Auditors link Anchorage's $25 million cash misstatement to how SAP closes the books

Anchorage's outside auditors told the Municipal Audit Committee on Wednesday how the city's 2024 cash and investments came to be misstated by about $25 million, tying the error partly to how the city's SAP accounting system handles corrections from prior years.

The report from BDO, the firm that audits the city, is dated June 22. It says the cash and investments footnote in the 2024 financial statements did not tie to the city's trial balance by about $25 million and was corrected through an audit adjustment. The report lists it among errors that the city's reconciliation and review controls were not precise enough to catch.

Chief Fiscal Officer Lance Wilber told the committee the cash was accounted for but "just not represented appropriately."

A BDO auditor said that because of how SAP closes the books, city staff have to run adjustments from prior years through equity. In 2024, the auditor said, the error ran through cash instead and went unidentified. "This is not something we do on most of our clients. This is very, very rare to have to do equity adjustments," the auditor said.

Controller Stefanie Ryan now pulls the 2025 figures from SAP and corrects them outside the system before handing them to BDO, "even if it's in an Excel workbook," she said. "Not my favorite, but we're working through some things."

Assembly member Erin Baldwin Day of Midtown, who chairs the committee, said the workaround did not sound sustainable. "We're paying millions of dollars for software that ... is not helping us to deliver the work product that we need to be able to do an audit in a coherent way," she said.

Ryan said the city converted to SAP S/4HANA about a month ago and is now meeting weekly with the SAP ERP team on changes. She said she hopes the workaround is needed only for 2025, and that the ERP team estimates the process, including testing, could take about six months.

Wilber said the change "can affect other departments," so the city wants to make it collaboratively, "so that we're not making a change that might be great for us and maybe not so great for others."

BDO found five material weaknesses and two significant deficiencies in the city's 2024 internal controls, including that the city failed to close its books in a timely manner after the fiscal year. Wilber said the city will be more timely with its 2025 report but still behind, and aims to have it done in the first quarter of next year.