WS working to fix 2010 audit finding

State auditors made one finding in their review of White Salmon's city finances for 2010 and followed up on two findings from previous audits.

In the section titled "Schedule of Audit Findings and Responses," auditors noted, "The city used restricted utility funds for unallowable purposes which could potentially affect utility rates." They identified the following inappropriate uses of restricted funds in the report dated Nov. 18, 2011:

"In 1998 the City formed a Local Improvement District (LID) to construct and finance a water main project. It collects assessments from more than a dozen property owners within the LID to repay $313,581 in bonds. One individual who owned four properties defaulted on $86,000 in assessments. In December 2010, the County filed foreclosure proceedings on the four properties with outstanding assessments. The City paid $109,535 of outstanding LID bonds using Water Reserve Fund money. State law does not allow it to use utility funds to pay the debt. During our prior audit, we communicated to City management that the General Fund should repay at $133,863, plus interest, in restricted funds that were used inappropriately. While the City repaid some of this amount, it does not plan to repay the remaining $82,705."

Auditors now report that White Salmon's General Fund owes restricted funds $201,808, including interest. "The General Fund cash position was $120,341 as of Dec. 31, 2010, therefore the City must establish interfund loans to the various restricted funds and make payments on the outstanding balance over the next five years."

City officials responded to the 2010 finding by stating their commitment to resolve the finding.

"The city has established Resolutions 2011-10-330 through -335 in order to repay the amounts previously shifted from the restricted resources. Most of the loans are for a period of four years and one loan is for five years. To address the concerns over the city's ability to make the payments for Interfund Loans, the city has recognized the lack of resources in the General Fund and has increased utility taxes by 6 percent across the board in order to ensure repayment, and also to build up reserves."

Additionally, city administrators told the auditors that they are working on revising the city's financial policies and procedures, and budget documents.

"The goal is to ensure greater clarity on what each fund is as well as what it can and cannot be used for," they wrote. "By educating more people involved in the city on the restrictions of the funds, and requiring review of all Interfund Transactions, we feel that the issue is mitigated."

Auditors also took note of the progress the city has made in addressing previous findings (as recorded in a March 10, 2011 audit report) regarding inadequate internal controls over payroll that resulted in errors and excess payments of at least $50,000, and inadequate internal controls over payments that put public funds at risk.

With regard to the findings, the City Clerk/Treasurer has "increased monitoring of the (payroll) process to ensure employees are paid in accordance with the collective bargaining agreement. In addition, the City Council is approving payroll each month," and is "performing a review to ensure payments are adequately supported" by documentation, are appropriate and do not exceed the budget's authorized expenditure limits.