After last year’s audit is complete and next year’s budget is prepared, it is time to think about your fiscal year 2015 audit. Revisiting tabled issues and investigating other matters you have not yet considered are excellent starting points. As your fiscal year 2015 audit approaches, Baker Tilly state and local government specialists recommend evaluating the following five issues:
1. Struggling Tax Incremental Financing (TIF) districts
Two of the main risks when creating a TIF district are investing too heavily in infrastructure and expecting too much development within the TIF district. Both pitfalls could lead to the TIF district not creating enough increment to cover its costs. Should this happen, your government may need to use general-purpose tax revenue to pay for the improvements, ultimately creating a higher tax burden for your constituents.
If your government is in this situation, consider strategies to help the TIF district recover. Some governments have found success in amending the original project plan, while others have declared their TIF district distressed.
2. Department efficiency and effectiveness
Government finance departments are typically comprised of a primary accounting system, procedures, and internal controls. Most governments also have some decentralized operations in their accounting function. It is a good idea to review those decentralized operations, including processes and controls, on a periodic basis to ensure efficient and effective operation. Be mindful that decentralization can increase fraud risk. For this reason, your review should also minimize fraud risk to an acceptable level.
The scope and thoroughness of the departmental review your government needs may vary. Some governments may find that a meeting with the governing body and/or management is sufficient, while others may need to hire an external firm to perform an independent operational review.
3. Audit findings and recommendations
Review your Communication to Those Charged with Governance and Management from your prior audit and implement changes to address findings or recommendations. Issues presented in this communication warrant your attention. Findings, especially material weaknesses, should be analyzed to determine if the benefits of remedying the findings outweigh the costs. If you do nothing, the same findings will likely be included as a part of your next audit.
4. Government Accounting Standards Board (GASB) statements 67 and 68
GASB statements 67 and 68 will affect governments in a significant way. Depending on your government’s pension plan(s), GASB 67 and 68 may require significant effort to implement. Work with your plan providers, auditors, and/or actuaries to ensure that you have all information required to implement these standards successfully.
5. New laws and regulations
Changing laws and regulations are a reality with which today’s governments must contend. Active monitoring of new legislation and regulations are critical to maintain compliance and identify opportunities. Noncompliance could lead to findings during your audit, while other changes may financially benefit your government.
As you prepare for your fiscal year 2015 audit, we recommend taking a deeper look into any of these issues that affect your government and exploring additional resources to determine what action your government may need to consider.
For more information on this topic, or to learn how Baker Tilly state and local government specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.