The recent state audit report was discouraging confirmation of what many island citizens already knew. This audit was narrowly focused and only addressed the reporting of financial information in a specific format.

Despite the narrow focus, the auditors discovered two transactions that were identified as significant “findings” – an unapproved transfer of money to a utility fund and an “undocumented receivable” as cash many months prior to its receipt. Even with the limited objectives of this audit it is clear that the finance department in the city has completely failed in its primary purpose of providing accurate and meaningful financial reports.

I am a CPA who spent my career in corporate finance. Such an audit report will almost always cause a for-profit finance manager to be replaced. I suggest that this would be the proper course of action for the city.

It is critical for the ongoing management of city operations and for council’s budgetary oversight to have a finance manager who is technically and managerially competent, and one with the necessary ethical backbone to report even bad news correctly. I can’t think of how a clerical mistake could classify a contingent receivable from the park district as part of the city’s 2007 ending fund balance.

It is equally clear that there are no effective cost controls or project reporting systems within the city. A competent finance manager should provide the council monthly reports showing the current financial status of the city plus pending commitments. I had these types of reports when I was on both the local school board and fire commission.

Budgetary oversight and establishing city priorities is the primary legal responsibility of a council member. The auditor recommends “the City Council closely monitor the city’s financial operations to ensure compliance with established policies.” The council can no longer hide behind “willful ignorance” in meeting its responsibilities. Lacking the necessary independent support staff, council should seek advice from one or more of the cities strongly recommended by the auditors in the exit meeting.

In talking with a school board member, I learned that the $40 million high school addition will come in on budget and on time. Contrast that with the sewer plant project, for which the council has no accurate reports on costs or timelines. The high school success is the result of competent management.

It appears this economic downturn will be long and painful. Council should assume a continued decline in tax revenues for at least the next six to nine months. Now is when there is an even greater need to have accurate and timely financial reporting and strong cost controls. Considering the current state of financial management I strongly suggest the city put all projects on hold until effective controls and reporting are implemented within both the Finance and Public Works departments.

Doug Johnson

Bainbridge Island