Preparing for your municipality's audit: what an auditor wants you to know
December 6, 2021
By: Krista M. Gardner, CPA
Member of the Firm
It’s hard to believe that 2022 is almost here! As we’re preparing for all of the celebrations and festivities this time of year, we’re also thinking about year-end wrap-up and audit preparations. Here are some reminders of things to be thinking about:
One of the first things I always initiate with my audit clients is a pre-audit meeting or phone call. This meeting is one of the most important steps in having a successful audit. It’s a good time for us to discuss and set expectations and review any changes or differences from the prior year.
Some of the more typical questions that I ask my clients include:
- Were there any changes to the municipality’s financial policies and procedures?
- Have there been any new union agreements, changes in payroll, or significant changes in positions?
- Did you open any new accounts or switch financial institutions?
- Have you had a new debt issuance during the year?
- Are you currently in the process of refinancing debt?
- Have you switched or changed any of the third-party service providers that you work with?
- Have you received any new types of funding?
- Have you received notification of any noncompliance or findings?
- Were there any large capital projects?
- And of course, top of mind this year - how has COVID-19 continued to impact your municipality?
- What processes and controls have been changed?
- What revenues and expenses have been effected?
- And along with that comes all of the questions related to ARPA (American Rescue Plan Act) funds!
- Do you have a plan in place for spending the funds and when?
- Have you completed your revenue loss calculation for 2020?
- Have you reviewed the compliance and internal control requirements related to the funding?
- Will you hit the single audit threshold ($750,000+ of federal expenditures during the year)?
But it’s not just about me asking the questions. The pre-audit meeting is also an excellent opportunity for me to answer questions from the client. So my clients will always hear me ask, “What concerns do you have?” The answer to that question will set the tone for the audit and spark conversations that can lead to new ideas or possibilities that benefit the audit process and your team's strength and operations. This is your time to speak up! As an auditor, I want my clients to voice their concerns now so that they can be addressed before they become an issue.
Now is the perfect time to tell us if there are controls you feel could use some tightening or if there are certain accounts or programs you aren’t sure about. The pre-audit meeting is also the time to talk through positions or responsibilities that have changed within the finance office or among administrative staff. If the Board Members, other Management, or maybe even outside parties have asked for additional information or reporting, you'll want to communicate that to us too.
Communication with the auditors is critical, especially if you have any new staff who may be experiencing their first audit. In my experience, reviewing the audit process and timeframe are especially helpful in ensuring the staff are fully prepared. It’s a good idea to let them know that they may be asked to meet one-on-one with the auditors to review their daily processes and procedures. Believe me: staff that aren’t prepared to meet with us feel like they are in trouble. I promise - we try not to be scary!
As an auditor, I understand that audits are often considered a necessary evil that must be dealt with, but I always want my clients to know that above all, I am here as a resource and a tool in their tool belt. Never hesitate to bring up concerns, and always let us know if there is something that you are expecting from the audit that you have not seen. Our firm is always on the lookout for ways that we can provide ideas or suggestions for improvement – these could be related to strengthening controls or even cost-saving measures. At the end of the day, our goal is simple: we want to make the audit as meaningful as possible for our clients.
As always, we encourage our clients to reach out at any time. If you're not currently an audit client of SEK's, we would love to be added to your bid list or have the chance to discuss any potential outsourced accounting / consulting opportunities. We look forward to helping you achieve your goals!