by Bradley Parsons
Staff Writer
For the last four years the City has paid accounting firm Ernst and Young, LLP to track and report on its finances. But the City Council auditor said it was the firm’s whining that put it in line for a raise in year five.
Coming up on an option year in a five-year deal with the City, the firm complained to Council auditors that it lost money over the last four years working for the City. Council Auditor Richard Wallace told the Council’s Finance Committee that Ernst and Young asked for about a $40,000 bump to make up the difference. The committee voted unanimously to increase the firm’s fee by $20,000 instead. The contract, pending the approval of the Accounting Committee and the full Council, expires March 31, 2005.
“They were complaining that they lost money on the early years of the contract,” said Wallace.
Asked by Council member Jerry Holland if the approximate 7 percent increase reflected Ernst and Young’s “whining about it,” Wallace responded “there was somewhat of a whine, and we decided to compromise.
“They wanted 15 (percent more) and we wanted zero. We settled out at seven,” said Wallace.
Auditing firms typically sign multi-year deals with municipalities because they know they’ll lose money early on, said Wallace. As the years pass, the firms usually become more familiar with municipal bookkeeping, saving time and resources. Although early losses are usually mitigated by later gains, Wallace said the firm would have lost money without the raise.
Next year will probably be the last that Ernst and Young performs the comprehensive audit. Cities typically change auditors after four or five years to keep a fresh perspective on the books, said Wallace.
“We like to change them out to avoid complacency,” he said.
Ernst and Young could be chosen again if they bid the lowest on the next contract, but Wallace said Jacksonville has never retained a firm after their contract expires.
The City will look at smaller, regional firms for the next five-year auditing period. Wallace said the national firms have lost interest in municipal auditing because of the complication and expense.