A long overdue financial audit of Anchorage’s bookkeeping may keep the city from getting tens of millions of dollars in grant money.
Annual, audited financial records are a condition to keep various grants flowing to the city from the state and federal governments. For at least one program, the city is at risk of running out the clock on its fourth extension with the state to close out its 2022 books.
It’s Joy Merriner’s job as an independent auditor with the firm BDO to go through the city’s financial statements and make sure they are fair and accurate. She told an Anchorage Assembly committee last month that there is no evidence of money “walking out the door,” but a lot of transfers have been recorded incorrectly and inconsistently amid heavy staff turnover in the city’s finance department.
“And so it’s a big, huge goose chase to find it,” Merriner said. “And then once it’s found, it’s a goose chase to figure out how to make it right.”
The city blew past a deadline last spring in the city charter and code to finish the audit of 2022 financial statements. The state Department of Health originally wanted the financials by the end of last May. Other state rules for grant administration required the report by the end of last September.
Merriner and the city’s in-house finance professionals are pushing to get the overdue audit done.
Anchorage Assembly member Felix Rivera said it’s a requirement for some state and federal grants. He chairs a committee overseeing the audit, and as an example, he said reimbursements for an ambulance program the state funds with federal Medicaid money is in danger.
“Now it's sort of in limbo, because we may or may not be meeting the deadline,” he said. “Which is a requirement for us to actually get the money. The state needs our audited financials before they give us the money.”
According to unaudited city budget documents, the city got nearly $24 million in 2022 from the Supplemental Emergency Medical Transport program, and another $13 million was expected in 2023 and again this year.
Alex Huseman, a spokesperson for the state health department, said the agency is committed to supporting the city, and will keep working with it if it misses the next deadline.
Assembly Chair Chris Constant said the overdue audit is also hamstringing a core Assembly duty.
“Oh my God,” Constant said. “The unknowns – it’s just, it makes our job to appropriate nearly impossible.”
He said he wants to be able to trust – and verify – the administration’s numbers during the regular budgeting process and when one-off requests come up.
Like at the Assembly’s last regular meeting on March 19, when it considered a pay scale adjustment for a small class of employees expected to cost an extra $380,000 a year. The administration wanted the change to take effect retroactively to the beginning of the year and said it could find the money to keep the budget balanced.
Constant and Assembly Vice Chair Meg Zaletel accused Mayor Dave Bronson of a pattern of budgeting in bad faith to score political points; lowballing in his fall budget proposals to keep property taxes down, then requesting retroactive increases like this one with unknown tradeoffs, on faith that there’s enough money. And finally, blaming the Assembly for higher spending and taxes.
“Where is that $400,000 when we are told there’s no money in the budget?” Zaletel said with frustration at the meeting. “And we certainly don’t have ‘23 audited financials because we don’t have ‘22 audited financials. So are they asking us to spend money we really don’t have? Who knows!”
Alden Thern, the city’s chief financial officer, couldn’t be reached for comment, but he sympathized with the Assembly at the meeting.
“I can certainly appreciate the uncertainty that you’re all going through right now,” he said. “I think the discussion about our financials is right on spot. You deserve to have numbers to know how to make decisions. That’s exactly right.”
Thern is Bronson’s third CFO in three years. Bronson appointed him last September. Bronson’s first CFO, Travis Frisk, resigned about a year into the job, as did his second one, Grant Yutrzenka.
City Controller Michael Cipriano told an Assembly committee that turnover and staffing shortages have been the biggest challenge to getting the financial audit done. When he started in the position last May, he said he only had seven out of 17 accountant positions filled.
“A lot of this work that we’re doing is, I’d call it forensic accounting,” Cipriano said. “We’re looking backwards at work other people have done to try and figure it out. So that’s – that’s a – it’s difficult.”
He said he’s up to 15 accountants now. But they could be poached at any time.
“There’s a shortage of accountants out there,” he said. “You have to pay them, and they know – everyone on my team is well aware, if they go across the street and work for the state, they can get a 20% raise and work remote.”
Part of the final report to come from the auditors will include recommendations to avoid this situation in the future.
“I am waiting to dissect all of that, and really do an autopsy, until after the audit is done,” Rivera said. “I want the folks to get the work done, and then we'll dive into what the issues were.”
