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As Hollister works to complete financial audits delayed by as much as three years, the latest completed audit for fiscal year 2021-22 found ongoing deficiencies in internal controls and financial processes.
According to a report by MUN CPAs to the Hollister City Council on Jan. 5, the Sacramento-based accounting firm found previously identified deficiencies in financial reporting that include expenses and assets not properly reported; incorrect and inconsistent recording of grant funds; delayed monthly bank reconciliations; and failure to submit annual financial audits by the nine-month deadline.
The report also noted the city had not addressed many ongoing issues.
The firm attributed the majority of the deficiencies to “significant” staff turnover and lack of controls in place. Hollister expects to have its third city manager start in February since the retirement of Bill Avera in late 2019.
The city is also looking to fill a finance director position, which according to the posting, has been open since Nov. 6.
The city agreed with the findings and unanimously approved the report on Jan. 5 without much discussion by council members.
“The result of our inquiries resulted in several audit adjustments to close out funds, correct revenue and expense balances, receivables, and transfers,” according to the report.
Generally, the report recommends the city revisit or formalize procedures and policies, and increase oversight to address and correct deficiencies.
Councilmember Rudy Picha asked during the council meeting whether hiring additional staff for the financial department would enable more oversight to address the deficiencies, and Erica Pastor with MUN CPAs said it would.
“I definitely think additional resources to help the finance department will benefit the city,” Pastor said.
Former City Manager David Mirrione said in his 2024-25 budget message on Sept. 30, 2024, that the city had not completed financial audits for three consecutive years beginning with the 2020-21 fiscal year—a situation that “further constrained our revenue streams,” because it limited the city’s eligibility for grants.
The 2020-21 audit was approved by the City Council in May 2024 and was also conducted by MUN CPAs.
Interim city manager Jim Pia said not conducting the audits placed the city in a difficult situation.
“To be this far behind in audits is very difficult, to say out loud, but also it could harm us in terms of credit ratings, in terms of grants and those types of things,” Pia said.
The neglected audits occurred under former councilmembers Ignacio Velazquez, Rick Perez and Tim Burns, and current council members Rolan Resendiz and Dolores Morales.
The annual reports reflect the city’s financial position and accounting operations, according to the staff report.
“It is important that the city catch up in this process as audits help ensure transparency and accountability in managing financial resources and provide information on the city’s financial picture,” the staff report states. “Being up to date in the audit process ensures that resources are effectively allocated and the process can help to identify potential risks in city finances or shortfalls in certain revenue sources.”
It adds that staff began looking for a new auditing firm to conduct a review of the city’s 2022-23 fiscal year financials.
“Staff intends to establish a clear and robust audit timeline with the new firm to address past delays, complete outstanding audits, and restore the city to a current and sustainable annual audit cycle moving forward.”
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