Burien’s state audit shows quick resolve of a single ‘significant’ problem 1by Jack Mayne The state auditor in its 2013 audit found no major financial problems in Burien city government, but one “significant deficiency” turned out to be an error the city staff found itself. Washington State Auditor Troy Kelly issued on Sept. 29 its report of the 2013 audit of Burien’s financial statements of the city’s governmental activities (download PDF of the audit here). A problem during the audit process prompted the auditor to suggest better internal controls. The single “significant” deficiency could have led to “material weaknesses.” Even so, the audit showed no “instances of noncompliance …” Missed $288,477 expense The report said the city has responsibility to have internal controls to be certain that statements are reliable, but the audit found a “significant deficiency in internal controls…” because the city “did not identify $288,477 of expenditures incurred but not yet sought for reimbursement.” The audit report said that was because the city did not have a procedure in place to be certain that correct information coming from various departments involved in federally financed projects. “The city did not dedicate sufficient time and resources to the preparation and review process.” The result was the total program expenditures increased and created a new major program that was required to be audited,” the state report said, adding that Burien’s Finance Department staff found and subsequently corrected the error. Even so, the auditor recommended that the city in the future provide time and money to ensure accuracy. City objects The city said it “respectfully” disagreed. “We do acknowledge an error in the originally submitted materials,” the city’s response said. “However, that error resulted from an isolated incident of oversight related to one federal grant out of 16 included” and the “single reimbursement request that was not included was discovered by finance staff and promptly and accurately reported” while the auditors were still at Burien City Hall. The auditor’s report acknowledged that. “The city has a small accounting staff and experienced an extended vacancy in the position responsible for performing this work,” said the report. “The error was an isolated incident of oversight as the other 15 grants … were correctly reported. In addition, the error was detected prior to finalizing the financial statements so those were accurately reported. “The city agrees that accuracy is important and has implemented additional policies and procedures related to grant reimbursement requests to ensure timely and accurate submittal of requests.” Income exceeds liabilities This included a “Management Discussion and Analysis” which the report said “is intended to be an easily readable analysis” of the city’s financial activities, and said over the past 10 years, the tax income has increased by an average of $5.36 million per year, a trend that continued in 2014 with an increase of $4.1 million. “Assets exceeded its liabilities at the close of the most recent fiscal year by $120.7 million,” the auditor wrote. “Of this amount, $98.8 million is net invested in capital assets and the remaining $21.9 million is available for capital projects, debt service and funding the government’s ongoing activities and obligations.” The auditor said the city’s total long-term debt increased $651,000, “which reflects a net increase in governmental activities long-term debt of $734,000 and a decrease of $83,000 in business-type activities.” Burien’s total line of credit is $3.6 million, the state audit report said, “but the city only drew down $2.4 million in 2013.” Economic factors As most citizens know, property taxes are a big part of Burien’s income, representing 19.5 percent of total governmental resources. The sales tax grew to 21.1 percent and Business and Occupations and Utility taxes total about 11.9 percent of income. Then money from state shared revenues and grants make up 28.8 percent of total resources. The state auditor said that while sales tax revenues “have rebounded to pre-recession levels, it will take several years to fully recover the loss of property tax revenues due to legislative limits on the amount that property tax can increase in any given year.” In 2012, Burien logged a decline in assessed valuation because the city hit its property tax cap of $1.60 per $1,000 in assessed value. “Assessed value declined further in 2013,” the audit report said, “assuring that it will take several years for the city to recover the lost property tax revenues.” Even though Burien’s assessed valuation grew by 2.7 percent in 2014, property tax revenue is approximately $500,000 less than the highest amount collected in 2011. “The loss in property tax revenues is cumulative and has caused a structural deficit,” said the state auditor. “Sales tax has returned to pre-recession levels and continues to grow; however, that revenue source alone does not overcome the property tax loss.”]]>