Hammond audit: city financial statements receive clean opinion but auditors flag two significant deficiencies

Michelle, the audit presenter, told the Hammond City Council on April 22 that the city's audited financial statements received an unmodified (clean) opinion but the auditors identified two significant deficiencies.

The first deficiency, Michelle said, stemmed from turnover among key finance personnel and meant internal controls over financial reporting "were not operating as designed." The second involved the city's new building-permit software: the third-party setup did not properly limit access for unauthorized users, she said.

Those problems did not change the auditors' opinion on the financial statements, Michelle said, and the audit was submitted to the Legislative Auditor and the Federal Audit Clearinghouse.

Why this matters: weaknesses in controls and in permit-system access can increase the risk of errors in the city's accounting or of inappropriate access to permitting records. The council and city staff discussed near-term steps to reduce that risk and improve reporting.

Details from the audit presentation

Michelle said the city's total net position increased by about $551,000 in the fiscal year, while the general fund decreased by about $505,000. She reported a roughly 2% drop in sales tax collections (about $430,000) and large capital grants and contributions that drove a $3.4 million increase in capital grants.

The auditors identified an increase in long-term liabilities tied to pension reporting, which the presenter said comes from a separately audited pension report that the Legislative Auditor provides to the city. The sales-tax fund ended with roughly $4.0 million, while the city's emergency reserve held about $3.3 million; together that was slightly above the Government Finance Officers Association's recommended two months of operating expenditures, Michelle said.

Council and public questions

A resident identifying their address as "610 Only Avenue, Hammond" asked how council members could ask informed questions without having the audit report in hand before the meeting. Council members and staff said the council would receive the report by email and that Carolyn had distributed a year-to-date (quarterly) financial report the prior Wednesday.

The resident and several council members also pressed the auditors on whether the turnover-related deficiency was a recurring finding. Michelle and council staff said the city had seen the same deficiency in earlier years and that staff are scheduling required trainings for finance personnel; Carolyn and Casey were noted as attending trainings this week and other staff planned to complete the training before the next audit cycle.

Additional fees and procedures

During public comment, Michelle confirmed auditors performed some additional nonattest services related to the staff turnover and the audit process and said the extra cost was about $7,500.

Follow-up and next steps

Council members asked for more frequent and more detailed year-to-date financial reporting tied to fund balances and line items; staff said they already had provided quarterly reports and could expand those materials to include clearer fund-balance detail. City staff also said they would pursue staff training and internal-process updates aimed at resolving the deficiencies before the next audit.

An audit document and the management's discussion and analysis (MD&A) pages were made available to the council; Michelle asked members to review pages 5'15 for variances and explanations.

Sources and attribution

Statements in this article come from the audit presentation by Michelle; public comment from a resident identifying their street address; and on-the-record comments by city staff referenced during the April 22 council meeting.