Anchorage's financial audit delayed, leaving key programs 'in limbo'

The city of Anchorage's annual audit of its 2022 fiscal year is about 10 months late. That has created a series of problems that put the city at risk of losing millions of dollars in grants and self-insurance policies from the state, city officials said.

The delay in the audit also comes even as Mayor Dave Bronson's administration and the Legislature are expected to revise and finalize this year's budget later this month, as city officials have no idea how much money the city of Anchorage has. This means that we do not yet know exactly what is going on.

“This makes it very, very difficult for Congress to do its job,” Assembly Speaker Christopher Constant said during Monday's meeting on the issue. “The municipality's job, our job, is to manage this municipality (finances): approve the budget, approve budget amendments, approve spending.”

“A year later, we still don't have the financial statements, so we are approving it blindly,” he said.

Anchorage's ordinance and charter require an annual independent audit of all city accounts to be completed “within 90 days after the end of the fiscal year.” Having a financial audit is also important for the city to maintain federal and state grants. And audit delays could affect the city's bond rating.

The Anchorage Council voted Monday to extend the city's contract with state accounting firm BDO, the city's auditor, through June.

“Everyone is fully committed to this. We are not making excuses,” City Manager Kent Koolhaase told councilors at the meeting.

The city conducts a comprehensive review of the previous year's finances, including state and federal grants, and a third-party auditor reviews the report. Felix Rivera, a City Council member and chairman of the city's audit committee, said audits are typically issued at the end of June, but in some cases they can take several months or more.

But the 2022 audit is still underway, leaving some of the city's “critical elements” such as subsidies and insurance “in limbo,” Rivera said.

The Medicaid reimbursement program through the state, which funds the ambulances, costs about $20 million, Rivera said. In this year's budget, his $2.4 million of those funds will go to the Anchorage Fire Department's mental health first response program, the Mobile Crisis Team.

Rivera said at the meeting that he expects the work of BDO and the City Finance Department to be completed by the end of April.

Audits have been delayed in the past, including under former Mayor Ethan Berkowitz, but never as late as this one. Council members had hoped the audit would be completed by the end of March, before annual budget revisions begin, as it remains unclear whether the city has overspent or underspent over the past two budget cycles.

“It's hard to spend money when you don't know how much money you have,” said Assembly Vice President Meg Zaletel.

When setting a budget for next year, cities typically have to make some assumptions about their financial situation because the current year isn't over yet. However, they usually perform a financial audit of the previous year. That wasn't the case last fall, when the Bronson administration proposed and Congress approved the 2024 budget.

The city needs to finalize its budget and set milling fees this spring in order to calculate its property tax bill by June 1.

“So we're dealing with a series of assumptions that may or may not be true,” Zaretel said.

That leaves little or no room for the city to resolve this year's budgeting issues and city priorities.

“Do we want more funding for snow removal for next winter? We can't answer that because we don't know if there will be more funding until the financial audit is complete,” Zaretel said.

It's also unclear how long delays will affect the municipality's bond ratings from major credit rating agencies, a concern that Congressional leaders have expressed.

The city sells bonds and takes on debt to pay for infrastructure and other voter-approved projects. If the city's credit rating is downgraded, the city will have to repay the debt at a slightly higher interest rate.

“It goes without saying that the delay in the 2022 ACFR is of concern to rating analysts and investors,” City Finance Director Ross Risvold said in a March 27 memo to Chief Financial Officer Alden Saan. Stated.

Risvold said the city's fund balance, or cash reserves, is more important to rating analysts, in part because the city has received federal funding for nearly all of its pandemic emergency spending. “Good news,” he said.

[Alaska House budget crafters reject $4 million request for Anchorage homeless shelter]

Risvold said the city could theoretically sell voter-approved bonds even if the audit isn't completed, but not until the audit is complete, adding, “It's a story for investors and rating analysts. becomes more complex and difficult.” Note. “Therefore, we will wait until the final audit is completed in 2022 before selling the bonds.”

In an email response to questions from the Daily News, Risvold said questions should be directed to Bronson's spokesperson and that the city would not respond to questions about the audit and its impact until after Tuesday. He said he could not answer.

Bronson administration officials said much of the delay was due to staffing and turnover issues at the Treasury Department, which includes all supervisors with experience in past audits, as well as pandemic relief grants and federal funding for the 2018 earthquake. This is due to new reporting requirements and additional workload due to reimbursement. The city's response to the new coronavirus infection.

Last year, about half of Anchorage's air traffic controller department staff positions were vacant. Sarne will also be Bronson's third CFO in less than three years.

“Personnel is the biggest hurdle,” City Commissioner Michael Cipriano told the Assembly Audit Committee in February.

“When I joined last May, we only had seven out of 17 staff members,” he said.

He said most of the positions in the department are filled by people who are new to the municipality and unfamiliar with the city's systems and are doing “forensic accounting,” looking at the work of others and trying to make adjustments.

At a February audit committee meeting, Joy Melliner, BDO's contracted independent auditor, called part of the audit a “massive goose chase” that uncovered book entries posted in “strange places.” expressed.

“We don't have a director of financial reporting here. We desperately need financial reporting. Financial reporting would be much better, but there's no one with overall responsibility for it. And it's structurally It was one of those things that used to be done by collectives, and they left and now there's a big hole,” Melinor said.

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