An audit of Washington’s financial books for fiscal year 2015 includes an unmodified opinion, the highest rating possible, but it did raise at least one concern.

Crystal Roberts, a certified public accountant with Martin Starnes & Associates, presented the annual audit report to the Washington City Council during its meeting Monday. The report noted there are no significant deficiencies or material weakness in internal control with the city’s finances.

Roberts, upon questioning by Councilman Doug Mercer who noticed references to violations  of the state’s General Statutes, acknowledged the city might be in violation of state law regarding the handling of three funds. Roberts said she is awaiting word from the state on that issue, which has been a matter of debate and different interpretations of the law.

“I should mention I’m still waiting on a phone call. We submitted this to the Local Government Commission — it was before the holidays. They are backlogged. I am still waiting on a phone call from the Local Government Commission,” Roberts said. “After we submitted this to them, there has been some debate as to whether or not we may still have that violation.”

The Local Government Commission oversees the finances of local governments in North Carolina.

Roberts said state law requires a local government to adopt a budget for any fund for which it is receiving or disbursing money.

“So, any fund that shows up in your budget … should have a budget. The three funds that I specifically pointed out in the finding were your water reserve fund and your sewer reserve fund and then your CDBG program income fund,” Roberts said. “The city and management have never adopted budgets for those funds. So, this is not something you started in 2015 and noncompliance. This is like something new every year — a hot topic with the state.”

Roberts said the state in recent months informed her company that some of its other local governments were not adopting budgets for specific funds.

“The reason you’re not adopting, internally, budgets for these funds is because you’re not dispersing money. You’re either only recognizing transfers in or a little bit of interest income. With the CDBG fund, you’re only recognizing loan payments. So, you’re only recognizing revenues in those funds. In the past, our audit partners and the state have leaned on (is) if you’re not spending money without a budget, you’re not in violation,” Roberts said. “It’s a hot topic. We felt our hand were tied, There has been debate. I really can’t say if the finding will go away. That will be a state call.”

If the state determines there has been a violation, the city’s finance personnel are prepared to adopt budgets for those funds in the current fiscal year, she said.

“It’s a gray area, and I have been working closely with Matt (Rauschenbach, the city’s finance director), and I am still waiting on a phone call,” Roberts told the council. “If it goes away, we will be reissuing your (audit report).”

For additional coverage of the audit report, see future editions of the Washington Daily News.