External consultants find large year‑end adjusting entries but no widespread internal control failure; recommend budget process fixes

City‑hired consultants from Citroen Cooperman on March 11 presented a review of the city’s fiscal year‑end adjusting journal entries for FY 2023 and an assessment of budget transfers for the three years ended Sept. 30, 2024.

Why it matters: The review began after commissioners raised questions about large, year‑end accounting entries and frequent budget amendments. The consultants said the large dollar value of those entries did not necessarily indicate accounting errors or fraud but that administrative improvements are needed to improve transparency and department‑level budget accountability.

What consultants found: Steven Emery of Citroen Cooperman said auditors reported 39 adjusting journal entries that collectively affected about $90.3 million. He said roughly $83.1 million (92% of the total) were presentation reclassifications—entries commonly posted at year‑end for financial statement formatting. Other entries included pension and OPEB true‑ups (about $3.6 million) and accounts receivable true‑ups (about $3.4 million). Emery said the entries themselves were not evidence of internal control weakness but should be better explained to management and the commission.

Budget transfer review: The consultant reviewed 31 budget amendments covering about 1,900 line items and identified recommendations including: - Policy and procedures to ensure purchase orders and associated encumbrances roll over consistently so department staff do not receive unexpected “funds unavailable” errors when reusing approved purchase orders. - Quarterly budget‑to‑actual profit and loss reporting to department managers to improve transparency and accountability. - Timely and accurate allocation of costs such as health insurance (consultants noted multi‑year retrospective allocations had created a timing issue and suggested annual true‑ups going forward). - Stronger review of account numbers on budget amendments to prevent clerical errors that later require staff reconciling decisions.

Commission reaction: Commissioners pressed staff about whether some past transfers were purposeful rather than clerical—Vice Mayor Cassell said some items looked intentional and demanded clearer follow‑up. Emery and the consultants said their work was limited to the documents supplied for the review and that many large entries were reclassifications typical of year‑end financial reporting. City finance leadership and the city manager said administrative actions, a system upgrade and the new chief financial officer’s oversight would address many of the recommendations. The commission asked staff to implement the policies and return with a timeline.

Ending: The consultants recommended several administrative changes and software/process improvements; the commission directed staff to adopt the recommendations and report back as part of upcoming budget workshops.