Audit cites county for late reports

An audit of Flathead County's financial records for the past two years showed that one of the biggest deficiencies was filing late reports.

The Anderson Zurmuehlen & Co. accounting firm of Bozeman delivered its findings to the county commissioners recently, noting that the county didn't meet the state deadline for filing financial statements for the year ended June 30, 2007.

In fact, the reason the firm audited fiscal 2007 and 2008 simultaneously was because the 2007 audit was delayed by the late filing.

County Administrative Officer Mike Pence said employee turnover in the finance department was the culprit. The finance director stepped down in the middle of the 2007 audit, putting "considerable adversity" on Flathead County in meeting the reporting deadlines.

In its response to auditors, the county noted it has taken a number of preventive measures to ensure late filing doesn't happen again. The county has contracted a certified public accountant from Polson to serve as its internal auditor and has acquired new financial software to help expedite the year-end closing and other audit requirements, according to the audit report.

For the fiscal year ending June 30, 2008, auditors found budget overdrafts in the general and transportation funds. Expenditures exceeded the general fund budget by $3.2 million and the transportation fund by $1.2 million.

"Controls were not in place to prevent overdrafts or ensure budget amendments were property adopted," the audit report stated.

The county explained that expenditures in the general fund went over budget because of the reclassification of an operating lease to a capital lease to fund upgrades to the county's heating, ventilation and air-conditioning systems.

A capital lease entails different accounting treatment than an operating lease and consequentially it wasn't budgeted.

"Legally the county could have prepared a budget amendment, but chose not to because significant time has passed … and the expenditure was covered by an increase in the inception of capital-lease proceeds revenue in the general fund that more than offset the expenditure overage," the report noted.

The transportation fund overrun was due to an accounting adjustment involving the purchase of transit buses. The buses were budgeted only in the amount of the local match paid by the county, but auditors said federal grant money should have been included in capital outlay as well.