Finance Committee Receives 2022 Audit Summary Presentation – Discusses 2 Compliance Findings Noted In Report

The Finance Committee met 07/24/2023. Around 20 minutes of the meeting was taken up with a presentation on the 2022 Audit and Executive Summary. The presentation was given by Leah Lasecki a CPA with CliftonLarsenAllen (CLA), LLP, the company that conducted the audit.

CLA gave Appleton a “clean” opinion saying that they believe the city’s financial statements are not materially misstated. As she explained, “[W]hat we’re actually giving you is an opinion that we believe your financial statements are not materially misstated. Okay? We don’t look at every single dime and dollar that’s going through the city. Obviously, it’s a risk-based audit that we do in order to give a, not absolute, but still the highest level of assurance that we can give you that we believe that the financial statements are not materially misstated.”

Although the audit result was “clean” there were a couple compliance findings. The city did not follow controls ensuring that procurement policies were followed for Coronavirus State and Local Fiscal Recovery Funds. Additionally, the city did not have adequate internal controls for Community Development Block Grants to ensure that Federal Accountability and Transparency Act (FFATA) reporting requirements were completed in a timely manner. Neither of those issues seemed to be particularly serious and the city had either already corrected or were in the process of correcting the issues.

I’ve prepared a complete transcript of the discussion for download.

The audit this year took longer than normal because of the implementation of new accounting standards, but otherwise, there were no changes to the scope and timing of the audit.

There was a little confusion with the presentation because the PowerPoint slide on page number 7 of the printout that had been provided to the committee in the agenda packet was not accurate. CLA had kept the slide from the presentation given last year and not updated it properly.

The slide stated “There were no compliance findings reported;” however, as noted above, there were actually two compliance findings reported. Ms. Lasecki pointed out that CLA audited four federal programs each with 15-20 compliance requirements and each of those compliance requirements could themselves contain 4-5 sub-requirements. So, they were looking at auditing 60-80 total compliance requirements. “It’s a lot. It is rare that you get through a single audit without something being found, because it’s so specific and there’s so much detail.”

CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS – The city did not follow controls related to ensuring procurement policies were followed. Items purchased through procurement transactions were individually insignificant thus City believed procurement was not applicable. However, when applying the micropurchase threshold, a nonfederal entity should note that the threshold applies to the aggregate purchase amount from the vendor/contactor rather than the cost of individual items.

Ms. Lasecki explained that CLA did not believe the city had procured the goods in question in an unacceptable manner, but the city’s policy didn’t conform with uniform guidance, so they needed to fix that so it didn’t happen in the future. Finance Director Jeri Ohman was already implementing the necessary changes. Ms. Lasecki also noted that in the past, the uniform guidance had not included a rule about counting the aggregate cost of micropurchase items so, previously, that had been a great loophole.

COMMUNITY DEVELOPMENT BLOCK GRANT – The city did not have adequate internal controls designed to ensure that the reporting requirements related to FFATA were completed timely. The city had already taken corrective action and the reporting had already been done in June.

View full meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=1110588&GUID=ADD7DE9F-28EA-40DD-A210-6439A3BFF06C