The audit of Columbus’ finances for Fiscal Year 2019 showed issues with the city budget that went beyond the misdeeds of the former chief financial officer charged with embezzlement, certified public accountant Wanda Holley told the city council at its Tuesday meeting.
Holley, a CPA at Watkins, Ward and Stafford, the firm which conducted the FY 2019 audit, found the city overspent some of its budgets and did not amend the overall budget in a timely manner, she said.
Former chief financial officer Milton Rawle prepared the FY 2019 budget, and he has since been charged with embezzling almost $290,000 from the city between 2016 and 2018. He made several unauthorized transfers that were not recorded in the city’s books, but Holley said she found other revenue and expense items, separate from Rawle’s criminal activity, that were not recorded.
“In the process of reconciling the bank account (after Rawle resigned), we had to make sure that all the transactions that happened were recorded in the books,” Holley said. “It was a lengthy process and it took a while. That’s why the budget was not amended at the right time.”
State statute requires municipalities to make all final budget amendments by the end of the month after the fiscal year ends. Columbus’ fiscal year ends Sept. 30, so it should have made all the amendments to the FY 2019 budget by Oct. 31, 2019.
Rawle resigned in February 2019 after a 16-workday suspension for failing to alert council members of the city’s steep deficit until November 2018. The city operated at a deficit exceeding $800,000 in both FY 2017 and FY 2018, plunging its general fund balance to $2.3 million from close to $4 million.
Rawle was indicted for embezzlement in June 2020 and arrested in August. His case is pending in Lowndes County Circuit Court, with his next court date set for Feb. 24.
Holley also found that Columbus “does not keep adequate records for fixed assets,” such as land, buildings and equipment, an issue also noted in the city’s FY 2018 audit. She recommended that the city conduct annual physical inventory and keep an asset ledger.
The city conducted an inventory after the audit’s completion in December and is working on implementing asset markers, CFO Deliah Vaughn said, and she has seen cooperation from all of the city’s department heads.
Columbus also needs to maintain control over the receipts from the landfill, southeast of the city, another issue from the FY 2018 audit. Holley and Vaughn both said the city is working on implementing controls such prohibiting people from dumping in the landfill if they have an unpaid bill.
Additionally, Holley found that not all of the city’s elected officials “were current in filing their economic interest statements” in FY 2019, but all of them were up to date by December 2020, she said.
The city ended FY 2019 with a fund balance of $8,480,510, as well as $930,018 in capital assets, Holley said in her report. The city also racked up nearly $500,000 in long-term liabilities for compensated employee absences that year.
Uncovering questionable transfers
Holley also conducted the FY 2018 audit that brought Rawle’s embezzlement to light. She told the council she noticed “something questionable” during the audit and asked Rawle about it, and he admitted that he made an unsupported adjustment to the bank reconciliation.
Holley notified Mayor Robert Smith and Chief Operating Officer David Armstrong, and Rawle resigned shortly afterward.
The auditors paused the audit so the city could reconcile its bank account, but the accountant hired by the city to do so left before finishing the job, so the auditors had to do so while restarting the audit, Holley said.
“I saw transfers that looked like they were going out of one city bank account and should have been going into another, but could never find the other side of that,” Holley said. “We also noticed that the ending balance on one month’s bank statement did not match the beginning balance on the next month’s bank statement.”
She turned the investigation over to the state auditor’s office in August 2019. The city’s CFO position is bonded, so the state auditor’s office sought reimbursement for the city for Rawle’s embezzlement, and the city received a $242,951 check from the bonding company in December, Holley said.
Ward 6 Councilman Bill Gavin asked Holley if there was any way the council could have known about Rawle’s embezzlement and put a stop to it sooner. Holley noted that Rawle disguised the unauthorized transfers, many of them as tax payments.
“There should be someone else looking at those bank reconciliations, and that’s what’s happening now,” Holley said. “(The city has) implemented a system of approval for transfers. There’s a signed form that goes in duplicate, where one person keeps one, the CFO keeps the other one, and when the bank statement comes, a totally separate person takes the statements and makes sure everything on there was approved.”
The Dispatch has requested, but has not yet received, a copy of the audit report.
Conflict disclosure: Managing Editor Zack Plair took part in editing this article. He is currently involved in legal proceedings with the city of Columbus.
Tess Vrbin was previously a reporter for The Dispatch.
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