LYNNWOOD — Officials here were hardly surprised to learn that the State Auditor’s Office found fault with the city’s financial reporting for the year 2010.
That was the second year in Lynnwood’s biennial budget cycle marked by serious financial trouble.
“Staff responsible for financial statement preparation and oversight lack the level of technical knowledge needed to ensure the city’s financial reporting is accurate and complete,” the report said.
Lynnwood made progress in managing its finances but more improvement is needed in order for the city to get a clean audit, the report said. The auditors called for city officials to provide staff with the resources necessary to provide accurate financial statements.
Some of the issues pointed out in recent audits go back more than several years, according to Lynnwood Mayor Don Gough. He said officials are working to take steps to remedy the problems. For example, employees now use a software program that makes it easier to keep track of finances.
Gough said he hopes to hire additional staff to work in the department that deals with city finances.
The report listed several errors in Lynnwood’s financial reporting in 2010. The city overstated the value of its land by at least $4.3 million by claiming assets it no longer owned and attributed almost $1.5 million in spending to the wrong fiscal year.
In addition, the city didn’t submit 2010 financial statements for audit before the federal deadline and didn’t complete financial statements within 150 days after the end of the year, as required by state law.
State auditors met with City Council members and staff on July 9 to discuss a draft of the report. They noted that city officials haven’t addressed all of the issues found in the audit for 2009. For example, there was no sufficient documentation to explain about $103,000 in administrative costs charged in 2009 by the City Council and the mayor’s office to utility funds. They also said officials lacked a detailed review process that would have allowed them to catch mistakes in the financial statements.
It was in 2010 that former finance director John Moir walked out of a City Council meeting after being peppered with questions about the way city funds have been allocated to plug budget gaps and whether information was being withheld. They demanded he produce financial statements they’d asked for during a meeting two nights earlier.
He said at the time: “I don’t need this, I do not need this, folks, I’m leaving.” He resigned the next week.
Turnover in key financial positions in the past two years played a significant role in Lynnwood’s financial woes. The city lost several employees in the accounting department and has gone through several financial directors since 2005 including Moir. Patrick Dugan served as interim finance director before Lorenzo Hines took over in March 2011.
The auditor’s report is helpful to staff and Council members, Council President Loren Simmonds said.
“I think we have made progress, but I think it’s a moving target,” he said.
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