DENVER – City agencies have improved at tracking assets and special revenues but still could do a better job, according to two new follow-up reports out this month from Denver Auditor Timothy M. O’Brien, CPA.
“The city needs to keep a close watch on how we are using taxpayer dollars,” Auditor O’Brien said. “The city’s money should be used transparently, and we should know what the city owns and where these items are at all times.”
We followed up on two audits: Special Revenue Funds from 2017 and Capital Assets: Buildings and Equipment from 2018.
Capital Assets: Buildings and Equipment
Our 2018 audit found errors in how agencies were keeping track of physical inventory, including assets listed in the wrong locations, inaccurate or insufficient descriptions of those assets and missing records.
Capital assets are items such as land, equipment and software with an initial useful life of greater than one year and usually a value of at least $5,000. In total, the city’s capital assets were disclosed at a value of $7.1 billion.
We found missing equipment and several inaccuracies — including a city vehicle sold in 2003 and still on the books 15 years later — and a swimming pool counted twice. Unclear and inaccurate capital asset records could result in missing and misidentified equipment.
We recommended changes to the Controller’s Office, the Wastewater Management Division, and the Departments of Public Safety, Parks and Recreation, General Services and Transportation & Infrastructure (formerly Public Works).
We recommended these agencies establish and assign locations to every asset. All agencies implemented this recommendation in the annual inventory count process. However, we continued to find errors in the inventory lists. At the time of follow-up, there was still more work to do to clean up old data issues and to better monitor assets and follow fiscal accountability rules.
Special Revenue Funds
Our 2017 audit found insufficient transparency and safeguards over the city’s use of special revenue funds. A complete listing of all city special revenue funds was not available to the public, and there was no formal procedure for establishing and closing out these funds.
A special revenue fund is used to separate, and track income restricted to specific purposes by the source of the funds, the law or an administrative action. For example, in another previous audit, Auditor O’Brien recommended the city use a special revenue fund to track marijuana tax dollars and how they’re used, in the interest of transparency.
“Special revenue funds can be a useful tool and can help ensure the proper use of public money,” Auditor O’Brien said. “However, we need to track them closely and shut down inactive ones to avoid misuse.”
When our team followed up on the Special Revenue Fund audit, we found the city was doing a better job of sharing transparent information about the funds. The Budget and Management Office provided an addendum for the “2020 Mayor’s Proposed Budget” that included information about special revenue funds not previously included in the proposed budget.
We also found the city was in the process of closing about 60 accounts, in accordance with our recommendation to review all special revenue funds and possibly close the ones not currently in use.
However, the city did not implement two of our recommendations. First, the Controller’s Office is not reviewing all supporting documentation for fund reconciliations. This means the office could miss the opportunity to ensure accurate and complete information. Missing financial information could negatively impact the ability to make the best financial decisions for the city.
Second the Mayor’s Office has not improved the agency gift reporting process. Risks remain related to the transparency of donations to agencies. The Mayor’s Office says it has not updated the executive order because administrators anticipate a new online donation reporting portal and a new fiscal accountability rule this year.
You can find more information about the Auditor and recent audits at denverauditor.org.