Some say that Metro Districts operate like we are still living in the wild, wild west. Meaning, only a few self-appointed cowboys get to make decisions behind drawn curtains, seal their records in a combination safe, and stop citizens from reviewing the written word in how their city is governed.
None of that is true. It is just a campfire tale told by some folks who wish to divert the truth, because perhaps, they really do want to live like they did in the wild, wild west.
Truth is, metro district audits become public record, and citizens have the authority to review it. Better yet – metro districts are subject to an audit if their total revenues or expenses are greater than $750,000. Districts that have revenues or expenditures under $750,000 must submit an application for exemption from an audit, prepared in accordance with their state’s local government audit laws.
Check Points
Audits have extensive check points and controls. Their curriculum is meticulous, and each step is clearly documented and monitored.
How do we know this? Because we had the opportunity to speak with Amanda Kae Castle, a former auditor, and currently the Chief Operations Officer and Partner at Pinnacle Consulting Group, a leading firm that provides financial and operational solutions to special districts and municipalities across Colorado.
Here, she leads the Pinnacle team through the aspects of finance and accounting for the clients they serve, including working side by side with auditors, providing all records for annual reviews. She told us what really happens during an audit.
“In my role, I oversee the delivery of high-quality services to our clients, ensuring their compliance, transparency, and sustainability,” Castle said. “Auditors follow strict audit standards and conduct specific tests to ensure financial accuracy. And then they opine on the materiality of their clients’ books.”
Castle continued, “Auditors, are accountable for their review. After following a regimented audit process, they render an opinion that imparts their findings as ‘materially accurate’, so an in-depth assessment is essential.” While much of the auditing can occur online, onsite visits are common as well. “Auditors like to see things, and review paper documents.”
Annual reviews are most common, although if a metro district is in debt, there are more requirements that can be implemented, including quarterly monitoring, and reporting to the bond holders through EMMA “Electronic Municipal Market Access.” All audits must be filed with the state by July 31 each year, and like tax filings, extensions can be requested, allowing filing by September 30.
What is the Best Practice?
A best practice in the industry to ensure that auditors remain independent and distinctly separated from their clients is to rotate partners every few years. This allows for a fresh set of eyes. Another point of process integrity is where auditors audit auditors. This is called a peer review, and it is a requirement that must occur a minimum of once every three years, or more frequently if desired.
Beyond the self-governed process there are other layers of accountability and scrutiny, including the oversight of the Colorado Open Records Act (CORA).
Managing the Audit
Castle also gave us some wonderful guidance on how to manage auditors.
“The metro district board should be the one that determines which auditor to hire. In doing so, also question the fee. The lowest bidder may not be the best choice,” she said. “Most importantly, is the integrity of the auditor. Ask to see your auditor’s peer reviews – and evaluate recommendations from other work they have done. When choosing an auditor, it is important to understand their full scope of service.”
What’s more, there is yet another layer of accountability for the auditors themselves – the Public Company Accounting Oversight Board. The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers registered with the Securities and Exchange Commission (SEC), including compliance reports filed pursuant to federal securities laws.
In Short
Citizens can be assured that metro districts do not operate in their own wild, wild west. What’s true, is audits are highly regulated, provide layers of accountability, occur regularly, are completed by independent peer-reviewed auditors, and are public record.
Metro district audit records are available on both the city and state websites, and on metro district sites as well. The Metro District Education Coalition (MDEC) exists to advocate for best practices in the formation and operations of metro districts and promote improved transparency and accountability on behalf of homeowners. Our team is available for questions and guidance at any time.