November 24, 2021 |
The accounting firm hired to prepare the Town of Saratoga’s 2020 audit may be nearing the completion of its work. In October, Tim Fixter with the Lander-based firm Fangant, Lewis and Brinda informed town officials that the audit is taking longer than anticipated.
Reconciling the books was made more complicated because of poor-record keeping in previous years. In an October 13th email, Fixter said his teams had run into “numerous holes” that had been ignored by previous auditors. The additional work required meant a higher fee, he said. As previously reported, Mayor Creed James asked council to approve a change order at the October 19th meeting.
Pictured above: File photo of Saratoga Town Hall. Photo by Emma Diercks/Bigfoot 99.
Mayor James said the additional costs would run several thousand dollars more than the original estimate of $27,500.
The problem with the town’s books, Fixter said in the email dated October 13, was that past policies and procedures resulted in a lack of documentation. The poor-record keeping was ignored and papered-over for years.
Last week, Councilman Ron Hutchins asked the mayor for a status update on the work.
Fixter warned the town that when the audit is finally completed and delivered, it will likely come with an “adverse opinion.” An adverse opinion is something previous administrations had fought hard to avoid. The delay in fixing the books and the drama that spilled out in public meetings only delayed the inevitable. Mayor James told council last month that any issues the auditor finds should not come as a surprise.
What the fallout will be from an adverse audit is unclear.
First, a little background: CPA firms issue four levels of opinion on audits. An “unqualified opinion” is a clean audit. Financial statements are presumed to be free from material misstatements.
A “qualified” audit is less common, and is given when financial records have not followed standards known as GAAP, or Generally Accepted Accounting Principals. Although the wording of a qualified opinion is very similar to an unqualified opinion, the auditor provides an additional paragraph including deviations from GAAP in the financial statements and points out why the auditor report is not unqualified.
The third category is the most unfavorable, and is called the “adverse” opinion. This is considered rare in accounting circles. An adverse opinion indicates financial records are not in accordance with GAAP standards and contain grossly material and pervasive misstatements.
Also in rare cases, an auditor may be unable to complete an audit due to the absence of financial records or insufficient cooperation from management. In this fourth and final instance, the auditor issues a disclaimer of opinion, which is not an opinion itself. It’s not a completed audit, either.
Saratoga will receive a completed audit. In Fixter’s email to the town, he said that the inability to produce a clean audit is the result of poor record-keeping, not something “malicious.”
At the October meeting, Councilman Jon Nelson, who first raised questions about the bookkeeping practices at Town Hall two years ago, said the findings are expected and welcomed the chance to fix what went wrong.
Mayor James informed council that some of the issues and policies that affected the 2020 audit will be present in the 2021 audit, as well. As more findings are uncovered, the mayor said policy and procedure changes can be put into place at Town Hall so that the 2022 audit is clean with no opinion.
Related: Saratoga hires Lander auditing firm