An auditing firm can’t comment on the accuracy of Williamsport’s 2020 financial statements because of the city’s messy finances, the firm says in audit of that year’s finances.
The decision by Zelenkofske Axelrod of Harrisburg to avoid offering an opinion marked the second audit in a row the firm couldn’t comment on accuracy.
Both times the firm has blamed the “unavailability of audit information, turnover in key accounting and management positions, omission of analysis and activity of custodial funds, and omission of River Valley Transit and Williamsport Parking Authority financial statements” and other data.
The city still hasn’t finished its 2021 and 2022 audits, both due by Oct. 1 of the following year.
Mayor Derek Slaughter said he hopes both audits will be completed by the end of the year.
“They're saying the numbers are so bad, they can't even give an opinion on it,” Slaughter said. “The numbers they are showing are so convoluted and a mess that without doing a forensic audit, they're not able to feel comfortable with the numbers they're seeing.”
The Attorney General’s Office and Federal Transit Administration have been investigating the city, River Valley Transit and the city’s parking authority for four years.
RKL LLP, Lancaster accounting firm, found River Valley Transit mismanaged state and federal money by spending for years for things other than its bus transit system.
River Valley Transit was part of city government then.
In 2022, River Valley Transit became an authority, separate from the city and governed by a five-member board. The state Department of Transportation recommended the separation.
City officials expect Williamsport will have to repay an unknown amount of state and federal money.
“The whole RVT (River Valley Transit) investigation has been a part of it because, in this timeframe, RVT was the department of the city. The lag there complicated some of the data input, that would be a part of the audit,” City Council President Adam Yoder said.
The city’s failure to come with audits on time has led to critical notices issued by the Municipal Securities Rulemaking Board.
Congress established the board to write rules and regulate municipal securities such as bonds that cities and other municipalities sell to raise money.
Williamsport sold $19.31 million in bonds to investors in 2017 to pay off bonds sold in 2013, 2014, 2016 and 2017, according to documents on the board’s online Electronic Municipal Market Access System. Any time a municipal government sells bonds it must file annual audits and budgets with the board that are posted publicly on the system website.
Williamsport has had a problem doing that, which led to three critical notices.
In September 2022, the board issued a notice that said the city failed to file the 2019 and 2020 audits and the 2020 and 2021 budgets on time. The city then filed the 2020, 2021 and 2022 budgets concurrently with the notice.
Last November, after the city finally submitted the 2019 audit, the board issued a notice warning investors that it was filed late. That poses a potential barrier for the city to borrow more money, Yoder said.
On Monday, as the city submitted the 2020 audit, the board issued another notice saying that audit was late. The notice points out what the auditors said about the audit’s limitations.
The board has not cited the city again for filing late budgets, though the 2021 and 2022 audits remain overdue.
The city is “playing catch up” to get the audits finished and approved, Yoder said.
In 2020, River Valley Transit was unable to make payment on its debt so the city assumed more than $10.4 million in the transportation arm’s debt.
“We've incurred more debt because of the result of the investigation,” Yoder said. “The numbers that we've previously had were accurate. Those kinds of things are where having these audits up to date is going to be very helpful when we start getting into those larger scale planning activities.”
The debt has limited funding of projects within the city. Ongoing projects such as upgrading City Hall and the levee system need funding, Yoder said.
“The biggest risk is not being able to obtain outsourced outside funding, whether it's grants or any kind of loans we need. We need updated audits for what we've been able to get through without that,” he said.
Slaughter said the audit’s findings were expected.
“We know that our finances were bad… This is part of the process to get it cleaned up and to get us back on solid financial footing. Realizing that the first couple of years of audits were going to be a mess, that was not surprising,” he said.
The 2020 audit, as uncertain as the auditors may be about its accuracy, showed the city’s general fund ended the year with a surplus of more than $3.86 million.
After his 2019 election, Slaughter introduced updated financial software to City Hall. Finances and payroll were “pen and paper” in previous administrations, he said.
“We have to make sure we solidify our finances. We now have in place - brand new financial software, brand new HR (human resources) software, brand new payroll software - none of which was in any place previously,” the mayor said.
The city wants to be transparent about its financial situation once all audits are finalized, Slaughter said.
“We're still working through that because we're only on to the 2021 audit. Getting to a place where the numbers are accurate, where the auditors are comfortable with it and they can give us a clean opinion,” Slaughter said. “It's just that these previous audits and financials that we inherited are not there.”
