Delayed financial reporting was causing turbulence for this city. Lack of visibility into the City’s financial position meant the Finance Director was flying blind for much of the year. Missed compliance deadlines threatened to tank the city’s bond rating and increase its cost of capital. Find out how the City broke through the clouds by tapping into CRI’s governmental accounting expertise.

Client: Large municipality of $400+ million

Challenge: Missed compliance deadlines due to late financial reporting

Solution: CRI took over preparation of the City’s CAFR, assisted in closeout of records, reconciliations, and gathering of audit evidence.

Results: Timely and accurate financial statements expedited audit process and reduced City’s accounting department man-hours by 300+. Enabled city to meet municipal bond and other compliance filing due dates.
The City barely met the December 31 deadline to comply with its municipal bond disclosure requirements that year. But in years past, late issuance of the City’s audited annual financials (in some cases nine months after year-end) had caused the municipality to miss the deadline.

Missing the Federal filing deadline for these tax-exempt bonds is bad enough. But the City also ran the risk of violating its bond covenants, which would have dire consequences on its bond rating. A lower bond rating would drive up the cost of financing on its sizeable bond – potentially costing the City millions in interest. These close calls were causing the Finance Director almost unbearable stress.
Besides the drama of potentially missing critical reporting deadlines, late financial statements were useless as a management tool.

By the time the Finance Director received the final, audited numbers, it was too late to adjust the flight plan for the current year. As a result, weaknesses or deficiencies noted in one management letter remained uncorrected when the auditor issued the following year’s report — painting an image of negligent financial management that was politically damaging.
At the root of this timing issue was overwhelming complexity. As governmental accounting and auditing has grown exponentially more complex and time-consuming, the accounting resources of most municipalities have not kept pace.

The City was operating with an accounting department roughly the same size and structure as it had for the past 15 years, and it simply did not have the capacity and expertise to account for such complex issues as unfunded pension liabilities, fair value of investments, and other post-employment benefits.

And yet, given budget constraints, the City Council would not approve hiring additional accounting staff. While the City’s external audit firm had helped prepare financial statements in previous years, the support the auditors could provide was limited due to independence issues.
As the City neared the end of another fiscal year, the Finance Director knew he needed help performing the accounting groundwork necessary for a smooth and efficient audit experience.

With decades of experience auditing governmental entities, CRI had the sophisticated level of expertise needed to prepare the Comprehensive Annual Financial Report (CAFR) in accordance with GAAP and Government Finance Officer Association requirements. The CRI team also assisted the City’s accounting department with closeout of records and reconciliations, gathering of audit evidence, and even orchestrating actuary studies and other external deliverables.

Righting the Plane
Prepared with a better flight plan in the form of clean financial statements and audit evidence, the City experienced a smoother annual audit. Not only was the audit completed about three months earlier than in previous years — enabling the City to easily meet its bond filing and other compliance deadlines — but the process also required at least 300 fewer man-hours from the City’s already overburdened accounting department.

Perhaps most importantly, the timely audited financial statements gave management the accurate readings they needed to keep the municipality on the right trajectory.
In addition to enabling a faster and more efficient audit, CRI resolved other issues that had been plaguing the City’s overburdened accounting department. For instance, due to retirements and loss of institutional knowledge, the City had overlooked a payroll tax deadline and ended up paying tens of thousands of dollars in penalties to the IRS. CRI recovered much of that for the City, realizing savings that far outweighed the total fees they had paid for CRI’s accounting services that year.

By outsourcing the closeout procedures and audit preparation work, the City also averted the need to expand the accounting department (a savings of at least $65,000 per year).
Governmental accounting and auditing requirements continue to grow in volume and complexity. Don’t fly blind. CRI’s governmental accounting team has the experience you need to prepare for a smooth and stress-free audit experience. Contact your CRI advisor today.