Oak Harbor’s accounting practices put public funds at risk of loss and misappropriation, according to the results of 2009 state audit.
The Washington State Auditor’s Office released its annual audit report Dec. 27 with two findings. Both determine that the city lacks adequate internal controls over cash-receipting and deposits in its finance department and at the Oak Harbor Marina, putting public funds in jeopardy.
“It is unlikely that the city would be able to fix responsibility for a loss, should one occur,” the report said.
Mayor Jim Slowik said he and his staff are taking the findings very seriously and that many of the recommendations are already being implemented. He also confirmed that the city has launched an independent investigation into the marina’s financial practices.
“There are some pretty serious issues with the marina,” Slowik said.
According to the findings report, the facility collected about $1.3 million in revenue in 2009 from sources ranging from boat moorage to fuel sales. As many as five employees were found to have been receipting payments, the report said, with three of those having system access that allowed them to perform transactions under another user name. Also, the access rights of two former employees had not been removed by marina officials.
The report lists a catalog of other safeguard deficiencies, ranging from improper storage of receipt books and cash to the incomplete recording of fuel sales and a single person performing end-of-day reconciliation of the Fuel Dock Change Fund.
Slowik said the city specifically asked the auditors to look into the marina’s financial procedures. The request was not sparked by any known past theft of public funds, nor was any found by auditors, but there was concern that poor practices left the possibility open, Slowik said. It’s the same reason the city will conduct another investigation of its own.
“We owe the citizens that,” Slowik said.
Problems were also discovered in the finances department. According to the report, it receipted about $16.1 million from customers and other city departments in 2009. A review of the controls for cash receipting found that some responsibilities and duties of the department’s internal audit position were incompatible.
The position has administrative rights to cash-receipting and general ledger systems, is empowered to create and delete users with control over passwords, and has the ability to adjust and delete transactions. That person can also change transaction data, have access to money receipted prior to deposit, and make actual deposits with no secondary review process in place.
In addition, the audit noted weaknesses in controls over cash receipts and deposits, such as wide-range accessibility of cash at City Hall, allowing a single person to record payments and collect money from a drop box, and cashiers failing to receipt and restrictively endorse check payments.
Slowik said he believes the issue with the internal auditor’s position is more of a job description shortcoming than the lack of an important safeguard. Access to cash also has more to do with low staffing levels than a security threat. However, he said all the recommendations are either already being implemented or under review.
One issue the auditor did not cite as a problem was the city’s planned use of up to $2 million from the Real Estate Excise Tax, or REET, fund to bury power lines on SE Pioneer Way. City Councilman Scott Dudley and a state audit manager in August voiced concerns about the proposal.
Although Slowik said he was never concerned and he was always “confident we were doing the right thing,” it was one issue he was glad not to see turn up as a finding.
“We were happy to have that verified by the auditor,” Slowik said.
