State auditors issued a finding against the City of Pullman in a report released today, concluding weaknesses in internal financial controls resulted in misstatements and the improper categorization of funds in 2018 records.
Auditors reported city staff did not fully understand the accounting requirements and did not have an effective review process for detecting financial errors. The 99-page report lists a number of misclassified transactions and misstated fund balances discovered during the review of 2018 financial reports.
“The City’s internal controls over financial statement preparation were inadequate to ensure accurate and complete financial reporting,” the finding states, adding, “The City did not have an effective review process to detect and correct financial statement errors before submitting the annual financial report for audit.”
A written response from the city emphasized Finance Department managers have changed since 2018 and pledged to dedicate additional resources to reviewing future financial statements. The city also planned to change to a “cash basis” reporting.
“The City of Pullman takes this finding very seriously, and corrective action has already been taken,” the response states. “Additional training – both in course accessibility and staff availability, decreased department turnover, staffing increases, additional experience & knowledge gained, and commitment to improving internal controls as well as operational functions will alleviate adverse findings going forward.”
City officials noted the financial misclassifications did not change the designated uses or total fund balances.
The financial statements and federal audit report outlines the city’s overall operational expenses, assets, debts, pension obligations, association memberships and many other financial details. On page 72, it lists ongoing liabilities or litigation such as the impacts of the COVID-19 pandemic and a recently filed lawsuit from a former employee.
The State Auditor’s Office also released a 7-page accountability report for the city, covering 2017 and 2018. That audit did not include any findings or modified opinions.
The accountability audit did identify issues with the reimbursement of Pullman Fire Department wages in a Sept. 30 management letter, which Whitman County Watch requested. That letter indicates the fire department overbilled the state for wage reimbursements in 2017 and 2018 after local firefighters worked on state wildfire mobilizations.
They city also paid some fire overtime wages through accounts payable instead of payroll, which reportedly resulted in unpaid payroll taxes and reduced benefits.
Auditors recommended the city establish an independent review process for checking the accuracy of reimbursement billing and ensure compensation goes out through the payroll process.
City officials stated they planned to add staff to the Finance Department in an effort to keep better track of financial reporting requirements and allow additional review of financial transactions. They stated the department’s workload had “increased 180.7 percent” since the last increase in staff 14 years ago and new managers would prioritize those review efforts.
“Finance Department turnover has stabilized with new leadership,” the response states. “Moving past the onboarding transitional period has created economies of scale to work flow thus allowing additional time for the review process.”
The audits note the city moved to a two-year budget cycle in 2019. That budget writing process is now in the works for 2021-2022. Read recent coverage of those discussions here:
- Daily Evergreen: Pullman saw $700,000 drop in yearly revenue
- Lewiston Tribune: Pullman officials call for maximum property tax increase
- Moscow-Pullman Daily News: Pullman sees its revenues dip by 3 percent