Audit finds Fort Worden Public Development Authority lacked internal controls

Financial statements were inconsistent, report says

PORT TOWNSEND — The state auditor’s office has found that the Fort Worden Public Development Authority didn’t have adequate controls over financial statements during a two-year period ending in 2017.

In a report released Monday, the auditor specified four points that “represent a material weakness” with regard to accounting and financial recording, and questioned the relationship between the PDA and the Fort Worden Foundation.

Diane Moody, the PDA’s chief financial officer, and Executive Director Dave Robison issued a memo to the board last week that said the PDA is forming a finance and audit committee as a result.

“This committee will perform regular review of internal financial controls, processes and policies,” Moody and Robison said in the memo Feb. 17.

“The committee will review all monthly financial statements as well as financial records being submitted to the state auditor for accuracy and [generally accepted accounting principles] compliance prior to submittal.”

Robison has recommended the board allocate resources for the finance team to attend the annual Generally Accepted Accounting Principles (GAAP) training and workshop.

The PDA also will be working with the state auditor’s office prior to the 2018-19 audit to determine how the relationship between the agency and the foundation should be classified, either a “component” or “related unit,” the memo stated.

The auditor’s findings were from Jan. 1, 2016 through Dec. 31, 2017.

The report said the PDA did not properly accrue all payroll and general expenses incurred in one reported period but paid in another.

It also said staff members responsible for preparing financial statements lacked the technical expertise needed to perform their duties.

“In addition, the [PDA] did not have an effective review process in place to ensure it identified and corrected material departures from GAAP,” the report said.

State law requires local governments to submit annual financial reports to the auditor’s office within 150 days of the end of the government’s fiscal year, and the auditor’s report said the PDA did not file in a timely manner.

The report detailed several statements that were classified incorrectly and that the 2016-17 notes did not disclose $3.5 million of debt issued before year-end.

It also stated the financial reports were submitted 180 days and 544 days after the statutory deadline for each year, respectively.

“This substantially delayed our audit and prevented the governing body, public and other report users from obtaining timely information about the [PDA’s] fiscal operations,” the report stated.

In the PDA’s response, it said both parties acknowledged an unusual process with three different auditors assigned during a seven-month period.

“The timing of the final reassignment took place in May, which is the beginning of the PDA’s busiest season,” the response said. “As a result, the PDA’s capacity to respond was very limited until the season slowed in September.”

The PDA said the discrepancy in debt was due to its interpretation of the timeline for debt disclosure.

“In 2019, seven months after the audit began, the PDA received an additional revenue bond for $2 million to fund a new glamping project and then one in December for $1.5 million to fund renovation of building,” the response stated.

“At the end of the audit, the PDA was informed that all debt needs to be disclosed while the audit is still underway, not at the time the financial statements are submitted.”

Moody and Robison said in the memo to the board that finance staff should be more proactive and reach out to the state auditor’s office when there are questions about the best approach.

“The PDA appreciates that the auditors have helped finance staff to better understand the GAAP reporting requirements and have identified procedures on how to avoid material weaknesses and presentation errors,” they wrote.

“The PDA also appreciates the recommendations the auditors have provided to strengthen the PDA’s internal controls and will seek the auditors’ counsel as needed before submitting final annual financial statements.”

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Jefferson County Managing Editor Brian McLean can be reached at 360-385-2335, ext. 6, or at [email protected].

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