audit_findings: 42
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| 42 | wa-sao | 1021358 | 2016-001 | 287 | WA | City of Sunnyside | City/Town | 0846 | 5368750 | geoid_place | Washington State Auditor's Office | Accountability audit — City of Sunnyside | Accountability | 2016 | 2016-01-01 | 2016-12-31 | 2018-05-21 | internal_controls | The City did not have adequate oversight of payroll operations to safeguard public resources | Background The City paid about $10.7 million in payroll during 2016. During three prior audits dating back to 2011, we have recommended the City Council and management strengthen internal controls over payroll. The current audit identified continuing control weaknesses in this area. Description of Condition The City uses a system to run payroll and issue payroll checks that is separate from its general ledger and financial reporting system. The payroll system data is uploaded to its general ledger after payroll checks are processed. However, after the payroll is upload ed, subsequent payments to vendors for employee benefits – such as retirement, unemployment and deferred compensation – are made through an online system. We noted the following payroll related control deficiencies that continue to hinder the City’s ability to properly report payroll expenditures in the general ledger: In 2015, o ne City employee was responsible for human resources and payroll functions without oversight or monitoring. In 2016, the City hired a separate employee to process employee payro ll, independent from human resources functions. However, human resources was still responsible for processing employee benefit payments, which included calculating, reporting and remitting these payments. No one reviewed this information to ensure it was submitted or recorded correctly. An independent review of payments to benefit vendors was not performed before the payments were issued to ensure the transactions were valid, supported and properly recorded in the general ledger. Although the City performed a reconciliation between the bank statement activity and the general ledger, differences identified during the reconciliation were not adequately followed up on. Differences related to payroll transactions were recorded in a temporary clearing account and sent to the Human Resources Assistant for follow-up; however, the City did not always identify the reason for the differences to accurately record the transactions to the proper account. Washington State Auditor’s Office Page 7 Cause of Condition The City Council and the City Manager have not made it a priority to address prior audit recommendations or to segregate the payroll and human resources functions in a manner that provides adequate oversight, monitoring and accountability. Although these positions were separated during the audit period, Human Resources still processes benefit payments without adequate oversight. Further, management has not held staff accountable for following up on differences that are identified between the bank reconciliation and the ge neral ledger to ensure all payroll transactions are recorded accurately in the general ledger system. Effect of Condition Without adequate oversight and monitoring of payroll payments and the reconciliation to the general ledger, the City cannot ensure all payments are valid. Also, the City cannot ensure that the general ledger reports accurate payroll expenditures. From our review of bank reconciliations for 2016, the City identified the following payments processed through the bank that were not included in the general ledger: One retirement payment of $11,619 from February 2016. Three payments for unemployment compensa tion totaling $13,095 from March, May and November 2016. In addition, there were multiple instances in 2016 when the deferred compensation payments in the general ledger did not agree to the amount paid, for minor amounts. Once these differences were identified, the City recorded these transactions in the clearing fund and flagged them for further follow-up. However, at the time of our audit, the City had followed up on only one out of the four transactions several months after the transaction occurred. Further, the City did not take adequate steps to research why the differences occurred and establish appropriate procedures to avoid future differences. The City was forced to do a prior period adjustment, totaling $192,988, at the beginning of 2016 to clear unresolved payroll differences that had accumulated since 2012. Unresolved differences of about $10,000 still remain in the clearing account as of the date of our audit. Washington State Auditor’s Office Page 8 Recommendation s We recommend the City develop payroll policies and internal control processes to ensure: Adequate monitoring, review and approval of all payroll benefit payments All payroll-related payments are accurately and promptly reconciled to the general ledger to ensure accurate reporting Any unresolved differences continue to be researched and resolved to ensure all public funds are accounted for and properly recorded City ’s Response The City of Sunnyside acknowledges this finding in part, however disputes the assertion that the City Council and City Manager do not make this a priority. The city has been working to rectify these conditions. The City did in fact hire a payroll clerk to segregate HR and payroll functions. The city has been working on transitioning to a single financial software system for several years. Dur ing the audit period the City was using one (BIAS) financial software for most financial transactions, and another (Eden) because it was not able to use Bias for HR and payroll. The city has now completed the transition and has eliminated the dual system problem. Management recently reorganized staff and has placed HR under the direct supervision of the Finance and Administrative Services Director. All payroll benefit payments are now run through Accounts payable and have a two tear approval process. The pa yroll related payments are now reconciled to the General Ledger in a timely manner. Management is currently working on resolving all outstanding HR and payroll related discrepancies. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next audit. Applicable Laws and Regulations RCW 43.09.200 – Local government accounting – Uniform system of accounting. Budgeting Accounting and Reporting System (BARS) Manual – Accounting Principles and Controls, Internal Control, Constrols over Financial Reporting BARS Manual 3.1 – Accounting Principles and Internal Controls BARS Manual 3.8.11 – Electronic Funds Transfer – Disbursements Washington State Auditor’s Office Page 9 Finance & Administrative Services Director 818 East Edison Avenue Sunnyside, Washington 98944 (509) 837-3782 Office, (509) 837-3268 Fax | https://portal.sao.wa.gov/ReportSearch/Home/ViewReportFile?arn=1021358&isFinding=false&sp=false | 2026-07-30 13:24:54 |