office.”

 

The report, which reviewed the port’s books in 2013, outlines the specific problems and lists some recommendations, such as performing a “centralized, detailed review of all documentation provided by (port) departments.”

 

Here’s what the Auditor’s Office found after a review of the port’s schedule of expenditures of federal awards:

 

• An airport improvement grant was underreported by $19,916.

 

• Total expenditures were understated by $89,195.

 

• Net investment in capital assets incorrectly included $17.6 million of restricted net position.

 

In other words, Smith explained, the $17.6 million, which was the amount of money raised from a recent bond issue for specific projects, doesn’t change; but it needs to be shown as a restricted use, not unrestricted.

 

The port corrected the errors in its final financial statements, according to the report.

 

But Smith continued to press the Auditor’s Office:

 

“The port is concerned that the Auditor’s finding ultimately misleads those reading port financial statements and the grant-awarding agencies, because in fact the financial statements were materially correct and grant transactions were made in accordance with the granting agency requirements.”

 

The Auditor’s Office agreed, saying grant requirements were met. But it also defended its process.

 

“We recognize that the port is committed to strengthening and improving its internal controls; however, we continue to emphasize that the financial statement errors were not discovered by the port.”

 

Smith added Wednesday that he takes the report seriously, but the sky isn’t falling either, he said.

 

 

 

 

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