Missed deadline for city audit to cost $50,000
By Johnny Brannon
Advertiser Staff Writer
A major annual city audit that is more than three months late is likely to cost taxpayers an extra $50,000 at least, and it is the third year in a row the cost has shot up because of delays, a City Council analyst said yesterday.
Each time, the cost rose because city officials failed to meet deadlines for providing financial information to private accountants, legislative auditor Ivan Kaisan told the council's budget committee.
The problems cost an extra $37,000 last year, and $87,000 more in 2001, he said. This year's audit originally was to cost $209,000 and be finished by November 2002.
Kaisan said findings that the city did not account properly for all infrastructure were expected to require a $200 million change to figures in previous reports.
There is no indication that such a modification will trigger an immediate downgrade of the city's bond ratings and thus raise interest rates on loans but it is not good news, Kaisan said.
"It's always troubling for bond holders to find out that numbers they relied on in previous years were wrong," he said.
City budget and finance director Ivan Lui-Kwan said he had met with the city's investment bankers and bond underwriters, and none had expressed alarm. "We haven't been told that this would jeopardize our bond rates at all," he said.
Lui-Kwan said the delay this year is largely because of new national requirements that cities assess the value of thousands of segments of infrastructure, such as sewer lines, roads and buildings.
He suggested the auditors, PricewaterhouseCoopers, were responsible for the delays. They were paid $223,000 more to help the city prepare for the new requirements.
"Everyone knows this is just a monumental job, and I would expect the external auditor would anticipate that," Lui-Kwan said.
But Kaisan said city officials had failed to produce financial information on a schedule agreed upon with the firm. "Certain internal deadlines were agreed to, and those deadlines slipped," he said.
City internal auditor Michael Hansen said officials had since provided the company with all the information it needs. The audited Comprehensive Annual Financial Report may be finished by the end of the month, but there is no firm schedule yet, he said.
The report should have been filed with four Nationally Recognized Municipal Securities Information Repositories by the end of February.
The city filed unaudited financial statements instead, which Lui-Kwan said would satisfy agreements with bondholders in the meantime.
Reach Johnny Brannon at email@example.com or 525-8070.
Correction: A statement in a previous version of this story was attributed incorrectly. City budget and finance director Ivan Lui-Kwan said that the delay in completion of the audit is largely because of new national requirements that cities assess the value of thousands of segments of infrastructure, such as sewer lines, roads and buildings.