In a separate action, the board appointed Cecilia Min as director of finance and administration.(See related story.) Min has served in the role on an interim basis since May and has overseen the work needed for all three audits. 

Ingrid Sheipline, an accountant with Richardson & Company, presented the results of the 2021-22 audit, which was just completed.

Min told the board she expects to have draft audits for 2022-23 and 2023-24 ready by mid-November. She also reported on other financial matters at the meeting.

Sheipline told the board that Richardson & Company had issued a modified opinion on the financial statements for the water and sewer funds because of missing infrastructure assets. The district’s other funds – drainage, solid waste and security – received an unqualified report.

An unqualified report, often called a clean opinion, indicates the auditor found the financial statements present a true and fair view of the district’s finances in accordance with accounting standards. A qualified, or modified, opinion means the statements are fairly presented except for a specific issue that is material but not pervasive.

The audit report also cited five material weaknesses and two significant deficiencies, most of them carried over from the three previous audits. Sheipline said the problems stemmed largely from a shortage of finance staff.

“Cecilia had to jump into midway through fiscal year of 2021-22 to get everything cleaned up to get where we are actually issuing a report,” the auditor said.

Examples of internal control issues included delays in reporting payroll transactions and incomplete bank reconciliations. One reason for the modified opinion, Sheipline said, was that developer-constructed infrastructure turned over to the district had not been quantified or recorded in the district’s books. 

“So, basically these assets are missing,” she told the board.

Sheipline also outlined recommendations that did not rise to the level of material weaknesses or significant deficiencies. Among them were auditing capital assets, reviewing the district’s reserves policy, updating a procedures manual that has not been revised in 10 years, and integrating the billing system with the general ledger.

“The billing system was unable to generate an accounts receivable aging report, so that is something that needs to be looked at,” Sheipline said.

When Board President John Merchant asked for comments, Director Tim Maybee said he didn’t see any surprises.

Merchant agreed, noting that Min and her staff have been addressing problems as they arise. While the next two audits may be easier because staff now understand issues they didn’t before, he cautioned the district will likely continue to face similar problems that could result in repeated findings from the auditors.

“The goal is that we can somehow work our way through where we get a clean audit,” he said.

Director Linda Butler asked when the district will be able to determine the amount of its reserves. 

“Not until the books get updated,” Sheipline replied.

On another point, Min reported that the 2021-22 audit included 34 adjustments: corrections of misstatements needed to balance accounts. 

“That’s not acceptable to me, so we need to make sure we don’t have that many journal entries going forward,” she said.

At the Aug. 19 Finance Committee meeting, Sheipline noted that a typical audit would include only five to 10 adjustments.

Min reported that staff is making good progress on the 2022-23 and 2023-24 financial records. She said 97% of the data for those years has already been entered into the district’s Great Plains software.

She noted it was fortunate that one of the Robert Half temporary accountants hired by the district had experience with the district’s older software. In addition, she brought in a Great Plains consultant to help with the data transfer.

Min said she expects to have draft audits for both years completed in November.

For years, district finance staff told the board that the Great Plains software was outdated and unsuited for a government agency because it could not handle fund accounting. As a workaround, staff relied on Excel spreadsheets. Min discovered that Great Plains did include a fund accounting module, but it had never been activated.

Min also updated the board on staffing changes, though she did not say whether they were affecting progress on the audits. One of the district’s accounting clerks has left, and the CSD accountant is working part time while on paternity leave. In addition, one of the Robert Half junior accountants will be leaving at the end of the month.

To fill the gaps, Min said the district will bring in a higher-level temporary accountant to assist with accounts payable and to cover for the district’s accountant. She also noted that she took over payroll in July and has already identified several areas for improvement.

At the June Financial Committee meeting, Minn reported significant challenges with the 2021-22 audit, which had already been submitted to the auditing firm. After sending a list of outstanding items to the district in February, the auditors received no response and were preparing to move on to another client, until Min intervened.

To keep the auditors engaged, she suspended all work on the 202223 and 2023–2-4 audit preparations and redirected the temporary accountants, district accounting staff and other CSD employees to focus on resolving the 2021-22 audit issues.