State auditors outline 2024 financial statement and federal grant compliance audit for Spokane

The Washington State Auditor's Office told Spokane's Finance and Administration Committee on Friday that it will perform a financial statement audit for the city's 2024 fiscal year and a federal grant compliance audit covering major federal programs.

The auditors said their financial statement work will be conducted "in accordance with government auditing standards" and that the office will issue a combined financial statement audit report and federal compliance report at the end of the engagement. "At the end of the engagement, we will issue a financial statement audit report in accordance with US GAAP," an auditor said during the presentation.

The auditors identified two specific federal programs selected for compliance testing: the city's highway planning and construction grant program and the Coronavirus State and Local Fiscal Recovery Funds program. The office said those two programs together represent about 75% of the city's federal expenditures for fiscal 2024 and therefore were chosen to meet federal coverage requirements.

Auditors said they will also focus on a recent accounting change required by the Governmental Accounting Standards Board. "The city was required to implement GASB statement number 101, related to compensated absences," the presentation said, and auditors will review the city's accounting and reporting for that liability.

The State Auditor's Office said it will review work performed by an outside CPA firm on the city's pension funds. Moss Adams (noted in the presentation as now operating as Baker Tilly) performed financial statement audits for the city's SIRS, police and firefighter pension funds; the state auditors said they will perform a workpaper review for the SIRS pension fund because it is material to the city's financial statements and limited review procedures for the smaller police and firefighter funds.

The office described its reporting levels: findings (most significant: material weaknesses or material noncompliance), management letters (intermediate items for the council), and exit items (housekeeping matters for management). The auditors estimated the audit costs for the engagement at about $285,500 and said the State Auditor's Office will continue weekly status meetings with city leadership and hold an exit conference with results when fieldwork concludes.

Auditors also reminded the committee about loss reporting obligations under state law and cybersecurity incident reporting thresholds. The presentation noted the State Auditor's Office 's most recent peer review received a pass rating.

Committee members asked for timing and detail about the auditors' review of the CPA firm workpapers and the scope of federal compliance testing; auditors said they would report back during the exit conference and in the audit report if material misstatements or fraud were identified.

The auditors concluded by emphasizing continuous communication and safeguarding confidential information the city may provide during testing.