Representatives with the Town of Paonia's accounting firm, RubinBrown LLP, said the town is "Trending in the right direction" during their public presentation of the town's 2015 audit.
In addition to high marks by auditors, RubinBrown engagement partner Russell White reported that they encountered "no difficulties in performing the audit that would obstruct its timely completion." They commended town finance officer Cindy Jones and town manager Jane Berry for a job well done, particularly Jones' efforts to track expenditures and assist the process by providing information to auditors in a timely manner.
The deadline for local governing bodies to submit annual audit reports to the Office of the State Auditor was Friday.
Auditors found two significant deficiencies in internal control.
The Samuel Wade Road Bridge, which the town took over from Delta County in 2010, is not included on the fixed asset schedule. Auditors said corrections were discussed with Jones and the bridge will be included as an asset in 2016.
In performing a single audit, auditors found another deficiency. The single audit was triggered by the town's spending of more than $750,000 in federal funds during the fiscal year. The single audit, intended to ensure that federal grant money is being used properly, revealed that the town failed to report the appropriate federal and state share of funds on an EPA grant related to upgrades to the town's water delivery system. The grant passed through the Colorado Water Resources & Power Development Authority to the town.
Auditors said that while they present a clean, or no-opinion audit, from a single audit standpoint they do give an opinion. The audit report states the town lacked training on reporting those requirements. Following all the requirements is no small task," said White. "This happens all the time."
White commended Jones for doing work he described as "complex with multiple funding sources with different percentages" applied to the federal portions of the grants. "It's kind of like auditing a moving target."
The town has already submitted plans for corrective action, and will identify an individual who is independent of the administrative function of the grant programs to review the "schedule of expenditures for federal awards" for completeness and accuracy.
The single audit resulted in an additional 50-60 hours of billed time, said White.
Auditors also recommended that the town consider cross-referencing vendors and contractors to an IRS Form 1099, and identifying possible fringe benefits and determining proper values in each individual's taxable income. They also recommend creation of a formalized review process to mitigate any risk of noncompliance.
The auditor viewpoints also provided updates on 10 control observations from the 2014 audit that were determined to be a material weakness, including the segregation of financial duties such as review and approval of bank reconciliations, cash transfers, payroll, invoices and disbursements, and unrestricted access to computer terminals. Auditors determined that the town has implemented corrective measures with these issues.
Among five items in the town's Management Discussion "'highlights and notable financial statements" comparing 2015 to 2014, the FY 2015 draft budget specified $410,000 in spending deficits in violation of Colorado statues requiring budgets be balanced. Beginning in November 2014, financial provisions were put in place to eliminate spending deficits. The 2014 audited financial statements and positive fund balances for the fiscal year ending in December 2015, "are dramatic proof the financial decisions made in late 2014 and January 2015 were the 'right decisions'" for the town, said Berry.
Other noted comments comparing the 2015 audit to 2014:
• FY 2015 statements detail $10,531 in over-expenditures for Sidewalk Fund only, while 2014 total over-expenditures of $178,470.
• 2015 funds net increase to fund balances total of $468,663, versus 2014 net decrease of $350,699.
• Enterprise Funds (water and sanitation) operating income of $83,420 for 2015 vs. 2014 operating loss of $78,994.
• Total 2015 operating losses for all funds of $43,923, vs. 2014 operating losses of $505,767.
Auditors also report that the town's Fire & Police Pension Statewide Defined Benefit Plan is slightly over-funded, which is a good position to be in, said White.
Torrez worked on the 2014 audit and said this year's audit went much more smoothly. Using a method in identifying anomalies in cash disbursements in 2015, which the town had in 2014, Torrez said, "There was nothing that showed anything unusual."
Before the presentation was completed, trustee Bill Brunner brought up the North Fork Airport, and asked about airport-related comments in the audit report. White explained that they are required to disclose all of the town's commitments, which in this case is the September 2009 agreement between the town and Delta County, in which the town signed over control of operations to Delta County. While the town is a 75 percent owner of the facility, and the county owns 25 percent, it's listed as an asset on Delta County's books, said Torrez. Since the town relinquished control of the facility, said Torrez, the arrangement doesn't qualify as a joint venture.
The town's audit statement calls for taking a more active roll in the airport in the future. If the town wants to claim it as an asset, said Berry, "We need to take a more proactive role in the governance and oversight of the airport for it to be reflected in our financial statements."
Board-appointed town treasurer Ross King reviewed the audit and credited board, staff and management of town for the good report card, and gave the town an "A" for its work in managing town finances.
Berry thanked Jones for her organizational skills and attention to detail. "This year's audit . . . went very, very smoothly because of Cindy's financial expertise," said Berry, "adding that the town's records are impeccable."
The audit report, financial statements and auditor viewpoints are available at www.townofpaonia.com.