Stamford’s Overdue Audit Reveals Extensive Financial Accounting Shortcomings

Stamford’s Overdue Audit Reveals Extensive Financial Accounting Shortcomings

The awaited fiscal 2022 report for Stamford, delayed by over a year, has finally emerged, revealing substantial deficiencies in financial management. Scheduled for review by the Stamford Board of Finance next week, the report, conducted by independent auditor RSM, exposes various shortcomings within the city’s financial departments.

Outlined under the category “Cause,” the report delineates the reasons behind these failures. These issues encompass lapses such as inadequate financial controls, improper review of general ledger account balances, deficiencies in grant management, and the absence of centralized grant reporting, among others.

Furthermore, the report delves into the implications of these shortcomings, highlighting their detrimental impact on the city. The lack of effective financial information hampers managerial decision-making, while deficient reporting jeopardizes future state and federal grant awards. The report also notes the necessity for restating balances in government and capital projects accounts from 2021 due to inadequacies.

RSM’s auditors underscore the significance of good internal controls that ensure regular reconciliation of accounts and thorough reviews by supervisory staff. However, Stamford has faltered in executing these measures. During the audit process, RSM identified over 125 adjustments that needed to be rectified by city financial officials, contributing to significant audit delays and inefficiencies.

The report highlights how weak financial controls lead to inaccuracies, impacting management decisions. It emphasizes the need for robust internal controls to ensure the reliability of financial reporting—a standard Stamford has failed to meet, as the audit revealed.

Among the adjustments made by auditors was a $15.7 million increase in liabilities related to mold remediation, stemming from the unexpected discovery of mold in school buildings back in 2018. The costs associated with this issue surpassed initial estimates significantly, prompting a substantial upward revision.

Another adjustment involved the misclassification of assets as “construction in progress,” erroneously accounting for assets already in use. This misclassification, valued at $18.5 million, affected the valuation of city assets but did not directly impact the city budget.

Ben Barnes, Director of Administration, highlighted that several completed projects weren’t placed into service promptly, leading to the underestimation of liabilities related to these ventures.

In summary, the delayed audit report has unveiled multifaceted shortcomings in Stamford’s financial accounting, emphasizing the pressing need for strengthened internal controls and accurate reporting mechanisms to mitigate such issues.