The auditors cometh

 

At a meeting of the Goochland Finance and Audit Committee held on the morning of December 3, Mike Garber and Andrea Nichols, representatives of the county’s outside auditors PBMares (https://www.pbmares.com/) reviewed the annual certified financial report (ACFR) for FY25, which ended on June 30, and discussed other financial issues. Garber presented the ACFR to the board of supervisors during its afternoon meeting.

The Committee is comprised of three supervisors, Jonathan Christy, District 1; Tom Winfree, District 3; Charlie Vaughters, District 4; County Administrator Dr. Jeremy Raley; and the director of finance. Dave Wilson is serving as interim director of finance while the county recruits for that position.

The Committee last met on August 5 for the kickoff of the annual audit process when the work schedule for the audit was discussed.  The bulk of onsite testing that included various layers of review and quality control for accounting and data collection was scheduled to begin in September.

On December 2, Garber reported that PBMares will issue an unmodified—clean—report for Goochland’s FY 25 financial statements, well in advance of the state submission deadline of December 15.

However, Garber said that some material weaknesses were identified in the audit process earlier in the year at the county level that did not include the school division or economic development authority. These errors were adjusted so that the final numbers are correct. No evidence of fraud or illegal acts was detected. The issue was one of policy execution focus, or lack thereof, at the “staff base.”  After several years of glowing audit reports, this was disconcerting.

“Most of this had to do with just being prepared for the audit when we (PBMares) got here. Once we dug into some numbers and looked at different things, there were adjustments, which is unusual for Goochland," said Garber. For the past several years, annual ACFR reports from the auditors commended the finance department and all county participants in the audit process for attention to detail and thoroughness of preparation.

When these discrepancies were discovered, Garber said that he “pivoted” to Raley. “The real comfort is that this is being addressed to make sure that we go right back to everything we were doing before which is clean, no deficiencies, nothing noted.”

There were “significant” adjustments in the capital projects fund. “It’s part of our job not to just gloss over this but to make sure that we have pointed out to this group what those adjustments have been,” Garber told the committee.

“The governance is still sound. We now need to make sure that what we are doing is the blocking and tackling (GOMM told you there would be sports analogies) to go right back to the standard,” said Garber who contended this is achievable is short order.

Multiple entry errors, exacerbated by lack of a third quarter review of reconciliations, were further complicated by “compression”—too few people trying to do to perform too many complex tasks in too a short time—caused the issue.

Wilson contended that a third quarter review and reconciliation can identify entry errors. “Most of this is communication, just sitting down and looking at things that just don’t make sense.”

He said “We’re going to track what we do and how we do it to make sure that we reconcile these accounts and look at these accounts constructively to see if something is really out of whack that we should look at before handing it to the auditors. The objective of the finance department is to hand a clean audit to PBMares.”

Garber reassured Winfree that the bottom-line figures used by the supervisors to make financial decisions last year were sound. Failure to examine some of the entries to see if they made sense contributed to the misstatements. The errors included not recording activity in some accounts and doing it twice in others.

The school division and Treasurer’s office were doing what they needed to do with reconciliations throughout the year, said Garber.

County finance staff is embarrassed about the situation and very focused on making sure that it doesn’t happen again, Raley said. He contended that going forward, the key to avoid a repeat of the situation is to ensure that quarterly reconciliations are completed to make sure that the finance department prepares for the audit throughout the year. As financial reporting standards and county finances grow ever more complex, it is vital to build staff ability to understand and comply with them.

Raley, Garber, and Audit Committee Chair Vaughters, who was also involved in identifying and rectifying the misstatements, contended that the issue was a “one off” and pledged that measures have been taken to ensure that it never happens again.

Happily, this situation was identified and fixed in a timely manner.