County receives clean financial audit; auditors cite three federal-grant deficiencies and a $2.6 million receivables adjustment

Clackamas County commissioners were told April 8 that independent auditors Moss Adams issued an unmodified (clean) opinion on the county’s fiscal 2023–24 financial statements, but identified three significant deficiencies and three instances of noncompliance related to federal grants and reported an uncorrected projected accounts-receivable adjustment of about $2.6 million.

The audit presentation, delivered by Ashley Austin of Moss Adams and summarized for the board by Finance Director Elizabeth Comfort, confirmed the county’s financial statements were prepared in accordance with U.S. generally accepted accounting principles and said the county continues to meet technical presentation standards, including those required by the Government Finance Officers Association (GFOA).

Auditors also reported findings from testing of federal awards. "We tested three major programs — the Entitlement Grants Cluster, the HOME Investments Program and the Coronavirus State and Local Fiscal Recovery Funds — and identified three significant deficiencies and three instances of noncompliance," Austin told commissioners. The audit report lists: a missing federal transparency form for at least one subrecipient award that should have been reported; late quarterly cash-on-hand reporting for the entitlement grants cluster; and procurement and allowable-cost problems in the SLFRF (COVID recovery) fund.

On procurement, auditors said county files lacked documented evidence that contract vendors had been checked against the federal System for Award Management (SAM.gov) for suspension or debarment and that required federal contract clauses were not included in two sampled contracts. "We recommend retaining the SAM.gov search evidence and required federal contract language in procurement files going forward," Austin said. On allowable costs, auditors flagged time-sheet coding for some contract labor supplied through Robert Half: auditors reviewed 35 items and found nine contractor time entries; one of those entries contained time charged to the COVID recovery grant for activity coded to Ballot Measure 108, which auditors said is not an allowable charge to that grant.

Austin said the COVID-related procurement and allowable-cost items were relatively small in dollar amount and were reported as significant deficiencies rather than material weaknesses because the matters fell below reporting thresholds used in the federal single audit guidance.

The auditors also described an uncorrected audit adjustment related to accounts receivable. During testing of an approximately $20.2 million AR population, auditors sampled seven items and identified a $40,000 invalid receivable arising from an invoice dated Dec. 31, 2021, that had never been billed. Under audit methodology the error was projected to the population, producing a $2.6 million adjustment. "Management and the auditors believe this is immaterial to the financial statements as a whole," Austin said; Comfort told the board the county has implemented an accounts receivable module in its PeopleSoft system and is reviewing older receivable items created prior to the 2023 software implementation.

Commissioners asked about the limits of a financial-statement audit and whether forecasts can be audited. Austin said auditors do not audit prospective forecasts as part of the financial-statement audit, though a prospective forecast can be engaged as a separate service. Commissioner Savas asked whether the county could commission a performance audit or an audit of forecasts; Austin said Moss Adams could provide such services but they are separate engagements.

Comfort said management’s corrective action plan is in the final pages of the audit report and will be circulated to the board. The auditors said they found no reportable matters of fraud, waste or abuse.

Ending: The auditors met with the county’s audit committee earlier in spring; the financial statement audit, federal single-audit findings and management’s corrective actions will remain on the county’s agenda for follow-up. Comfort said staff has already implemented an AR module and will work through older invoices identified in the auditors’ testing."