‘Material weaknesses’ repeated in Johnson City audit
JOHNSON CITY, Tenn. (WJHL) — Problems with Johnson City’s bank reconciliations and the accuracy of its financial reporting persisted for a second straight audit from the Tennessee Comptroller’s Office as the city continued implementing software purchased in 2021.
The fiscal 2023 audit for the year that ended last June 30 found “material weaknesses” — the more serious of two main audit finding categories — under “accurate financial reporting” and bank reconciliations.
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The 2022 audit had the same findings, which the city attributed to “overburdened” accounting following the implementation of a new software system in the 2021 fiscal year. The city responded a year ago that accounting and IT staff “continue to work with the implementation team” to correct the financial reporting issues, and that it was manually reconciling bank information.
Assistant City Manager Randy Trivette told News Channel 11 last May the issues “should all be addressed” for the 2023 audit. On Monday, he said while the city didn’t quite meet his hoped-for deadline, the process is now basically complete and “those material weaknesses will go away next year.”
Auditors found June 30, 2023 cash balances weren’t accurate and that cash reconciliation still hadn’t been performed timely.
The audit found that in the case of accurate financial reporting, “many fund level trial balances” weren’t properly adjusted when the city closed out fiscal 2023. They included cash, payroll, utility billings, grant reporting and capital assets. Numerous journal entries, prepared by Johnson City and also proposed by the auditor, were needed to properly reflect the city’s June 30, 2023 financial position once that was complete in February.
Trivette said the city moved from a decades-old system in 2021 to the current one, and that some of the data didn’t transfer, while other data went into the wrong “charge codes.” That caused more significant problems during the 2022 audit, he said.
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“In 2022, that audit, they were here trying to audit but it took them about a month and a half before they could start the audit because the information wasn’t matching up,” Trivette said.
“This 2023 audit was much much better. They were able to see the reporting, we were able to generate the information that they were needing in order to do auditing.”
The finding on accurate financial reporting noted it “is essential for proper oversight and decision making within the City.”
Trivette said the shortcomings didn’t threaten the financial integrity of the city, but that they were flagged as material weaknesses in 2022 because they’d been noted as a “significant deficiency” the previous year and had not been completely corrected.
The city’s response said the software implementation continued to cause “hardships for the accurate and timely reporting of financial data.” It said the city was using manual processes to adjust fund data in a timely manner until “implementation flaws have been corrected and the software allows for accurate and timely financial reporting.”
The bank reconciliation finding said cash balances weren’t adjusted properly, and those also did not get finalized until February 2024.
“We had the bank (reconciliation) nearly completed but it wasn’t perfect yet,” Trivette said of that finding.
Auditors also noted a “significant deficiency,” which is a less serious finding, in the area of cash disbursements and purchasing. It said several disbursements’ documentation after the software change didn’t have an attached purchase order when the amount was over a threshold requiring a PO.
That finding also said “purchases had been split up so they would not have to be approved before being obtained via the purchase card.”
Overall, Trivette said the new accounting software, which is a cloud-based Oracle product, is a much better option for the city than the previous version of local government software.
The repeated material weakness findings come after years without any such findings in Johnson City’s audit. The Kingsport and Bristol, Tenn. audits for 2022 and 2023 each had no material weaknesses noted.
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