The District is required to file annual financial reports to the Washington State Auditor. Most years, the filing deadline is May 30; however, the 2019 filing deadline was extended by the State legislature to July 1, 2020. The District’s report was filed on time on July 1.

The Annual Financial Report negative net revenue of $575,483 differs from the negative net revenue of $358,395 reported in the draft internal financial report for December 31, 2019, presented to the Administration Committee on February 26, 2020, and the Board of Health on March 10, 2020. Even with this variance, the District did not exceed appropriations in 2019.

The major components of the $217,088 variance is comprised of three items recorded during preparation of the annual financial report:

• Loss on the disposal of capital assets, most of which is related to the replacement of the Rucker Building’s HVAC system.            

• An increase to leave expenditures of $294,381 for Vacation, Sick Leave & Comp time due to variances between leave accrued and leave used. The District reports these types of leave on an “as used” basis in the annual financial report; however, the financial system records them as “earned” as payroll is recorded. Historically, an adjustment is made at year-end to adjust the difference between the two. These adjustments are not typically significant, but in the last 3 years, where the District has a number of layoffs and terminations, the leave used was significantly higher than leave earned. As these items have become more and more material, staff are working to update the financial statement processes so leave is recorded monthly the same way in the financial system as it is in the annual financial report.  Correspondingly, note that the liability for compensated absences has fallen over $500,000 as noted in the Statement of Revenues, Expenditures, and Changes in Fund Balances.

• These increases in expenditures were partially offset by increases in Environmental Health fees due to a full audit of transactions in EnvisionConnect back to implementation in 2017. Since EnvisionConnect is not integrated to the financial system, there are a variety of discrepancies between the two systems. Staff are working to develop and implement processes that reduce or eliminate variances between the two systems, as well as perform monthly reconciliations. One significant barrier to the effectiveness of this process is the inability to lock closed financial periods in EnvisionConnect, as well as challenges with accurate reporting in that system.

The audit of the 2019 Annual Financial Report by the State Auditors is tentatively scheduled to commence the first week of August and typically lasts about six weeks.