2020 Audit Nearly Finished

As the end of Fiscal Year 2022 draws ever closer for the Town of Saratoga, the governing body has finally received the results regarding the audit of Fiscal Year 2020.

On March 15, the Saratoga Town Council was provided a 30 minute presentation by Tim Fixter of Fagnant, Lewis & Brinda. The Lander-based accounting firm was engaged by the Town of Saratoga in May 2021 to conduct an audit of Fiscal Years 2020 and 2021. It is the third firm engaged by the town council in as many years.

Joining the council meeting via videoconference, Fixter informed the council the Town of Saratoga would be receiving a Qualified Opinion on their audit. There are four opinions which can be given for an audit and they include; Unqualified Opinion, Qualified Opinion, Disclaimer of Opinion and Adverse Opinion.

An unqualified opinion indicates a clean audit and the firm is satisfied with the financial reporting from the entity. A qualified opinion, however, is given when an auditor isn’t confident about any specific process or transaction which prevents them from issuing an unqualified opinion. A disclaimer of opinion means the auditor is distancing themselves from any opinion on the audit and an adverse opinion indicates gross misstatements in the financial reporting of the entity.

The governing body of Saratoga did not appear to be surprised about the Qualified Opinion, which Fixter said was due to “various reasons”.

The primary reason, it seemed, was due to the Town of Saratoga’s lack of internal controls. As his firm audited Fiscal Year 2020, Fixter said it was difficult to find documentation supporting fund transfers and expenditures. These were, according to Fixter, also issues which plagued previous firms such as Anton Collins Mitchell (ACM) and Carver, Florek & James.

“What these firms struggled with was documentation. They could not figure out where funds were being transferred, how it was going to those respective areas,” said Fixter. “So, nobody could really draw a line in the sand and say ‘This is the fund balance for water/sewer, this is the fund balance for the general fund’. That documentation just didn’t exist.”

Fixter also touched on the time in which the Town of Saratoga had engaged Cheyenne-based CPA James Childress as a third-party accountant. Following his analysis of the Town’s finances, Childress introduced to the Town terms such as “implicit approval” and “retroactive overhead allocations” to explain why money was transferred from enterprise, or restricted, funds to the general fund. Adjustments made by Childress to reflect the retroactive overhead allocation were heavily contested by both Councilmember Jon Nelson and members of the Saratoga-Carbon County Impact Joint Powers Board.

“What I see quite often is you have council members that are on a short-term, they might be there three (or) four years,” said Fixter. “They want to build something, they want to show something that they did while they were on council and when you see water/sewer revenues come in and you see those cash balances continue to increase, it gets very tempting for people on certain town councils to transfer money out and use them for different projects.”

By the end of calendar year 2020, the Saratoga Town Council’s engagement with Childress had, effectively, ended. In 2021, the council engaged with Stewart Webster. In July 2021, following Webster’s own analysis, the council reversed the Childress adjustments through four adjusting entries.

“During that time, the Town’s system of internal controls did not really improve, from what I have seen. There’s still lacking documentation. I think Georgia (Gayle) has done a good job of jumping in and taking the lead on some things to correct that, but it’s something that needs to be a priority of the council,” Fixter said. “We’ve got to get some documentation and the Town has got to establish their process of how things are done.”

Later in his presentation, Fixter did note a number of the findings in the audit of Fiscal Year 2020 were currently being resolved. One issue which still needed to be resolved, however, was an internal system of controls. According to Fixter, as they interviewed Town employees during the audit, they received different answers regarding different processes.

“It just came to light very, very quickly that the Town did not have a documented process of what was the Town of Saratoga’s way of doing things,” said Fixter. “So, everyone was just doing what they thought was best.”

Additionally, the Town of Saratoga was unable to pass test samples of payroll and cash disbursements. With payroll, 40 out of 40 test samples failed because they didn’t have some level of documentation while, with cash disbursements, 18 out of 40 test samples failed for the same reason. Fixter noted, with payroll, it appeared while there may have been a “fudged” timecard here and there it did not appear anyone was taking advantage of the system.

The other reason for the Qualified Opinion was due to the transfers between the water and sewer funds and the general fund. According to Fixter, they were unable to find sufficient documentation to track the transfer between the funds and expenditures from the funds.

“In total, I think the Town’s funds were okay but, as far as lining those up in the individual funds, it was almost impossible to do and that’s why you have the Qualified Opinion,” Fixter said.

The auditor ended his presentation to the Saratoga Town Council by encouraging them to continue their engagement with Webster. Fixter said he believed the Town of Saratoga had not received adequate coaching in the past, as far as audits went, and that both he and Webster would try to help.

“He can jump in and be more active than I can be from an audit standpoint,” said Fixter. “He can jump in and be very, very hands on and I would strongly urge you guys to continue to use him as far as audit preparation and bank reconciliation and getting some of this ironed out.”

He also informed the council his firm wanted to begin the audit of Fiscal Year 2021 “right away” to get to Fiscal Year 2022 and get the Town of Saratoga back on the right schedule.

The next meeting of the Saratoga Town Council will be at 6 p.m. on April 5 at Saratoga Town Hall.