Denver has recurring weaknesses in accounting for infrastructure and construction assets – leading to adjustments of more than $35 million in 2005, according to an external audit.
The audit, by KPMG LLP, cited the city for the same problem in 2004.
In addition to citywide issues, Denver International Airport’s books needed a $26.6 million adjustment. And wastewater management corrected mistakes of hundreds of thousands of dollars.
The figures account for assets, for items such as street lights and bridges, not cash going out the door.
Still, City Treasurer David Hart said the past few years of audits have shown “themes” that call for major changes.
“The lack of centralized accounting … is at the root of those issues,” he said.
Hart told City Council members at a finance committee meeting Wednesday that an overhaul of the city’s financial structure is needed.
City Controller Beth Machann – whose position was added last year in response to previous audits – told council members the city is working to fix problems in the short term.
“There really isn’t someone responsible for capital assets,” she said. Instead, the responsibilities are spread among several agencies.
Machann said the city has put one public-works official in charge of reporting on assets. Officials also will begin checking their books midyear to check the accounts.
The Manager’s Report from the 2005 audit, released Wednesday, is the third straight annual report to list at least one “material weakness” – an accounting term for problems that could lead to misreporting funds.
In 2004, KPMG’s audit listed four material weaknesses.
The unfavorable reviews led Mayor John Hickenlooper to appoint a task force that this year recommended an overhaul of the city’s financial structure.
City Council will consider a plan to change city accounting Monday.
In its report, KPMG endorsed the task force’s idea to create a chief financial officer. The report said such a position would “provide a clearer structure to address the financial reporting issues the city is facing.”
“Absent financial management leadership through the CFO function,” the report said, “we believe the city will continue to experience deficiencies in its financial reporting and internal controls.”
The report also listed six issues not as serious as a material weakness but still problems.
Those included the lengthy time it took for the city to complete its accounting, and inaccurate statements in accounting.
The audit also noted other glitches in the city’s accounting. For instance in December 2005, the auditor’s office erroneously put the invoice number of a check in the amount box. As a result, where there should have been a $200 payment, a check went out for $1,013,954. A bank caught the error, and the payment was stopped.
Staff writer George Merritt can be reached at 303-820-1657 or gmerritt@denverpost.com.
