{"database": "mytown-research", "table": "audit_findings", "rows": [[8, "wa-sao", "1020019", "2016-002", 4, "WA", "City of Seattle", "City/Town", "0433", "5363000", "geoid_place", "Washington State Auditor's Office", "Financial and Federal audit \u2014 City of Seattle", "Financial and Federal", 2016, "2016-01-01", "2016-12-31", "2019-08-19", "internal_controls", "material_weakness", null, null, "The Seattle City Employees\u2019 Retirement System d id not have adequate internal controls in its accounting, which caused delays in its annual financial statement preparation", "Background \nManagement is responsible for designing, implementing and maintaining internal \ncontrols to fairly present financial statements and provide reasonable assurance \nregarding reliability of financial reporting. The City prepares its financial \nstatements in accordance with generally accepted accounting principles (GAAP) as \nprescribed by the Budgeting, Accounting and Reporting System (BARS) Manual. \nA certified public accountant firm audited the fund financial statements of the \nSeattle City Employees\u2019 Retirement System [SCERS] and provided its report to \nour Office. In accordance with auditing standards, we are responsible for reporting \ninternal control deficiencies that affect the City\u2019s financial reporting. \nDescrip tion of Condit ion \nThe certified public accountant firm\u2019s audit identified the following significant \ndeficiency in internal controls over financial reporting: \n\u201cAccount Reconciliations and Reporting \nDuring the year, the investment and securities lending general ledger accounts were \nnot analyzed and reconciled with subsidiary information on a periodic basis. These \nperiodic reconciliations, together with the posting of correcting journal entries, \nhelp ensure timely and accurate interim financial information that can be used to \nmonitor and control operations. In addition, timely reconciliation of accounts \nis most cost efficient, since reconciliation at a later date is often more difficult and \ntime consuming. A key accounting system goal should be to provide tim ely, \naccurate financial information for management.\u201d \nCause of Condition \nThe City did not prioritize timely account reconciliations of the Seattle City \nEmployees\u2019 Retirement System.\nWashington State Auditor's Office \nEffec t of Conditi on \nTimely reconciliations of general ledger accounts were not performed throughout the \nyear. Further, untim ely reconciliations caused a delay in pr eparing the fin ancial \nstatements. \nRec omm endations \nThe certified public accountant firm recommended: \n\u201cSCERS adopt procedures to ensure that the monthly analysis of general ledger \naccounts becomes a routine procedure. \nIt was additionally identified the financial statements reflect the reclassification between \ninvestment income and securities lending income not reflected in the trial balance. While \nthe proper amounts were reflected in the financial statements, we recommend timely, \naccurate journal entries in order to prevent errors.\u201d \nCity\u2019s Respo nse \nIn 2015, SCERS began monthly reconciliations with the monthly investment summaries \nreceived from its custodial bank, Bank of New York (BNY). To date, SCERS has only \nbeen able to receive detailed securities lending information on an annual basis from BNY. \nSCERS is continuing to work with BNY to ensure that monthly investment summaries are \ncomplete and accurate and that detailed s ecurities l ending information are provided \nmonthly. \nAudit or\u2019s Rem arks \nWe appreciate the City\u2019s commitment to resolve the identified condition and thank City \npersonnel for their cooperation and assistance during the audit. \nAppli cable Laws and Regulat ions \nGovernment Auditing Standards, December 2011 Revision, paragraph 4.23 states: \n4.23 When performing GAGAS financial audits, auditors should \ncommunicate in the report on in ternal control over financial \nreporting and compliance, based upon the work performed, (1) \nsignificant deficiencies and mat erial w eaknesses in in ternal \ncontrol; (2) instances of fraud and noncompliance with provisions \nof laws or regulations that have a material effect on the audit and \nany other instances that warrant the attention of those charged with \ngovernance; (3) no ncompliance with provisions of contracts or \ngrant agreements that has a material effect on the audit; and (4) \nabuse that has a material effect on the audit. \nWashington State Auditor's Office \nThe American Institute of Certified Public Accountants defines significant deficiencies \nand material weaknesses in its Codification of Statements on Auditing Standards , \nsection 265, as follows: \nDeficiency in internal control. A deficiency in internal control \nover financial reporting exists when the design or operation of a \ncontrol does not allow management or employees, in the normal \ncourse of performing their assigned functions, to prevent, or detect \nand correct, misstatements on a timely b asis. A deficiency in \ndesign exists when (a) a control necessary to meet the control \nobjective is missing, or (b) an existing control is not properly \ndesigned so that, even if the control operates as designed, the \ncontrol objective would not be met. A deficiency in operation \nexists when a properly d esigned control does not operate as \ndesigned or when the person performing the control does not \npossess the necessary authority or competence to perform the \ncontrol effectively. \nMaterial weakness. A deficiency, or a combination of deficiencies, \nin internal control over fin ancial reporting, such that there is a \nreasonable possibility that a material misstatement of the entity's \nfinancial statements will not be pr evented, or d etected and \ncorrected, on a timely basis. A reasonably possibility exists when \nthe likelihood of an event occurring is either reasonably possible \nor probably as defined as follows: \nReasonably possible. The chance of the future event or events \noccurring is more than remote but less than likely. \nProbable. The future event or events a re likely to occur. \nSignificant deficiency. \nA deficiency, or a combination of deficiencies, in internal \ncontrol over financial reporting that is less severe than a \nmaterial weakness yet important enough to merit attention by \nthose charged with governance. \nA11 Indicators of material weaknesses in internal control include: \n\uf0b7 identification of fraud, whether or not material, on the part \nof senior management. For the purpose of this indicator, \nthe term \u201csenior management\u201d includ es the principal \nexecutive and fin ancial officers as well as any other \nmembers of senior man agement who play a significant \nrole in the entity's financial reporting process; \nWashington State Auditor's Office \n\uf0b7 restatement of previously issued financial statements to\nreflect the correction of a material misstatement due to\nfraud or error;\n\uf0b7 identification by the auditor of a material misstatement of\nthe financial statements under audit in circumstances that\nindicate that the m isstatement would not have been\ndetected and corrected by the entity's internal control; and\n\uf0b7 ineffective oversight of the entity's financial reporting\nand internal control by those charged with governance.\nRCW 43.09.200 Local government accounting \u2013 Uniform system of accounting, states \nin part: \nThe state auditor shall formulate, prescribe, and install a system of \naccounting and reporting for all local governments, which shall be \nuniform for every public institution, and every public office, and \nevery public account of the same class. \nBudgeting, Accounting, and R eporting S ystem (BARS) Manual - Accounting, \nAccounting Principles and Internal Control, Internal Control states in part: \n3.1.3.20 Internal control is a process \u2013 affected by those charged \nwith governance, management and other p ersonnel designed to \nprovide reasonable assurance regarding the achievement of \nobjectives in the following categories: \n\uf0b7 Effectiveness and efficiency of operations\n\uf0b7 Compliance with applicable laws and regulations\n\uf0b7 Reliability of financial reporting\n3.1.3.30 Management and the governing body are responsible for \nthe government\u2019s performance, compliance and financial \nreporting. Therefore, the adequacy of internal control to provide \nreasonable assurance of achieving these objectives is also the \nresponsibility of management and the governing body. The \ngoverning body has ultimate responsibility for ensuring adequate \ncontrols to achieve objectives, even though primary responsibility \nhas been delegated to management. Since management and the \ngoverning body are assumed to work in harmony, both parties are \ncollectively referred to as \u201cmanagement\u201d throughout the rest of \nthis section. \n3.1.3.140 This objective refers to fair p resentation of financial \nstatements and r equired schedules in all material r espects in \naccordance with the stated basis of accounting. \nWashington State Auditor's Office \n3.1.3.150 In meeting this objective, the government should have \ncontrols that accomplish the following key functions: \n\uf0b7 Identification of financial events \u2013 Controls should\nensure fin ancial events and transactions are properly\nidentified and recorded.\n\uf0b7 Properly applying accounting standards \u2013 Controls\nshould ensure correct criteria and methodology is applied\nwhen accounting for financial events. When the correct\nmethod of accounting for or reporting a transaction is\nunclear, the government should seek clarification by\nperforming r esearch, contracting for accounting\nassistance, or communicating with the State Auditor\u2019s\nOffice or standard setting bodies.\n\uf0b7 Correctly accounting for all financial events \u2013 Controls\nshould ensure that:\n\uf0b7 Only valid transactions are recorded and reported.\n\uf0b7 All transactions occurred during the period are\nrecorded and reported.\n\uf0b7 Transactions are recorded and reported at properly\nvalued and calculated amounts.\n\uf0b7 Recorded and reported tr ansactions accurately\nreflect legal rights and obligations.\n\uf0b7 Transactions are recorded and reported in the\naccount and fund to which they apply.\n\uf0b7 Preparation of the annual report \u2013 Controls should ensure\nthat fin ancial stat ements and r equired s chedules are\nproperly compiled and p repared from sou rce accounting\nrecords. Controls should also ensure correct presentation of\nstatements and schedules.\nWashington State Auditor's Office", "https://portal.sao.wa.gov/ReportSearch/Home/ViewReportFile?arn=1020019&isFinding=false&sp=false", "2026-07-30 13:24:54"]], "columns": ["rowid", "source", "report_number", "finding_number", "muni_id", "state", "entity_name", "entity_type", "entity_ext_id", "place_geoid", "match_method", "auditor", "report_title", "audit_type", "fiscal_year", "period_start", "period_end", "published_date", "finding_category", "severity", "questioned_cost", "cost_basis", "finding_title", "finding_text", "report_url", "fetched_at"], "primary_keys": ["rowid"], "primary_key_values": ["8"], "units": {}, "query_ms": 44.644095993135124, "source": "MyTown", "source_url": "https://mytown.theboringparts.com", "license": "CC BY 4.0", "license_url": "https://creativecommons.org/licenses/by/4.0/"}