Internal report exposes city deficiencies; improvements planned for finance department

At the July 23, 2018 Snoqualmie City Council meeting, council members approved a contract with Clark Nuber CPA and Consulting Firm to a conduct bank reconciliation process to solve some un-reconciled differences.

According to recently-hired Snoqualmie Finance Director Robert Hamud, the city has carried a discrepancy in its bank reconciliation of approximately $2,500 over several months. Clark Nuber will be assisting his department with the reconciling as part of the contract. Timely bank reconciliation considered important in detecting accounting errors and fraud.

In early January 2018, the city council approved a separate contract authorizing Clark Nuber to conduct a two-phase independent and objective examination of its financial and contract administration operations for adherence to internal controls, city and state policies and procedures and standard best practices.

Phase one, conducted over the winter, provided an operational analysis, controls evaluation and risk and process assessments. Clark Nuber examined payroll and timekeeping, cash disbursements, contract management and also conducted interviews, examined various processes and conducted documents reviews. It was during this process the bank reconciliation issues were discovered.

In its draft report, Clark Nuber noted multiple deficiencies in city systems that could put it at risk and recommended a set of improvements to strengthen internal controls and put effective policies in place that the city is currently lacking.

In a report to the F&A council committee, Finance Director Hamud explained the extensive analysis found the city’s current systems and processes in place did not keep up with organizational growth and its needs.

It was recommended the city: upgrade IT systems and internal control policies and practices to keep pace with demands and service needs; additional training and certification of staff members; and additional staff to handle the growth of the Finance/HR/Payroll departments.

So what does the city plan to do about this alarming report? Firstly, Hamud reported the city will procure a new Enterprise Resource System, along with a project manager that was approved in the 2018 budget.

Hamud’s Finance Director position is also noted as part of the improvements, where he – in the new director role – now reports  to the City Administrator, where as his predecessor reported to the Administrative Services Director.  Hamud said he is currently putting new controls and procedures in place for best practices and evaluating the department’s organizational structure. Another piece of the improvement puzzle is new financial and contracting policies that will be presented to council members in the upcoming year.

Residents who obtained the internal report via a public records request (PRR) were alarmed at the report’s content that notes many deficiencies, including strained relationships between departments; lack of clarity over roles and responsibilities; procedures implemented when the city was much smaller giving an employee too much control over a payroll function; pay period dates that create additional work, require estimation of hours and create risk; a bank reconciliation process that is overly cumbersome and an unreconciled balance that has been outstanding since October 2017; and contract management that is not in compliance with city policies and procedures.

In response to the unflattering report Mayor Larson said, “The Clark Nuber report confirmed that we have not provided increases in people and resources for the Finance Department relative to the rapid growth we have been experiencing. Our attention was consumed by right-sizing the outward facing services – police, fire, parks – that more directly impact residents.”

Larson said reorganizing the department under a new Finance ‘Director’ position has helped considerably, adding that they will recommend two additional finance department full time positions in the 2019-20 budget. In the interim, he said they added an expanded intern position.

The mayor acknowledged the many deficiencies the report exposed, some of them he noted were due to employees being asked to take on many different roles as the small city grew, which can create disgruntled staff members. Larson said they hope to improve “the working environment, conditions, systems and controls so all employees in that department have renewed confidence and pride in their work.”

He added, “Organizations can only become great when deficiencies and mistakes – made in good faith – are treated as opportunities to learn and improve.”

Along with the many noted deficiencies, the report also noted that the “City has been audited by State Auditor each year, and received unmodified opinions each year. The Agency undertook this process in the spirit of improvement with a desire to strive towards best practices. Also, the City has grown significantly over the years, and management wants to ensure that the administrative processes are “right sized” for where they are now.”

The proposed Phase II of Clark Nuber’s work would look at record keeping, financial reporting, IT processes, grant reporting and inter-local agreements. Hamud said they are already evaluating many of these processes and once those evaluations are completed, they will decide whether or not to move forward with Clark Nuber for phase II.

Hamud said he has no timeline for that decision, as he just began as Finance Director in April and needs time to complete his evaluations.

 

 

 

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Comments

  1. I am alarmed that information such as this has to be obtained by PRR initiated by citizens rather than transparency at the City. It is also alarming that Mayor Larson tries to justify the lapses. Time for him to go.

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