Anchorage coded most sampled spending to the wrong account, audit finds

Anchorage departments put city spending in the wrong accounting bucket 72 percent of the time, an internal audit found — and no one has ever written down which bucket is which.

Auditors sampled 139 expenditures and found 100 coded to the wrong general ledger account. Another 25 were coded correctly but lacked accurate descriptions or documentation. The root problem, the audit says, is that the city's controller keeps a master list of accounts but has never defined what belongs in any of them. Departments improvise, and staff get no training on it.

Asked why they code all contract services to a catch-all account called Other Professional Services, managers in the Health Department and the IT office gave the same answer: "this is how it has always been done." Health Department staff said they code most homelessness spending there because that's where the budget was approved and loaded into the city's financial system. In one case, a Fire Department employee took a University of Alaska Fairbanks course from Anchorage, and the cost was booked as non-local travel.

The consequences aren't theoretical. Bad coding makes the city's financial reports unreliable, the audit warns, and slows reconciliations and outside audits.

Management agreed to write definitions, train staff and monitor how coding is done. But it pushed back on the framing, saying most of what auditors flagged "represented a difference in the level or nature of expenditure classification" rather than evidence that any spending was invalid, unauthorized, wrongly recorded or misstated. In other words: right money, wrong label.

This isn't an isolated finding. City auditors previously identified a material weakness in how general government capital costs were recorded. Related reviews found no central list of the city's project agreements with the state — worth $17.2 million across 47 projects since 2021 — and at least $11.8 million in spending that went out without a purchase order. Another review of fund classifications is on this year's audit schedule.

One detail about the audit itself: the office skipped the external quality-control review of its own work, citing budget constraints.

The Assembly takes up the report Tuesday.