City under-budgeted debt payments by $1M+ in 2019

 

Robert Smith

Robert Smith

 

David Armstrong

David Armstrong

 

Wanda Holley

Wanda Holley

 

 

Isabelle Altman

 

 

The city of Columbus paid more than $1 million in excess of what was initially budgeted for general obligation bond debt in 2019, according to the city's audit report for that year.

 

The city paid the extra $1,384,372 with money from its general fund, and city officials laid the blame for the incorrect budgeting at the feet of former Chief Financial Officer Milton Rawle, who resigned in February 2019 and was arrested for embezzlement in August 2020.

 

The audit was made public after Wanda Holley, a certified public accountant with Watkins, Ward and Stafford in Columbus, presented it to the city council on Feb. 3.

 

 

General obligation bonds are municipal bonds backed by the credit and taxing powers of the issuing municipality rather than a specific revenue source, and they are generally used to fund street work and other projects.

 

Mayor Robert Smith, current CFO Deliah Vaughn and Chief Operations Officer David Armstrong all said it was negligence on the part of Rawle for not budgeting the proper amount of money to pay the debt.

 

By law, municipalities are required to prepare a budget before the fiscal year begins Oct. 1, based on fiscal data and proposed budgets from city departments. It is then the city council's job to approve the budget.

 

The law also allows the city council to revise the budget throughout the fiscal year if it appears certain budgetary estimates will be over or under what was in the initial budget.

 

However, Armstrong and Vaughn said Rawle should have known exactly how much the city would pay on the general obligation bond in 2019 because when cities take out loans, the bank provides an amortization schedule breaking down how much the city must pay each year until the debt is satisfied.

 

That amortization schedule is provided to city officials, including the mayor and city council, as part of the proposal that must be approved before issuing bonds.

 

"Once you receive the debt schedule, it's your job to go through that debt schedule and calculate your interest payment and your principal payments, so that you can have your amount to budget for the year," Vaugn said.

 

She said she did not want to speak to why Rawle did not budget the money correctly when he had access to the schedule. Armstrong said he thinks Rawle simply didn't pay attention to it and budgeted the money incorrectly.

 

"I don't think he intentionally did it," Armstrong said. "He just very negligently ... miscalculated."

 

Moreover, budgeting the amount incorrectly also led to the city council setting an insufficient millage rate for the fund used to pay for general obligation bonds.

 

The city has three main accounts it supports with property taxes: a general account to pay for operations and maintenance, a disability relief fund for fire and police officers and an account to repay debt. For each account, the council allocates a number of mills, which are used to calculate property taxes.

 

For Fiscal Year 2020, Vaughn recommended the council raise the mills by a 3.65 bump to account for the debt service for its general obligation debt.

 

The city also under-budgeted repayments for special bonds by thousands of dollars, including debt related to the redevelopment of Burns Bottom and the development of Moore's Creek Crossing and University Mall.

 

Rawle resigned his position 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. More than a year later, in August 2020, Rawle was indicted for allegedly embezzling nearly $290,000 in city finances.

 

Rawle has pleaded not guilty, and his case is pending in Lowndes County Circuit Court. His attorney, Chance Fair of Tompkins Law Firm in Columbus, declined to comment on the case or the audit.

 

 

Checks and balances

 

The audit also listed "significant deficiencies" in the city's financial record-keeping, specifically noting the city council never approved the illegal transfers Rawle is accused of making from the city's funds to his own accounts, said Holley, who prepared the audit report.

 

Armstrong, Vaughn and Smith said the city has implemented policies to minimize the opportunity for future embezzlement by city officials and ensure all disbursements from the city's bank accounts are approved by the council. Checks are now signed not by the CFO but by Smith and Pat Mitchell, director of human resources. Additionally, Smith approves all transfers between city bank accounts, and both the CFO and COO hold copies of those transfers.

 

"There's not one person who's tasked with everything," Vaughn said. "There's more than one person that's looking at everything. We're trying to make sure we have our checks and balances in place, (that) we have more than one person in place that knows what's going on."

 

The city council also receives copies of monthly claims dockets and has to approve them, though that has always been part of city policy.

 

The audit also found the city does not maintain adequate internal control over its landfill receipts and recommended city officials design internal controls to monitor those gate receipts. Earlier this year, Vaugn and Armstrong said, city officials installed internet connection at the landfill and updated both its camera system and computer software system. The new software synchronizes landfill receipt data with the city's computer system and allows management to review gate receipts immediately. The city has also installed credit card capabilities with the software, thus lowering cash intake and creating less opportunity for human error, Vaughn said.

 

Conflict disclosure: Managing Editor Zack Plair took part in editing this article. He is currently involved in legal proceedings with the city of Columbus.

 

 

 

 

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