Island Transit officials are protesting a finding state auditors made against how the organization prepares its financial statements.

Auditors found that Island Transit had inadequate internal controls over its preparation of financial statements, according to a report released this week by the Washington State Auditor’s Office.

In reviewing statements, auditors found errors in revenue numbers. They found tax levy revenue was understated by $1.49 million, state grant revenue was understated by $572,859, and other grant revenue was overstated by $1.957 million.

Island Transit contracts with an outside firm to prepare financial statement. The audit report states that Island Transit didn’t verify the accuracy of the financial statements the outside firm produced.

Island Transit officials were shocked by the finding, considering they have used the same system for years without any issues raised by the auditor’s office.

Martha Rose, director of Island Transit, said the finding stems from a change in procedures Island Transit pertaining to the year-end report. The problem was Island Transit officials didn’t learn of the change until they received the finding.

“They didn’t inform us,” Rose said. “If they had told us, it would have been an easy change to make.”

As for the errors in revenue numbers, she said a couple of figures did get transposed, but the bottom line was accurate.

She said Island Transit has always had sparkling reports from the auditor’s office. Island Transit hasn’t received any findings from the auditor’s office in the past nine years, according to the audit report.

Island Transit did receive a second finding from the state auditor’s office this year as well.

Auditors found Island Transit failed to check the federal excluded parties list for a $100,000 project funded by a federal grant. Auditors noted that the company hired for the project wasn’t on the list.

Rose said that staff didn’t know that the threshold where they had to check that list had changed. It dropped from $100,000 projects to $25,000 projects.

She agreed with the auditor’s second finding and said Island Transit would follow the new change to the rule.

In the end, Island Transit didn’t receive any penalties as a result of the findings.

Island Transit is the second public entity to disagree with a state auditor finding in recent weeks.

The Coupeville School District disagreed with a finding they received over the auxiliary gym project. School officials used a change order so the contractor building the high school could build the auxiliary gym. State auditors said the school district should have used a competitive bidding process.

School leaders contend that using the change order saved hundreds of thousands of dollars.