Kootenai County accepts FY2024 audited financial statements; auditors note lease and software accounting deficiencies

Kootenai County commissioners voted unanimously April 8 to accept the county's fiscal year 2024 audited financial statements and the external audit after auditors described the statements as presenting fairly in all material respects and disclosed a significant deficiency in internal controls related to lease and certain software accounting.

The audit partner, Jodi Doherty of Eide Bailly, told commissioners the independent auditor's report states the county's financial statements "present fairly in all material respects" as of Sept. 30, 2024, while noting that two component units ' the North Idaho Fair and Rodeo and the Kootenai County Emergency Medical Services System ' were audited separately. Doherty also said auditors identified one significant deficiency involving incorrect lease calculations and an unrecorded subscription-based IT arrangement.

The finding did not rise to the level of a material weakness, Doherty said, and auditors reported no findings for federal program compliance. Auditors tested federal programs with a focus on ARPA funding as the major program and reported no compliance findings or internal-control-over-compliance findings related to federal awards.

Brandy Falcon, representing the county auditor's office, summarized key figures in the annual comprehensive financial report (ACFR). Falcon confirmed the Board's prior decision to increase property taxes by 3% for FY2024, noted the county had no outstanding bonded debt at fiscal year-end, and said the board had assigned $30,400,000 of fund balance for future projects. Falcon also said the county expects to finish spending ARPA funds in FY2025.

Falcon and deputy finance staff highlighted several line items of note: the county reported $88.7 million in cash and cash equivalents (with portions restricted for specific funds such as airport and parks), a $61 million receivable representing the FY2025 levy booked at year-end, and $15.668 million held by the solid waste fund for closure and post-closure costs at Fighting Creek landfill. The county's net position increased about $21.35 million year over year, driven in part by approximately $11 million in interest earnings and investment gains.

County staff explained the audit's internal-control finding stemmed from recent accounting standard changes requiring capitalization and amortization of certain leases and subscription-based information technology arrangements (SBITAs). Falcon said the county has nearly 200 leases recorded and that growing complexity in airport lease terms contributed to input errors; management plans weekly review of debt-book inputs, additional lease-accounting training for staff, and quarterly reviews of airport lease records by the airport director.

Falcon said the county and auditors discussed several uncorrected misstatements tied to the lease and SBITA issues; management judged them not material to the financial statements and did not require restatement. Auditors included those uncorrected items in the governance communication to those charged with governance.

During board discussion, Commissioners sought more information about the North Idaho Fair and Rodeo's separate audit and the airport lease disclosures; Falcon said the fair completed an alignment of its fiscal year with the county and had its own auditor. After brief questions, Commissioners Eberline, Duncan and Chair Metari voted aye to accept the FY2024 audited financial statements.

The meeting also included a separate, approved motion to enter executive session pursuant to the statutory language cited during the meeting and a recorded exit from executive session directing staff to "proceed as discussed." The board announced the motion to accept the audited financial statements carried and adjourned following public comment and the executive session exit.

Less critical details: the ACFR includes a schedule of expenditures of federal awards (SEFA) showing federal program spend by department; note disclosures describe a roughly $2 million increase in landfill depletion expense and a rise in net investment in capital assets from about $74.2 million to $91.8 million year over year. Staff said a full breakout of assigned and unassigned fund balances is in note 16 of the ACFR, and the board plans an assigned fund-balance exercise in the coming weeks.