During the regular Board of Aldermen meeting Nov. 9, Kristen DeLuca of K Deluca Audit Services LLC presented the audit for the fiscal year ending June 30, 2020.
“The city received what we call an unmodified opinion,” said DeLuca, which according to her is the best of the possible choices she was faced with. “What this means is that after performing our audit, I feel that these financial statements are fairly stated,” adding that the numbers seem to correctly reconcile.
After outlining the numbers of the report, including the fact that the city had an increase in its net position of $1.8 million, DeLuca expressed concerns with the city’s financial process.
• One of her concerns regarded segregation of duties.
“Any time we have a small staff where one or two people perform most of the accounting tasks, we have a lack of segregation of duties which is extremely common in organizations your size,” she said.
“But it is my job to remind you that situation exists and to encourage you to look for ways to add more people to the process, or even just adding more oversight to accounting tasks and things like that.”
The city has recently split the duties of the city clerk into two positions, adding a financial director.
• Another regarded timely reconciliation of accounts.
“During my audit testing, I noticed that a pooled bank account wasn’t reconciled until approximately six months after fiscal year end. So, at that time, you’re not able to go back and record any missing transactions in fiscal year 2020. You have to go ahead and enter them in the next fiscal year, 2021.”
DeLuca encouraged the city to continue implementing new procedures to ensure that reconciliations are done in a timely manner and to implement some kind of monitoring process to track what is being done.
• DeLuca was also concerned about the way grant administration is being handled.
“During the fiscal year there were multiple grants going on. It was difficult based on the information in the accounting system to always determine which costs were related to which projects and which reimbursements went where and if everything was in the right fund,” said DeLuca.
DeLuca offered a possible solution.
“I recommended a new process to track activity for each grant, so that we can easily identify where all the cost should be reported, that we’ve requested all eligible grants, that it’s timely and things like that,” she said.
The city audits are normally completed late in the year and presented to aldermen at a November or December meeting. The 2019-2020 audit would have normally been presented in November or December of 2020.
Salem was late getting 2019-2020 financial information to K Deluca Audit Services, of St. James. Deluca reported in March she normally receives information for the audit in October and tries to complete it by December, meaning the time frame for the July 1, 2019-June 30 2020 completed audit is 11 months behind.
Also, the audit for 2020-2021 would normally be given to aldermen in December. Mayor Kim Steelman said last month that information is available, and DeLuca has indicated she can get started on that soon and get the city back on a normal audit schedule.
According to DeLuca’s report, the City of Salem ended FY 2019-2020 with the following totals in the basic financial statements:
• total assets of $28,157,280—of which $9,027,958 is categorized as for governmental activities and $19,129,322 is categorized as for business-type activities;
• total deferred outflows of resources are $469,493—of which $294,815 is categorized as for government activities and $174,678 is categorized as for business-type activities;
• total liabilities of $10,093,967—of which $2,106,034 is categorized as for governmental activities and $7,987,933 is categorized as for business-type activities;
• total deferred inflows of resources of $269,529—of which $163,328 is categorized as for governmental activities and $106,201 is categorized as for business-type activities;
• and a net total position is $18,263,277—of which $7,053,411 is categorized as for governmental activities (which was a $102,693 decrease) and $11,209,866 is categorized as for business-type activities which is a $1,896,368 increase.
“So the city as a whole had an increase of net position of $1.8 million,” said DeLuca.
“General fund saw a decrease of $460,000, parks an increase of almost $18,000.”
Also, capital improvements saw a decrease of approximately $80,000 and other governmental funds saw a decrease of approximately $230,000.
Alderman Kevin James expressed the board’s thankfulness for DeLuca’s work.
“We appreciate your monumental effort that it took to put the components together, and we know that there were a lot of delays in the timing and we appreciate what it took to get it there,” he said.
An electronic version of the full audit as supplied to The Salem News by the city is available now at thesalemnewsonline.com.
