State auditors give Mukilteo a clean opinion but flag internal-control lapse and late reporting

The Washington State Auditor's Office told the Mukilteo City Council on March 30 that it will issue a clean, unmodified opinion on the city's fiscal-year 2023 financial statements, while also reporting one significant deficiency in internal control and several immaterial misstatements.

At an exit conference, SAO audit supervisor Kirk Gadbois said auditors found no material weaknesses and no material noncompliance that affected the financial statements. "We are able to give a clean, unmodified opinion on the financial statements for 2023," he said. He added that the office identified one significant deficiency in internal control and a set of smaller misstatements that the city corrected or agreed were immaterial.

The finding centered on timeliness and reconciliation issues. Gadbois told council members the city did not complete its FY2023 financial statements within the 150-day deadline set by state law; the city's statements were finished roughly seven months after that deadline, which delayed the audit process. Auditors also identified an unsupported balance under $40,000 on the statements and other omitted or misrecorded amounts that contributed to the deficiency.

Council members pressed auditors about prior findings and whether those issues changed the FY2023 statements. Gadbois said prior-year findings (for 2021 and 2022) were addressed separately and did not materially affect the 2023 financial statements. He also noted that a transfer of transportation impact fees was reclassified as a loan and subsequently repaid; SAO recorded that matter as a management-letter issue and said it would follow up in the next audit.

Finance Director Anna Maria Nunez told the council the city has adopted corrective actions including cross-training staff, parceling schedules across more personnel, adding deliverable deadlines, and hiring temporary accountants to reconcile fixed-asset records. Nunez said the 2024 statements had been uploaded to SAO the prior week and that staff are "on track" to produce timely reports going forward.

Courtney Amundsen, SAO audit manager, emphasized the office's role in independent review and encouraged the council to use the published report and management letter as a roadmap for corrective action. The SAO also reported that its federal compliance examination of COVID-related funds found no problems with how those grants were spent.

The SAO report and the finding will appear in the published audit report; the internal management letter referenced in the meeting is for city management and is not reproduced in the public report. Gadbois said SAO will follow up on the finding in its next scheduled audit.

The council asked staff to present a clearer timeline with measurable milestones and an organizational chart for the finance department at a future meeting so members can review staffing and progress on correcting the issues cited by auditors.

The exit conference packet and the SAO audit report will be published on the SAO website when finalized.