JOHNSON CITY, Tenn. (WJHL) — Johnson City’s fiscal 2022 audit shows three “material weaknesses,” the first time in years the city has reported the more serious of the two types of audit findings.
The city’s audit, which was completed several months later than usual, was posted by the Tennessee Comptroller’s Office April 28.
Staff turnover and continued adjustments to new accounting software were among the causes the city cited in its “management’s response” to each of the findings. That software was initially put in place in fiscal year 2021.
“When you’re looking back at how processes have worked, if we ever go to do this (software conversion) again we will hire a third party project manager instead of relying on our staff, who were already loaded down with day-to-day responsibilities,” Assistant City Manager Randy Trivette told News Channel 11 Tuesday.
The material weaknesses reported by the auditor for the fiscal year of July 2021 through June 2022 included the following:
- Bank reconciliations were not performed in a timely manner, and reconciliations “were not readily available for any month after Dec. 31, 2021. This meant cash balances for audit testwork couldn’t be verified.
- The city’s financial reporting during the fiscal year was inaccurate because implementation issues with the new software conversion “were not timely addressed and corrected.” This led to errors in report generation, reconciliation to subsidiary ledgers, and incompatible software integration.
- The city recorded some monthly processes in its food service inventory incorrectly and then not reconciled them to proper accounts. This meant the June 2022 inventory balances were overstated.
Both the bank reconciliation and food service inventory items had been listed as “significant deficiencies” — a less severe finding — in the city’s fiscal 2021 audit. Trivette said the financial reporting issue flowed from the bank reconciliation problem.
“That stuff should all be addressed (for the 2023 audit),” Trivette said.
“The food service inventory and the bank reconciliations we have corrected, and we actually have implemented the automated system into our software now to where our bank reconciliation will be verified every week, and then every month it’ll be balanced out.”
Trivette said the new Oracle cloud software is very robust, and some staff are still working on using it properly, but that the city is over the hump as far as the types of things that would flag auditors.
“It’s a very powerful machine,” he said. “We are extremely satisfied with it.”
Trivette also pointed to the city’s bottom line, which improved significantly in fiscal 2022 due to strong sales tax and hotel-motel tax revenues.
The audit shows local sales tax totaling $52.4 million in FY2022, up $7 million from 2021, with state sales tax coming to Johnson City up $1.4 million to $8 million. Lodging tax set a new record by a wide margin, totaling $2.9 million where the previous high was $2.3 million.
“We increased our fund balance about seven and a half million dollars to nearly $53 million, with $23 million of that being unrestricted or unassigned,” Trivette said. “And so we got the rainy day fund for emergencies and then we’ve got $23 million of additional funds in there for any projects or anything that comes up.”
The fiscal 2022 audit had one significant deficiency. It related to proper cash disbursement documentation not being “obtained and/or retained for every purchase” and some city departments “circumventing certain steps of the purchasing procedures in an effort to acquire replacement parts that are in short supply.”
The software conversion caused Johnson City to request two extensions to its filing date, which usually comes in December. Those requests were granted by the state.