The accounting firm hired to perform an audit of the city of Philomath’s finances for the last fiscal year went through its findings with the City Council Monday night and although overall they yielded positive results, there were a couple of “deficiencies” that were noted.
Brad Bingenheimer of the Salem firm SingerLewak told councilors that accounting errors related to overexpenditures in two city departments had been discovered. Also, the auditor noted the potentially dangerous practice of having a single utility billing employee handling multiple money-related steps.
Chris Workman, city manager, said that in a 2023-24 supplemental budget approved last year, there were unidentified expenses that had not been reported.
“We had some invoices that were outstanding and other things that didn’t get captured in that final supplemental budget,” Workman said. “So we ended up going a little bit over in a few of those individual funds. Our total budget was fine — we stayed underneath the total budget but for some individual funds … we didn’t get the dollar amount right.”
Finance Director Mike Murzynsky later discovered the errors, which surfaced in the police and City Council budgets in the general fund, well after the budget had already been approved.
“The moral of the story is to give yourself a little bit more buffer in those funds,” Workman said. “But really, it’s about having a more holistic view of where each of those individual funds are and if you miss just one item, it can end up being that your estimate for your ending fund balance is off. When it happens in January, March or April, it’s fine but when it happens in June, it gets flagged by the auditor that you were off the last month. So that’s what it was. So again, it’s been corrected already.”
The other issue identified in the audit was flagged as a “significant deficiency” — a lack of segregation of duties involving the utility billing clerk and also that the finance director alone prepares checks, signs checks and reconciles the bank accounts.
“We have one employee that does utility billing so she sends the bills, she collects the checks, she prepares the bank deposit and then she goes and makes the bank deposit,” Workman said. “In larger cities, they’ll separate those out to three different jobs, three different people doing those things and we just don’t have the personnel to do it. So she does the work, Mike reviews it, audits it and makes sure that it’s done correctly. But we don’t really have a way to separate some of those tasks … because we don’t have other employees to do it.”
The auditor did note that Philomath is not dissimilar from a lot of other small communities.
“You just don’t have enough people to split everything up to say we have good segregation of duties,” Bingenheimer said. “It’s the most common one we get for small entities.”
Later summarizing the findings, Bingenheimer added, “We as auditors always worry about what could happen, not what has happened. Nothing bad has happened, it’s just the internal controls could be better.”
The city will likely not face a fine from the state — at least the auditor has not seen that type of penalty in several years of doing work for municipalities.
“Most of the time, the worst thing that’s going to happen is you’ll get a letter from the secretary of state’s office saying ‘don’t do that anymore’ — that’s it,” Bingenheimer said.
Workman said he was grateful for the report, adding that he would be scared if the auditor had not found anything.
“It’s a solid report that tells me we’re in good hands with the auditor and that we should have a lot of faith … that our auditor did a good job for us,” Workman said. “Overall as far as the city goes, financially we’re in great shape there as well. Mike’s doing a great job for us taking care of all this and I think the audit reflects that.”
The City Council approved the report on a 6-0 vote (Diane Crocker absent).
