Clayton working to fine-tune accounting practices
CLAYTON, CA (Feb. 24, 2022) — Although the City Council received a “clean” opinion on the audit of the last fiscal year, a Cropper Rowe auditor noted some “material weaknesses” in the city’s accounting process.
“We do not audit the internal controls of the city, but it’s impossible for us to audit the city’s financial statements without noticing and reviewing parts of the internal controls,” auditor Bryce Rojas told the council at the Feb. 15 virtual meeting.
Key problems Rojas highlighted were a lack of continuity due to staff turnover, issues with closings procedures and the need for an IT review.
“There was a loss of knowledge in the accounting department, and that led to a little extra time closing the books,” Rojas said. “The books were not being locked in every period that was being closed, and that led to some discrepancies.”
Coming up with solutions
City staff is already working on an improvement plan, including addressing accounting software issues, increasing cybersecurity, and hiring an outside CPA to develop a long-term succession plan and bring records up to date. Staff will return to the council next month with details such as a timeline and financial impact.
Finance Director Katherine Korsak joined the Clayton staff in October, after the audit was conducted. She emphasized that despite the internal discrepancies, the audit was deemed “unqualified” – “verifying that our financial statements are free from material misstatements and that the city’s financial personnel have followed proper accounting principles.”
“There is no indication in the comments that I’ve heard tonight that we’re shirking responsibility or eschewing those challenges,” said Mayor Peter Cloven. “We’re taking those head on, and I’m looking forward to seeing what comes next in your plan.”
However, Councilmember Jeff Wan expressed deep concerns about the internal procedures.
“It’s surprising to me that we would have an unqualified opinion with this many material weaknesses,” he said. “I think it’s a judgement call and could just have easily gone the other way, and that would be bad for the city. I would suggest that we take it seriously.”
To which City Manager Reina Schwartz replied: “You are absolutely right, and we are absolutely taking it seriously.”
By the numbers
In reviewing the audit, Rojas reported fund balance changes in several areas:
- Road Maintenance and Rehabilitation Account (RMRA) gas tax increase of $192,000.
- Highway Users Tax Account (HUTA) gas tax increase of $114,000.
- Grove Park increase of $58,000.
- Landscape Maintenance District increase of $22,000.
- Endeavor Hall decrease of $74,000.
- General Fund decrease of $55,000.
- Measure J decrease of $2,000.
Korsak said many of the losses can be attributed to COVID shutdowns, pension liabilities and depreciation expenses.
Looking toward November ballot
Meanwhile, the council voted 3-2 to use $30,000 from the Rainy Day Fund for Strategy Research Institute to gather voter data about putting a parcel tax on the November ballot. Wan and Councilmember Jim Diaz dissented.
Cloven said he had been “ambivalent” about the need for research at the Feb. 1 meeting but changed his mind after speaking with many Clayton residents and officials from other jurisdictions. While agreeing with Wan that the growing gap between revenue and expenses is self-explanatory, the mayor now believes it is essential to understand voter preference.
“I don’t know all 8,600 voters or what their will is,” Cloven said. “And I think the polling company is the best way to go about doing this.”
Wan said that as elected officials, the council should decide on a proposed tax amount that would solve the budget crisis – and voters will either approve it or face losing some city services.
Councilmember CW Wolfe countered: “Sure, we’re elected to do this. But boy, we don’t want to get this wrong.”
Bev Britton
Bev Britton graduated with a degree in journalism from the University of North Dakota and moved to the Bay Area with her soon-to-be husband Jim in 1986. She was features editor at the Contra Costa Times in Walnut Creek before becoming managing editor of the Contra Costa Sun in Lafayette in 1995. She retired from newsrooms in 2001, but an ad for the Clayton Pioneer drew her back in. The family moved to Lake Wildwood in the Gold Country a few years ago - but working at the Pioneer keeps her in touch with her old neighborhoods in Concord and Clayton.