State auditors outline 2024 scope for Lacey; staff raise ARPA single-audit filing question

Auditors from the Washington State Auditor’s Office told City of Lacey officials during an entrance conference that they will conduct accountability, financial statement and federal grant compliance audits covering Jan. 1 through Dec. 31, 2024, and described the specific areas they plan to review.

Tony, the lead auditor on the engagement, said the office will perform an accountability audit to test compliance with state law, contracts and grant agreements; a financial statement audit to issue an opinion on whether the city’s financial statements are fairly stated; and a federal grant compliance examination focused on Treasury’s State and Local Fiscal Recovery Fund requirements.

The topic matters because the audits provide assurance to bond raters, grantors and the public about the city’s stewardship of public funds. The auditors also explained the process they will use to communicate findings and recommendations, and they described resources and reporting obligations that apply to the city.

Tony told the group the accountability audit will cover Jan. 1–Dec. 31, 2024, and that the team used a risk-based approach to select areas for review. Planned audit areas include utility accounts receivable (recalculation of billing charges), procurement compliance for public works and professional services, general disbursement approvals for accounts payable, review of unemployment claims under self-insurance, compliance with open public meetings requirements, and assessment of indicators of financial distress. He said the federal grant compliance examination will select enough programs to meet federal coverage rules and that the chosen programs represent approximately 86% of the city’s 2024 federal expenditures.

Lacey finance staff asked specific questions about how the city filed its annual ARPA (State and Local Fiscal Recovery Fund) reporting. Troy Wu, Lacey’s finance director, asked whether failing to select the alternative compliance option when filing the annual Treasury report poses a risk ahead of the Sept. 30 deadline. Wu said, “Hey, Tony. I think you're aware that when we filed our annual expansion report with Treasury that we didn't click the alternative compliance engagement box.”

Tony and other auditor staff said they had discussed the issue internally and with colleagues who handle single-audit matters and did not express immediate concern that the city could not update its submission or meet related deadlines. One auditor noted that many jurisdictions remain in flux because Treasury has not issued a full closeout process for ARPA funds and that some cities are using the single-audit process while Treasury responses are pending.

The auditors described communication and governance procedures for the engagement. They recommended weekly status-update meetings between the audit liaison and city staff to track progress and surface questions. They also said they will schedule an exit conference to present draft results to management and invited governing-body members, noting that if a quorum attends the city must meet Open Public Meetings Act requirements.

Auditors explained how they categorize written recommendations: audit findings (the most significant, published in full in the audit report with a city response), management letters (lesser issues that remain public documents), and exit items (housekeeping or best-practice suggestions provided to management). They also reviewed data-handling protocols and asked staff to flag records containing sensitive information so the auditors can apply additional safeguards.

The auditors highlighted no-cost support services available year-round, including a local government support team that provides technical assistance with annual reporting, the Center for Government Innovation (which offers cyber checkups, lean process services and financial intelligence tools), and a special investigations guide on preventing, detecting and responding to employee fraud. The auditors reminded officials that state law requires immediate notification to the Auditor’s Office for known or suspected losses of public funds, and that breaches affecting more than 500 state residents must be reported to the attorney general’s office; they provided web links and a contact name for dispute escalation (local audit manager Lisa Carroll).

No formal motions or decisions were taken at the entrance conference; the meeting functioned as a planning and information session and to set expectations for the engagement, including scheduling of weekly status meetings and the exit conference. The audit team said they will publish a combined report that includes the financial statement opinion, results of internal-control consideration and the federal compliance opinion when the work is finished.

City staff and auditors closed the session after questions and confirmed next steps for regular updates and data sharing.