The West Haymarket Arena Joint Public Agency and state Auditor Mike Foley have come to a compromise of sorts on his proposed audit of the city's $344 million arena project.
Because the JPA wasn't formed until June and the city's fiscal year ends in August, Foley has agreed not to audit the project until after the end of the 2011 fiscal year.
According to a letter the JPA plans to send to Foley, the agency has a budget of less than $200,000 for the rest of the year and few spending commitments.
"It would be more prudent to pay for an APA (auditor of public accounts) audit for a 15-month audit period than to pay for two APA audits in the same timeframe," reads the letter.
Foley said when he initially contacted Mayor Chris Beutler about doing an audit of the project, he anticipated that there would be large expenditures "right out of the gate."
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However, after receiving additional information, he learned that would not be the case, and he agreed that doing the first audit after 15 months was appropriate.
The three members of the JPA - City Councilwoman Jane Snyder, NU Regent Tim Clare and Beutler - voted to approve the compromise at Thursday's bi-weekly meeting of the agency.
While Beutler said he agreed with the substance of the compromise, "There are still several areas where I do not agree with Mr. Foley as to his authority."
One of those is whether the JPA will still have to hire an independent auditor to satisfy the requirements of issuing its bonds.
The draft language of the bond resolution says that the bond shall be audited by an independent, nationally recognized auditing firm.
Bond counsel Lauren Wismer said that is pretty standard language. He said potential bond buyers want assurances that the bonds are being audited in a consistent manner and by firms that are familiar with municipal bonds.
Beutler asked whether bond buyers would accept a state auditor's audit instead, a question Wismer deferred to Scott Keene, vice president of Ameritas Investment Corp., which is underwriting the bonds.
Keene said he couldn't answer that question definitively, but having a different auditing method "would clearly make us look different than other comparable financings out there."
On the other hand, having two financial audits is "extremely risky," Keene said.
Any discrepancies between an audit done by an independent private firm and one done by Foley could be problematic, he said.
"Having competing audits ... would be potentially disconcerting in the marketplace," Keene said.
Foley, however, pointed out that the city, county and Lincoln Public Schools, which issue hundreds of millions of dollars in bonds, do not have their bonds independently audited, and he doesn't see why the JPA would need to, especially since it has taxing authority to backstop any potential funding shortfalls.
He also said that the University of Nebraska and the state colleges, which are audited by Foley, have separate bond audits done.
"Bond audits are not duplicative of what I do," he said.
Reach Matt Olberding at 402-473-2647 or molberding@journalstar.com.
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