HomeMy WebLinkAbout05-07-26 Audit Exit ConferenceSPECIAL ACCOMMODATIONS: The City of Arlington strives to provide accessible meetings for people with disabilities. Please contact the
ADA coordinator at (360) 403-3441 or 711 (TDD only) prior to the meeting date if special accommodations are required.
PUBLIC NOTICE:
If you would like to join the meeting through Microsoft Teams, you must pre-register by 12:00 p.m.
the day prior to the meeting, by clicking here and filling out the form or by c alling 360-403-3441.
Instructions will be emailed to you by the day of the meeting. If you have any questions, please
contact the Administration Department at 360-403-3441 or administration@arlingtonwa.gov.
If you would like to submit written public comment only, you may do so in the written comment
section of the form. Written comment must be submitted by 12:00 p.m. on the day prior to the
meeting. Both written and oral public comment will be documented as public comment.
Please take notice that at least a majority of the City Council of the City of Arlington will be together
for the purpose of the exit conference for the 2024 Financial Audit by the Washington State
Auditor’s Office. No other business will be transacted.
____________________________________
Raelynn Jones, City Clerk
Special Meeting Attendance Notice
Thursday, May 7, 2026 at 10:00 am
SPECIAL ACCOMMODATIONS: The City of Arlington strives to provide accessible meetings for people with disabilities. Please contact the
ADA coordinator at (360) 403-3441 or 711 (TDD only) prior to the meeting date if special accommodations are required.
Please take notice that at least a majority of the City Council of the City of Arlington will be together
for the purpose of the exit conference for the 2024 Financial Audit by the Washington State Auditor’s
Office. No other business will be transacted.
____________________________________
Raelynn Jones, City Clerk
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Special Meeting Attendance Notice
Thursday, May 7, 2026 at 10:00 am
Executive Conference Room 238 N. Olympic Ave.
Exit Conference: City of Arlington
The Office of the Washington State Auditor’s vision is increased trust in government. Our mission is to provide
citizens with independent and transparent examinations of how state and local governments use public funds, and
develop strategies that make government more efficient and effective.
The purpose of this meeting is to share the results of your audit and our draft reporting. We value and appreciate
your participation.
Audit Reports
We will publish the following reports:
• Accountability audit for January 1, 2023 through December 31, 2024 – see draft report.
• Financial statement and federal grant compliance audit for January 1, 2024 through December 31, 2024 –
see published report.
Audit Highlights
We would like to thank Shelby Burke, Finance Director and Sheri Amundson, Assistant Finance Director and all
other City staff for their cooperation and responses to our requests throughout the audit. All staff were friendly
and professional, which made the audit process collaborative and productive.
Recommendations not included in the Audit Reports
Exit Items
We have provided exit recommendations for management’s consideration. Exit items address control deficiencies
or noncompliance with laws or regulations that have an insignificant or immaterial effect on the entity, or errors
with an immaterial effect on the financial statements. Exit items are not referenced in the audit report.
Financial Statement Audit Communication
We would like to bring the following to your attention:
• We did not identify any material misstatements during the audit.
• There were no uncorrected misstatements in the audited financial statements.
• The audit addressed the following risks, which required special consideration:
o Due to the possibility that management may be able to circumvent certain controls, standards
require the auditor to assess the risk of management override.
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Finalizing Your Audit
Report Publication
Audit reports are published on our website and distributed via email in a .pdf file. We also offer a subscription
service that notifies you by email when audit reports are released or posted to our website. You can sign up for
this convenient service at Sign Up for News & Alerts | Office of the Washington State Auditor.
Management Representation Letter
We have included a copy of representations requested of management.
Audit Cost
At the entrance conference, we estimated the cost of the audit to be $77,000 and actual audit costs will
approximate that amount.
Your Next Scheduled Audit
Your next audit is scheduled to be conducted in Summer 2026 and will cover the following general areas:
• Accountability for public resources
• Financial statement
• Federal programs
The estimated cost for the next audit based on current rates is $75,000 inclusive of travel expenses. This
preliminary estimate is provided as a budgeting tool and not a guarantee of final cost.
Working Together to Improve Government
Audit Survey
When your report is released, you will receive an audit survey from us. We value your opinions on our audit
services and hope you provide feedback.
Local Government Support Team
This team provides support services to local governments through technical assistance, comparative statistics,
training, and tools to help prevent and detect a loss of public funds. Our website and client portal offers many
resources, including a client Help Desk that answers auditing and accounting questions. Additionally, this team
assists with the online filing of your financial statements.
The Center for Government Innovation
The Center for Government Innovation at the Office of the Washington State Auditor offers services specifically
to help you help the residents you serve at no additional cost to your government. What does this mean? We
provide expert advice in areas like Lean process improvement, peer-to-peer networking, and culture-building to
help local governments find ways to be more efficient, effective and transparent. The Center can help you by
providing assistance in financial management, cybersecurity and more. Check out our best practices and other
resources that help local governments act on accounting standard changes, comply with regulations, and respond
to recommendations in your audit. The Center understands that time is your most precious commodity as a public
servant, and we are here to help you do more with the limited hours you have. If you are interested in learning
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how we can help you maximize your effect in government, call us at (564) 999-0818 or email us at
Center@sao.wa.gov.
Questions?
Please contact us with any questions about information in this document or related audit reports.
Tina Watkins, CPA, Director of Local Audit, (360) 260-6411, Tina.Watkins@sao.wa.gov
Kristina Baylor, Assistant Director of Local Audit, (425) 951-0290, Kristina.Baylor@sao.wa.gov
Courtney Amonsen, Audit Manager, (425) 510-0478, Courtney.Amonsen@sao.wa.gov
Erika Davies, Assistant Audit Manager, (425) 510-0476, Erika.Davies@sao.wa.gov
Deb Kindinger, Audit Lead, (425) 758-2250, Deb.Kindinger@sao.wa.gov
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we’re helping advance
#GoodGovernment
Accountability Audit Report
City of Arlington
For the period January 1, 2023 through December 31, 2024
Published (Inserted by OS)
Report No. 1039588
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Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (564) 999-0950 Pat.McCarthy@sao.wa.gov
Office of the Washington State Auditor
Pat McCarthy
Issue Date – (Inserted by OS)
Mayor and City Council
City of Arlington
Arlington, Washington
Report on Accountability
Thank you for the opportunity to work with you to promote accountability, integrity and openness
in government. The Office of the Washington State Auditor takes seriously our role of providing
state and local governments with assurance and accountability as the independent auditor of public
accounts. In this way, we strive to help government work better, cost less, deliver higher value and
earn greater public trust.
Independent audits provide essential accountability and transparency for City operations. This
information is valuable to management, the governing body and public stakeholders when
assessing the government’s stewardship of public resources.
Attached is our independent audit report on the City’s compliance with applicable requirements
and safeguarding of public resources for the areas we examined. We appreciate the opportunity to
work with your staff and value your cooperation during the audit.
Sincerely,
Pat McCarthy, State Auditor
Olympia, WA
Americans with Disabilities
In accordance with the Americans with Disabilities Act, we will make this document available in
alternative formats. For more information, please contact our Office at (564) 999-0950, TDD
Relay at (800) 833-6388, or email our webmaster at webmaster@sao.wa.gov.
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Office of the Washington State Auditor sao.wa.gov Page 3
TABLE OF CONTENTS
Audit Results ................................................................................................................................... 4
Schedule of Audit Findings and Responses .................................................................................... 5
Related Reports ............................................................................................................................. 10
Information about the City ............................................................................................................ 11
About the State Auditor's Office ................................................................................................... 12
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Office of the Washington State Auditor sao.wa.gov Page 4
AUDIT RESULTS
Results in brief
This report describes the overall results and conclusions for the areas we examined. In most of the
areas we examined, City operations complied, in all material respects, with applicable state laws,
regulations, and its own policies, and provided adequate controls over safeguarding of public
resources.
As referenced above, we identified areas where the City could make improvements. These
recommendations are included with our report as a finding.
In keeping with general auditing practices, we do not examine every transaction, activity, policy,
internal control, or area. As a result, no information is provided on the areas that were not
examined.
About the audit
This report contains the results of our independent accountability audit of the City of Arlington
from January 1, 2023 through December 31, 2024.
Management is responsible for ensuring compliance and adequate safeguarding of public resources
from fraud, loss or abuse. This includes the design, implementation and maintenance of internal
controls relevant to these objectives.
This audit was conducted under the authority of RCW 43.09.260, which requires the Office of the
Washington State Auditor to examine the financial affairs of all local governments. Our audit
involved obtaining evidence about the City’s use of public resources, compliance with state laws
and regulations and its own policies and procedures, and internal controls over such matters. The
procedures performed were based on our assessment of risks in the areas we examined.
Based on our risk assessment for the years ended December 31, 2024 and 2023, the areas examined
were those representing the highest risk of fraud, loss, abuse, or noncompliance. We examined the
following areas during this audit period:
•
• Payroll – gross wages, overtime, bonus and incentive payments and shift exchanges
• Compliance with public works projects – change orders
• Treasury activities – monitoring of banking activity
• Open public meetings – compliance with minutes, meetings and executive session
requirements
• Financial condition – reviewing for indications of financial distress
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SCHEDULE OF AUDIT FINDINGS AND RESPONSES
City of Arlington
January 1, 2023 through December 31, 2024
2024-001 The City did not have adequate internal controls over utility billing
rate implementations, which resulted in a gift of public funds.
Background
The City of Arlington provides water, sewer and stormwater services to about 5,200
customers. A seven-member City Council and Mayor govern the City, which had
utility billing revenues of about $13.9 million and $14 million in 2023 and 2024,
respectively.
City management is responsible for establishing adequate controls over customer
utility billings to ensure they are accurate and uniform for the same class of
customers or service, in accordance with state law.
In November 2023, the City identified an error in its utility billing system that
resulted in the City not billing some commercial, City-owned and school accounts
from February to October 2023. Once identified, the City passed Resolution
2024-013 waving the collection of utility charges associated with the undercharged
accounts.
Description of Condition
We reviewed the City’s utility billings and found it did not have established controls
to ensure it accurately charged the sewer base rate to all commercial, City-owned
and school district accounts.
Once the City identified the billing error, it did not have adequate controls to ensure
it took the appropriate steps to correct the underbilled customers in accordance with
City code (13.12.140) and prevent any rate discrimination.
This resulted in a gifting of public funds.
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Cause of Condition
The City did not perform an independent review to ensure new rates were properly
calculating in the utility billing system for all account types. Further, the City did
not commit sufficient time and resources to collect the unbilled revenue.
Effect of Condition
The City did not accurately charge sewer base rate fees for commercial, City-owned
and school district accounts, resulting in undercharging customers about $109,730
in fiscal year 2023. Because the City passed a resolution waving the undercharged
accounts, it was unable to collect the utility revenue, which could be considered
rate discrimination for those that were billed. Additionally, we found one fund
benefiting another because the City did not charge fees for City-owned accounts,
which is not allowed by state law.
Recommendation
We recommend the City strengthen its internal controls over utility billing to ensure
the system calculates the accurate bills for all account types when utility rates are
updated. We also recommend the City follow state law and city code to recoup
revenue if a similar situation occurs.
City’s Response
The City of Arlington acknowledges the audit finding regarding inadequate internal
controls over utility billing rate implementations. We appreciate the auditors’
review and recommendations and are committed to strengthening internal controls,
improving compliance with applicable state law and City Code, and preventing
recurrence.
The City agrees that stronger controls are necessary to ensure utility billing rates
are applied accurately and uniformly across all customer classes and account
types. The City also recognizes the need to take corrective actions consistent with
Arlington Municipal Code (including AMC 13.12.140) and applicable state law to
avoid rate discrimination and to ensure appropriate interfund charges, including
billing City-owned accounts as required.
After City leadership became aware of the issue—over a year after the underbilling
began—the City worked to assess the impact as quickly as possible. The City
obtained legal counsel and coordinated with the City Council to determine a course
of action. At the time, the City believed it was taking appropriate steps to address
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the matter. The City’s decision-making also considered the significant
administrative burden and time required to reconstruct and rebill affected
accounts. However, the audit finding clarifies that future corrective actions must
align with state law and City code expectations related to recoupment and uniform
treatment.
To address the recommendation to strengthen internal controls over utility billing,
the City will implement (and has already implemented portions of) the following
measures:
1. Rate Implementation Checklist and Standard Operating Procedure (SOP)
The City will update its SOP for utility billing to include (1) monthly billing reviews
and (2) additional controls related to software updates and rate table changes. The
SOP will include a standardized rate-implementation checklist covering
configuration, testing, approvals, documentation, and post-implementation
monitoring.
2. Independent Review and Approval Prior to Activation
For each future rate update, the City will require an independent review by a staff
member not responsible for system configuration. This review will verify that rates
and base charges calculate correctly for all account types, including (at minimum)
residential, commercial, City-owned, and other public-entity accounts, as
applicable.
3. Pre-Implementation Testing Across All Account Types
Prior to activating new rates, the City will run reports and review representative
billing outcomes across each customer class and account type to confirm accurate
calculation of base rates, consumption charges, and any applicable fees. Testing
results will be documented and retained.
4. Post-Implementation Monitoring and Reconciliation
Within the first full billing cycle after any rate change, the City will complete a
reconciliation review to confirm rate application and identify anomalies (e.g., zero-
bill accounts, missing base fees, or unexpected variances). Exceptions will be
documented, promptly investigated, and corrected.
5. Monthly Sample Review of Accounts
The City will perform a monthly review of a sample of accounts to verify that rates
continue to be applied correctly across account types and to identify rate table or
billing calculation issues early.
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6. Training, Cross-Training, and Escalation Expectations
The City will provide targeted training for staff involved in utility billing and rate
implementation, including internal control expectations, documentation
requirements, and compliance considerations. Cross-training will reduce reliance
on a single position and improve continuity and oversight. In addition, staff will be
trained to immediately report suspected billing or rate errors to their supervisor,
and these reporting expectations will be reflected in job duties and performance
expectations.
The City agrees with the recommendation to follow state law and City code to
recoup revenue if a similar situation occurs in the future. If the City identifies
underbilling or incorrect rate application going forward, the City will promptly
quantify the impact and document the time period, customer classes affected, and
total estimated underbilling.
The City will follow Arlington Municipal Code and applicable state requirements
to determine appropriate corrective billing actions and collection steps, including
clear customer notification and consistent treatment across similarly situated
accounts to avoid rate discrimination. The City will also seek legal and policy
guidance as needed to ensure corrective actions are compliant, consistent, and
appropriately documented before decisions are finalized.
The City is committed to maintaining accurate and uniform utility billings and
safeguarding public resources. The corrective actions described above are
intended to reduce the risk of future billing errors, strengthen oversight of billing
system changes, and ensure timely and code-compliant corrective action if issues
are identified.
Thank you for your work on this matter and for the opportunity to respond. Please
consider this letter the City’s formal response and commitment to comply with the
audit recommendations. The City can provide documentation supporting the
implementation of these procedures and controls as they are finalized and placed
into operation.
Auditor’s Remarks
We appreciate the steps the City is taking to resolve this issue. We will review the
condition during our next audit.
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Applicable Laws and Regulations
Article VIII, Section 7 of the Washington State Constitution,
RCW 35.92.010 - Authority to acquire and operate waterworks—Generation of
electricity—Classification of services for rates.
RCW 43.09.210 – Local government accounting – Separate accounts for each fund
or activity – Exemptions - mandates that no department or fund should financially
benefit from another’s appropriations
Arlington Municipal Code Section 13.12.060 - Average estimated charges. When
a meter has ceased to register since the preceding reading, due to mechanical
breakdown or when it is impossible to read a meter that is buried in debris, or for
any other reason is unreadable, or when it is necessary during any month to remove
such meter either temporarily or permanently for unforeseen reasons, or if any other
condition exists which would not permit a full monthly measurement of the water
used in any premises during the month, the water department is authorized to
average the bills of such user for previous available months and to charge such
average bill monthly during the continued presence of any of the conditions listed
above. (Ord. No. 2010-008, § 2, 5-17-2010)
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RELATED REPORTS
Financial
Our opinion on the City’s financial statements and compliance with federal grant program
requirements is provided in a separate report, which includes the City’s financial statements. That
report is available on our website, https://portal.sao.wa.gov//ReportSearch.
Federal grant programs
We evaluated internal controls and tested compliance with the federal program requirements, as
applicable, for the City’s major federal program, which is listed in the Schedule of Findings and
Questioned Costs section of the separate financial statement and single audit report. That report is
available on our website, https://portal.sao.wa.gov//ReportSearch.
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INFORMATION ABOUT THE CITY
The City of Arlington was incorporated in 1903. Located in Snohomish County, the City has a
population of approximately 22,980. The City provides a full range of services including police,
water distribution, sewage collection and treatment, street maintenance, parks maintenance,
economic development and planning, a municipal cemetery and a municipal airport.
An elected, seven-member City Council and a separately elected Mayor govern the City. The City
Council appoints a City Administrator to oversee the City's daily operations as well as its
approximately 135 full time employees. For the year ended December 31, 2024, the City operated
on an annual budget of approximately $117 million.
Contact information related to this report
Information current as of report publish date.
Audit history
You can find current and past audit reports for the City of Arlington at
https://portal.sao.wa.gov//ReportSearch.
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ABOUT THE STATE A UDITOR’S OFFICE
The State Auditor’s Office is established in the Washington State Constitution and is part of the
executive branch of state government. The State Auditor is elected by the people of Washington
and serves four-year terms.
We work with state agencies, local governments and the public to achieve our vision of increasing
trust in government by helping governments work better and deliver higher value.
In fulfilling our mission to provide citizens with independent and transparent examinations of how
state and local governments use public funds, we hold ourselves to those same standards by
continually improving our audit quality and operational efficiency, and by developing highly
engaged and committed employees.
As an agency, the State Auditor’s Office has the independence necessary to objectively perform
audits, attestation engagements and investigations. Our work is designed to comply with
professional standards as well as to satisfy the requirements of federal, state and local laws. The
Office also has an extensive quality control program and undergoes regular external peer review
to ensure our work meets the highest possible standards of accuracy, objectivity and clarity.
Our audits look at financial information and compliance with federal, state and local laws for all
local governments, including schools, and all state agencies, including institutions of higher
education. In addition, we conduct performance audits and cybersecurity audits of state agencies
and local governments, as well as state whistleblower, fraud and citizen hotline investigations.
The results of our work are available to everyone through the more than 2,000 reports we publish
each year on our website, www.sao.wa.gov. Additionally, we share regular news and other
information via an email subscription service and social media channels.
We take our role as partners in accountability seriously. The Office provides training and technical
assistance to governments both directly and through partnerships with other governmental support
organizations.
Stay connected at sao.wa.gov
• Find your audit team
• Request public records
• Search BARS Manuals (GAAP and
cash), and find reporting templates
• Learn about our training workshops
and on-demand videos
• Discover which governments serve you
— enter an address on our map
• Explore public financial data
with the Financial Intelligence Tool
Other ways to stay in touch
• Main telephone:
(564) 999-0950
• Toll-free Citizen Hotline:
(866) 902-3900
• Email:
webmaster@sao.wa.gov
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we’re helping advance
Financial Statements and Federal Single
Audit Report
City of Arlington
For the period January 1, 2024 through December 31, 2024
Published (Inserted by OS)
Report No. 1038057
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Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (564) 999-0950 Pat.McCarthy@sao.wa.gov
Office of the Washington State Auditor
Pat McCarthy
Issue Date – (Inserted by OS)
Mayor and City Council
City of Arlington
Arlington, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Arlington’s financial statements and compliance with
federal laws and regulations.
We are issuing this report in order to provide information on the City’s financial activities and
condition.
Sincerely,
Pat McCarthy, State Auditor
Olympia, WA
Americans with Disabilities
In accordance with the Americans with Disabilities Act, we will make this document available in
alternative formats. For more information, please contact our Office at (564) 999-0950, TDD
Relay at (800) 833-6388, or email our webmaster at webmaster@sao.wa.gov.
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Office of the Washington State Auditor sao.wa.gov
TABLE OF CONTENTS
Schedule of Findings and Questioned Costs ................................................................................... 4
Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards ..................................................................................................... 6
Independent Auditor's Report on Compliance for Each Major Federal Program and Report on
Internal Control Over Compliance in Accordance With the Uniform Guidance ........................... 9
Independent Auditor's Report on the Financial Statements .......................................................... 12
Financial Section ........................................................................................................................... 16
About the State Auditor's Office ................................................................................................... 17
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Office of the Washington State Auditor sao.wa.gov
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
City of Arlington
January 1, 2024 through December 31, 2024
SECTION I – SUMMARY OF AUDITOR’S RESULTS
The results of our audit of the City of Arlington are summarized below in accordance with Title 2
U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Financial Statements
We issued an unmodified opinion on the fair presentation of the City’s financial statements in
accordance with its regulatory basis of accounting. Separately, we issued an adverse opinion on
the fair presentation with regard to accounting principles generally accepted in the United States
of America (GAAP) because the financial statements are prepared using a basis of accounting
other than GAAP.
Internal Control over Financial Reporting:
• Significant Deficiencies: We reported no deficiencies in the design or operation of internal
control over financial reporting that we consider to be significant deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We noted no instances of noncompliance that were material to the financial statements of the City.
Federal Awards
Internal Control over Major Programs:
• Significant Deficiencies: We reported no deficiencies in the design or operation of internal
control over major federal programs that we consider to be significant deficiencies.
• Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We issued an unmodified opinion on the City’s compliance with requirements applicable to its
major federal program.
We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a).
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Identification of Major Federal Programs
The following program was selected as a major program in our audit of compliance in accordance
with the Uniform Guidance.
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by
the Uniform Guidance, was $750,000.
The City qualified as a low-risk auditee under the Uniform Guidance.
SECTION II – FINANCIAL STATEMENT FINDINGS
None reported.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED
COSTS
None reported.
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Office of the Washington State Auditor sao.wa.gov
INDEPENDENT AUDITOR’S REPORT
Report on Internal Control over Financial Reporting and on Compliance and Other
Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
City of Arlington
January 1, 2024 through December 31, 2024
Mayor and City Council
City of Arlington
Arlington, Washington
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States, the financial statements of the
City of Arlington, as of and for the year ended December 31, 2024, and the related notes to the
financial statements, which collectively comprise the City’s financial statements, and have issued
our report thereon dated September 15, 2025.
We issued an unmodified opinion on the fair presentation of the City’s financial statements in
accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair
presentation with regard to accounting principles generally accepted in the United States of
America (GAAP) because the financial statements are prepared by the City using accounting
practices prescribed by state law and the State Auditor’s Budgeting, Accounting and Reporting
System (BARS) manual described in Note 1, which is a basis of accounting other than GAAP. The
effects on the financial statements of the variances between the basis of accounting described in
Note 1 and accounting principles generally accepted in the United States of America, although not
reasonably determinable, are presumed to be material.
REPORT ON I NTERNAL CONTROL OVER FINANCIAL
REPORTING
In planning and performing our audit of the financial statements, we considered the City’s internal
control over financial reporting (internal control) as a basis for designing audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s
internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s
internal control.
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A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a
material misstatement of the City’s financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of
deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described above and was not
designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies and therefore, material weaknesses or significant deficiencies may exist
that were not identified.
Given these limitations, during our audit we did not identify any deficiencies in internal control
that we consider to be material weaknesses.
REPORT ON COMPLIAN CE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are free
from material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grant agreements, noncompliance with which could have a direct and
material effect on the financial statements. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not express such an
opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required
to be reported under Government Auditing Standards.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
City’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose. However, this
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Office of the Washington State Auditor sao.wa.gov
report is a matter of public record and its distribution is not limited. It also serves to disseminate
information to the public as a reporting tool to help citizens assess government operations.
Pat McCarthy, State Auditor
Olympia, WA
September 15, 2025
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INDEPENDENT AUDITOR’S REPORT
Report on Compliance for Each Major Federal Program and Report on Internal
Control over Compliance in Accordance with the Uniform Guidance
City of Arlington
January 1, 2024 through December 31, 2024
Mayor and City Council
City of Arlington
Arlington, Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM
Opinion on Each Major Federal Program
We have audited the compliance of the City of Arlington, with the types of compliance
requirements identified as subject to audit in the U.S. Office of Management and Budget (OMB)
Compliance Supplement that could have a direct and material effect on each of the City’s major
federal programs for the year ended December 31, 2024. The City’s major federal programs are
identified in the auditor’s results section of the accompanying Schedule of Findings and
Questioned Costs.
In our opinion, the City complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2024.
Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted
in the United States of America (GAAS); the standards applicable to financial audits contained in
Government Auditing Standards issued by the Comptroller General of the United States; and the
audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance)
are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our
report.
We are required to be independent of the City and to meet our other ethical responsibilities, in
accordance with the relevant ethical requirements relating to our audit. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on
compliance for each major federal program. Our audit does not provide a legal determination on
the City’s compliance with the compliance requirements referred to above.
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Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the
design, implementation, and maintenance of effective internal control over compliance with the
requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements
applicable to the City’s federal programs.
Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the
compliance requirements referred to above occurred, whether due to fraud or error, and express an
opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of
assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in
accordance with GAAS, Government Auditing Standards and the Uniform Guidance will always
detect a material noncompliance when it exists. The risk of not detecting a material noncompliance
resulting from fraud is higher than for that resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Noncompliance with the compliance requirements referred to above is considered material, if there
is a substantial likelihood that, individually or in the aggregate, it would influence the judgement
made by a reasonable user of the report on compliance about the City’s compliance with the
requirements of each major federal program as a whole.
Performing an audit in accordance with GAAS, Government Auditing Standards and the Uniform
Guidance includes the following responsibilities:
• Exercise professional judgment and maintain professional skepticism throughout the audit;
• Identify and assess the risks of material noncompliance, whether due to fraud or error, and
design and perform audit procedures responsive to those risks. Such procedures include
examining, on a test basis, evidence regarding the City’s compliance with the compliance
requirements referred to above and performing such other procedures as we considered
necessary in the circumstances;
• Obtain an understanding of the City’s internal control over compliance relevant to the audit
in order to design audit procedures that are appropriate in the circumstances and to test and
report on internal control over compliance in accordance with the Uniform Guidance, but
not for the purpose of expressing an opinion on the effectiveness of the City’s internal
control over compliance. Accordingly, no such opinion is expressed; and
• We are required to communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and any significant deficiencies
and material weaknesses in internal control over compliance that we identified during the
audit.
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Office of the Washington State Auditor sao.wa.gov
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. Accordingly, no such opinion is expressed. Our consideration of internal
control over compliance was for the limited purpose described in the Auditor’s Responsibilities
for the Audit of Compliance section above and was not designed to identify all deficiencies in
internal control over compliance that might be material weaknesses or significant deficiencies in
internal control over compliance and therefore, material weaknesses or significant deficiencies
may exist that were not identified.
Given these limitations, during our audit we did not identify any deficiencies in internal control
over compliance that we consider to be material weaknesses, as defined above.
Purpose of this Report
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other
purpose. However, this report is a matter of public record and its distribution is not limited. It also
serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
Pat McCarthy, State Auditor
Olympia, WA
September 15, 2025
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INDEPENDENT AUDITOR’S REPORT
Report on the Audit of the Financial Statements
City of Arlington
January 1, 2024 through December 31, 2024
Mayor and City Council
City of Arlington
Arlington, Washington
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Unmodified and Adverse Opinions
We have audited the financial statements of the City of Arlington, as of and for the year ended
December 31, 2024, and the related notes to the financial statements, as listed in the financial
section of our report.
Unmodified Opinion on the Regulatory Basis of Accounting (BARS Manual)
As described in Note 1, the City has prepared these financial statements to meet the financial
reporting requirements of state law and accounting practices prescribed by the State Auditor’s
Budgeting, Accounting and Reporting System (BARS) Manual. Those accounting practices differ
from accounting principles generally accepted in the United States of America (GAAP). The
differences in these accounting practices are also described in Note 1.
In our opinion, the accompanying financial statements referred to above present fairly, in all
material respects, the cash and investments of the City of Arlington, and its changes in cash and
investments, for the year ended December 31, 2024, on the basis of accounting described in
Note 1.
Adverse Opinion on U.S. GAAP
The financial statements referred to above were not intended to, and in our opinion, they do not,
present fairly, in accordance with accounting principles generally accepted in the United States of
America, the financial position of the City of Arlington, as of December 31, 2024, or the changes
in financial position or cash flows thereof for the year then ended, because of the significance of
the matter discussed below.
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Basis for Unmodified and Adverse Opinion s
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America (GAAS) and Government Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are required to be independent of the City, and to meet our
other ethical responsibilities, in accordance with the relevant ethical requirements relating to our
audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit unmodified and adverse opinions.
Matter Giving Rise to Adverse Opinion on U.S. GAAP
Auditing standards issued by the American Institute of Certified Public Accountants (AICPA)
require auditors to formally acknowledge when governments do not prepare their financial
statements, intended for general use, in accordance with GAAP. As described in Note 1 of the
financial statements, the financial statements are prepared by the City in accordance with state law
using accounting practices prescribed by the BARS Manual, which is a basis of accounting other
than accounting principles generally accepted in the United States of America. The effects on the
financial statements of the variances between the regulatory basis of accounting and accounting
principles generally accepted in the United States of America, although not reasonably
determinable, are presumed to be material and pervasive.
Matters of Emphasis
As discussed in Note 13 to the financial statements, in 2024, the City adopted new accounting
guidance for presentation and disclosure of compensated absences, as required by the BARS
Manual. Our opinion is not modified with respect to this matter.
Responsibilit ies of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the financial reporting provisions of state law and the BARS Manual described
in Note 1. This includes determining that the basis of accounting is acceptable for the presentation
of the financial statements in the circumstances. Management is also responsible for the design,
implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the City’s
ability to continue as a going concern for twelve months beyond the financial statement date,
including any currently known information that may raise substantial doubt shortly thereafter.
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Auditor’s Responsibilit ies for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinions. Reasonable assurance is a high level of assurance but is not absolute
assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and
Government Auditing Standards will always detect a material misstatement when it exists. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control. Misstatements are considered material if there is a substantial
likelihood that, individually or in the aggregate, they would influence the judgment made by a
reasonable user based on the financial statements.
Performing an audit in accordance with GAAS and Government Auditing Standards includes the
following responsibilities:
• Exercise professional judgment and maintain professional skepticism throughout the audit;
• Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, and design and perform audit procedures responsive to those risks.
Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements;
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion
is expressed;
• Evaluate the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the overall
presentation of the financial statements;
• Conclude whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the City’s ability to continue as a going
concern for a reasonable period of time; and
• We are required to communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit, significant audit findings, and
certain internal control-related matters that we identified during the audit.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the City’s financial statements. The accompanying Schedule of
Expenditures of Federal Awards is presented for purposes of additional analysis as required by
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Schedule
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of Liabilities is also presented for purposes of additional analysis, as required by the prescribed
BARS manual. These schedules are not a required part of the financial statements. Such
information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the financial statements. The information
has been subjected to the auditing procedures applied in the audit of the financial statements and
certain additional procedures, including comparing and reconciling such information directly to
the underlying accounting and other records used to prepare the financial statements or to the
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the information is
fairly stated, in all material respects, in relation to the financial statements as a whole.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING
STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated
September 15, 2025 on our consideration of the City’s internal control over financial reporting and
on the tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on the effectiveness of the City’s internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the City’s internal control over financial reporting and
compliance.
Pat McCarthy, State Auditor
Olympia, WA
September 15, 2025
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FINANCIAL SECTION
City of Arlington
January 1, 2024 through December 31, 2024
FINANCIAL STATEMENTS
Fund Resources and Uses Arising from Cash Transactions – 2024
Fiduciary Fund Resources and Uses Arising from Cash Transactions – 2024
Notes to Financial Statements – 2024
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Liabilities – 2024
Schedule of Expenditures of Federal Awards – 2024
Notes to the Schedule of Expenditures of Federal Awards – 2024
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Office of the Washington State Auditor sao.wa.gov
ABOUT THE STATE A UDITOR’S OFFICE
The State Auditor’s Office is established in the Washington State Constitution and is part of the
executive branch of state government. The State Auditor is elected by the people of Washington
and serves four-year terms.
We work with state agencies, local governments and the public to achieve our vision of increasing
trust in government by helping governments work better and deliver higher value.
In fulfilling our mission to provide citizens with independent and transparent examinations of how
state and local governments use public funds, we hold ourselves to those same standards by
continually improving our audit quality and operational efficiency, and by developing highly
engaged and committed employees.
As an agency, the State Auditor’s Office has the independence necessary to objectively perform
audits, attestation engagements and investigations. Our work is designed to comply with
professional standards as well as to satisfy the requirements of federal, state and local laws. The
Office also has an extensive quality control program and undergoes regular external peer review
to ensure our work meets the highest possible standards of accuracy, objectivity and clarity.
Our audits look at financial information and compliance with federal, state and local laws for all
local governments, including schools, and all state agencies, including institutions of higher
education. In addition, we conduct performance audits and cybersecurity audits of state agencies
and local governments, as well as state whistleblower, fraud and citizen hotline investigations.
The results of our work are available to everyone through the more than 2,000 reports we publish
each year on our website, www.sao.wa.gov. Additionally, we share regular news and other
information via an email subscription service and social media channels.
We take our role as partners in accountability seriously. The Office provides training and technical
assistance to governments both directly and through partnerships with other governmental support
organizations.
Stay connected at sao.wa.gov
• Find your audit team
• Request public records
• Search BARS Manuals (GAAP and
cash), and find reporting templates
• Learn about our training workshops
and on-demand videos
• Discover which governments serve you
— enter an address on our map
• Explore public financial data
with the Financial Intelligence Tool
Other ways to stay in touch
• Main telephone:
(564) 999-0950
• Toll-free Citizen Hotline:
(866) 902-3900
• Email:
webmaster@sao.wa.gov
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LETTER OF REPRESENTATION TO BE TYPED ON CLIENT LETTERHEAD
May 7, 2026
Office of the Washington State Auditor
15129 Main Street, Suite Cl02
Mill Creek, WA 98012
To the Office of the Washington State Auditor:
We are providing this letter in connection with your audit of the City of Arlington for the period
from January 1, 2023, through December 31, 2024. Representations are in relation to matters
existing during or subsequent to the audit period up to the date of this letter.
Certain representations in this letter are described as being limited to matters that are significant
or material. Information is considered significant or material if it is probable that it would change
or influence the judgment of a reasonable person.
We confirm, to the best of our knowledge and belief, having made appropriate inquires to be able
to provide our representations, the following representations made to you during your audit. If we
subsequently discover information that would change our representations related to this period, we
will notify you in a timely manner.
General Representations:
1. We have provided you with unrestricted access to people you wished to speak with and
made available all relevant and requested information of which we are aware, including:
a. Financial records and related data.
b. Minutes of the meetings of the governing body or summaries of actions of recent
meetings for which minutes have not yet been prepared.
c. Other internal or external audits, examinations, investigations or studies that might
concern the objectives of the audit and the corrective action taken to address significant
findings and recommendations.
d. Communications from regulatory agencies, government representatives or others
concerning possible noncompliance, deficiencies in internal control or other matters
that might concern the objectives of the audit.
e. Related party relationships and transactions.
f. Results of our internal assessment of business risks and risks related to financial
reporting, compliance and fraud.
2. We acknowledge our responsibility for compliance with requirements related to
confidentiality of certain information, and have notified you whenever records or data
containing information subject to any confidentiality requirements were made available.
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3. We acknowledge our responsibility for compliance with applicable laws, regulations,
contracts and grant agreements.
4. We have identified and disclosed all laws, regulations, contracts and grant agreements that
could have a direct and material effect on the determination of financial statement amounts,
including legal and contractual provisions for reporting specific activities in separate funds.
5. Except as reported by the audit, we have complied with all material aspects of laws,
regulations, contracts and grant agreements.
6. We acknowledge our responsibility for establishing and maintaining effective internal
controls over compliance with applicable laws and regulations, safeguarding of public
resources, and financial reporting, including controls to prevent and detect fraud.
7. Except as reported by the audit, we have established adequate procedures and controls to
provide reasonable assurance of compliance with applicable laws and regulations,
safeguarding of public resources, and accurate financial reporting.
8. We have no knowledge of any loss of public funds or assets or other illegal activity, or any
allegations of fraud or suspected fraud involving management or employees.
9. In accordance with RCW 43.09.200, all transactions have been properly recorded in the
financial records.
Don Vanney Shelby Burke
Mayor Finance Director
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