State auditors report clean financial audit; note recovered cyber loss and recommend strengthened payment controls

Representatives from the Washington State Auditor’s Office presented results of the City of Des Moines' fiscal-year-2023 audits at the March 27 council meeting. The auditors issued an unmodified (clean) opinion on the city's financial statements under the office’s regulatory basis and reported no material weaknesses in financial-statement internal controls.

Marcus Nelson, an audit manager on the South King County team, and Paul Griswold summarized audit work across accounts payable, procurement, payroll, asset tracking, open public meetings compliance, and federal-award attestation for ARPA (American Rescue Plan Act) funds. The auditors reported compliance "in all material respects" in examined areas and noted that the city’s financial statements are presented on a cash basis; that regulatory-basis opinion is accompanied by an adverse opinion on U.S. generally accepted accounting principles (a common outcome when entities report on a cash basis rather than GAAP).

The auditors also issued a management letter related to an external cyber incident. Marcus Nelson told the council that city staff recovered all funds affected by the attack and that the state auditors provided recommendations including written verification procedures for banking information, strengthened internal controls over payment verification and staff training. The auditors noted that the city had implemented some of the recommendations already in response to the incident.

The auditors also reported an attestation (in lieu of a federal single audit) on ARPA fund compliance; the auditors concluded the city complied in all material respects with the specified requirements for ARPA expenditures that were examined. In 2023 the city spent roughly $1.3 million in ARPA funds, representing about 88% of the city's federal expenditures that fiscal year, the auditors said.

City staff and auditors discussed audit timing; auditors said the state office is working down a backlog and aims to issue prior-year audits by December 31 of the following year. The auditors praised the city’s finance staff for cooperation during on-site work and singled out Finance staff for timely assistance in the process.

No formal council action on the audit report was required at the meeting; the auditors invited questions and closed their presentation.