Board & Administration

There was no fraud or misuse of funds. The balances that were incorrectly classified in an annual audit report were immediately corrected. NOLS is committed to being a responsible steward of public funds and values transparency, and the State Auditor’s Office has routinely thanked NOLS staff for being well organized and responsive. No funds were missing or used improperly.

The Washington State Auditor’s last Financial Statements Audit Report includes a finding for “a material weakness in internal controls over financial reporting regarding other postemployment benefit liability reporting and ending cash and investment classification.”

Both errors stemmed from state accounting rule updates that had not been implemented at the time by former staff. NOLS acknowledged and agreed with the findings, confirmed the corrections had been made, and committed to following the State Auditor’s recommendations going forward.

The finance staff also participate in routine trainings offered by the State Auditor’s Office and MRSC (Municipal Research and Services Center) to stay current on accounting requirements and best practices.

Here’s a brief summary of each audit finding:

Missing Retirement Health Benefit Costs (OPEB Liability)
It’s important to note this wasn’t money that went missing – it was a missing disclosure that NOLS corrected immediately.

The Auditor identified that NOLS was not reporting the liability for Other Post Employment Benefits (OPEB) specifically related to the Public Employees Benefits Board (PEBB) plan for health care. This plan provides OPEB benefits through implicit and explicit rate subsidies for NOLS retirees. Even though retirees pay 100% of their premiums, their payments do not represent the full cost of the benefits. Retirees pay less because participating employers such as NOLS pay higher premiums, subsidizing the retirees’ premiums. This requires a real financial obligation for NOLS that accounting rules require to be disclosed.

Wrongly Labeled Reserved Funds (Cash Classification)
NOLS has a number of reserve funds that are reported on at monthly Board meetings and managed using the Library’s Fiscal Management Policy.

In annual reports to the Washington State Auditor, the auditor identified that ending cash and investment balances classified as either “Restricted” or “Committed” should have been classified as “Unassigned” even if the Board of Trustees had identified a clear use for those funds.

For example, at the end of 2023, there was $1.2 million in a reserve account specifically setup for the Sequim Library Expansion and Renovation Project. NOLS had spent years saving timber revenue to build this reserve, and planned to use the reserve to match grant funding. Despite that intent, the funds could still technically be available for any purpose, so NOLS should have reported them as unassigned instead of committed or restricted.

The restricted label is used when a portion of the balance is subject to externally enforceable legal restrictions. The committed label is used when the balance is constrained by specific limitations that the government agency imposes upon itself at the highest level of decision making.