Council members question auditing procedures

An adjourned meeting Monday of the Brainerd City Council to discuss the city's annual audit procedures was a few members short of a quorum.

The council adjourned its April 6 meeting to Monday, but only two council members, Bob Olson and Mary Koep, were present when the meeting started. Council member Lucy Nesheim arrived about 15 minutes into the meeting but stayed seated in the audience because she said she had a cold and didn't want to spread it.

Though not an official meeting, Tom Koop of LarsonAllen, the city's auditor, fielded a variety of questions from the two council members and two members of the public. Koop said his staff was about one third of the way through the audit.

"We are just getting started," he said.

When Koep entered the city council chambers, she questioned why the meeting was being held.

"I surely would have preferred if this was one on one," Koep said, noting she didn't know what questions she should ask.

"I think we kind of got this one screwed up, but I'm not blaming anybody."

Olson, however, came prepared with a plastic-bound, 16-page handout of his 2007-2009 audit evaluation and recommendations.

Olson said the city should consider switching from a cash basis for monthly accounting, which Koop explained lists income when it is received, to an accrual basis, which Koop said lists income for the month in which it is earned.

Olson pointed out that Brainerd Public Utilities uses accrual basis accounting and pays $19,000 for its annual audit. The city, he said, pays $55,000. If the council decided against accrual accounting, Olson asked that transfers be done quicker.

Koop said that outside of the arena fund, which was an enterprise fund, it would be a significant cost for the city to switch to an accrual method for each of its 40 or so funds, including adding staffers to do the work. He said BPU has one fund, making accrual accounting easier.

Nesheim said accrual accounting would be a waste of time and she couldn't see how it would benefit the city. Finance Director Theresa Goble said she used the accrual basis of accounting to prepare the arena fund.

Koep said that the differences in accounting methods are on paper only and do not mean the city doesn't have the money in the bank.

Olson also questioned why LarsonAllen was auditing work it had prepared for the city and why a certified public accountant on the city's staff wasn't working more to prepare financial information in advance of the city's annual audit.

"Our finance department has to begin doing more of this financial audit work," Olson said. "We would save a lot of money if we had people do it in-house." In his report, Olson had 28 questions for Koop, which Koep asked to have answered in writing for all council members.

MATT ERICKSON may be reached at matt.erickson@brainerddispatch.com or 855-5857.