Russell Olsen, CPA with Larson and Rosenberger, came before Nephi City Council to present the annual audit for fiscal year 2011-2012.
"In a nutshell, it's a clean opinion," he said, referring to the city's financial statements.
The auditor's report stated that all financial statements were audited according to audit standards they are required to follow, and that in all material respects, the financial statements were correct.
The government auditing standards report requires the auditor to look at the city's internal controls and compliance with certain laws and regulations. The purpose of the audit is not for the auditors to give an opinion on those matters, but to help them decide what audit procedures to perform based on what was found. They did not find any problems or issues that needed to be reported in this report.
The state compliance report makes sure that the city is following the laws as they apply to specific things. The auditor did not find any issues that needed to be included in this report.
Olsen did not go into the specific numbers of the financial statements, but did cover the findings the auditors found.
In the management letter, the auditor communicates any issues or problems to the governing body. A few corrections were made to make the financial statements correct, and the auditor was required to disclose them. They are standard adjustments that the auditor has always made.
"On page 4, are the findings," he said. "I prefer to call them suggestions because 'findings' sometimes has a negative connotation, but we're here to help the city improve and do the best it can and these are some of the things we can talk about in that light."
The first finding was one that had been talked about before: the segregation of duties.
"In a perfect world...there are certain duties you want separated," he said. "In other words, you don't want the same person reconciling the bank statement, that writes the checks, that signs the checks, that makes the deposit. There are certain duties you want separate people to do to avoid the possibility of fraud or theft."
With the size of Nephi's staff, Olsen said it was nearly impossible to completely segregate the duties. He said the city council provides the oversight for the goings-on of the city.
"It's a finding that we want to talk about, and we'll talk about it every year, so we recommend that you do what you are currently doing. Maybe someday when you have all the money in the world you can hire 20-30 people and you can separate these duties, but until then, carry on," Olsen said.
The next two findings were not necessarily related to the first finding, but came about from the same standard that came out a few years ago.
"As the auditors, we have historically come in and proposed some of the journal entries to close the books. We've done the year-end journal entries," he said. "In a perfect world, that would all be done when we got here and then we'd audit what was done. But, in the circumstances you are in, that's just something we've always done. Just a few years ago, they changed the standard to say that if you are doing that as the auditor, then we have to include that as a finding."
The next finding was one that had been talked about last year. The purchasing policy of the city hasn't been updated in a long time and the city is currently working on it.
The last finding was a state compliance finding. Each year the state has the auditors look at specific things, and one of those things was the justice court and the timeliness of their deposits. State law requires that if any entity receives cash then a deposit should be made every day, if practicable.
"It should never be longer than 3 days," he said. "We just noted in our test work at the justice court that those deposits aren't being made consistently within three days."
There was nothing wrong, but it was a good internal control to make sure that the person doing it was protected.
The city had taken control of last year's finding of a fund balance problem.
Overall, the city is doing as well as can be expected, and in some circumstances, better than some other communities.
Olsen thanked the staff for their hard work and making his job easier. Mayor Mark Jones thanked Olsen for doing a great job.