Despite nine findings of poor accounting practices in the city’s Fiscal Year 2021 audit, Chief Financial Officer Jim Brigham said Thursday that all but one had been corrected.
Wanda Holley, a certified public accountant with Watkins Ward and Stafford, the firm which performed the audit, presented the report Tuesday to the city council. She noted it was two years late due to difficulty obtaining information from the city.
Six of the audit’s nine findings were repeated problems noted in the Fiscal Year 2020 audit, also completed later than the state and federal deadlines. The city logged unbudgeted expenditures, failed to reconcile its bank accounts or reconcile and distribute court fines, didn’t properly track transfers between bank accounts and did not obtain proper documentation for hotel stay charges — all of which were considered material weaknesses.
Significant deficiencies, considered less severe findings, included failing to maintain adequate records or perform an annual inventory of capital assets, failing to reconcile landfill billing and gate receipts and not properly tracking interfund loans. The audit also caught an improper expense in the Blight Elimination Program that has since been corrected.
“It’s no secret that when I came into office there were some issues we were having in the finance department and with the finances of the city that we’ve done hard work, I think, in trying to address,” Mayor Keith Gaskin said during a Wednesday press conference, noting Fiscal Year 2021 ended only three months into his administration. “… Are we perfect yet? No. But we are working hard to make sure we are the best stewards possible of the city’s resources.”
Brigham, who started in April 2022 and helped compile information for Holley for the FY 2021 audit, said the FY 2022 audit should be done by year’s end, and he hopes the FY 2023 audit will be substantially complete by next summer.
He has spent time correcting information, like bank account reconciliations, to avoid those findings repeating again. He noted that after previous CFO Deliah Vaughn left in September 2021, interims led the financial department until he arrived.
“For 2021, (the plan was) we’re not going to go back and fix things. We’re going to report it the way it was,” he said. “(For FY 2022) I’m going back and trying to fix some things. From Oct. 1 through April 1, there was nobody here. This was just the Wild Wild West as far as accounting.”
As for future audits, and the current state of city accounting, he said most of the necessary internal controls are in place.
“I will definitely commit to it being much cleaner (for FY 2022),” he said. “From there on out, it’s my bag if there are problems.”
Unbudgeted funds, general accounting
The most recent audit report listed millions of dollars in unbudgeted expenditures, for everything ranging from grant and bond funds to the police and fire disability retirement fund.
Revenue for those runs through the general fund and was transferred properly to the correct accounts, Brigham said. While they were noted in the general fund budget’s “Transfers Out,” the city did not establish budgets for the individual funds where they transferred.
“I would say it’s not right, but it’s not unusual,” Brigham said.
Now each fund is budgeted correctly.
Further, he said, his office of five is reconciling bank accounts with the city ledger monthly and properly monitoring all transfers and interfund loans. He said those duties are segregated among qualified personnel, and the work is checked at each step.
“We have enough qualified people now to have some good checks and balances,” Brigham said. “If I was doing it all myself, that’s not good.”
Municipal Court
In Fiscal Year 2021, unreconciled fine accounts led to roughly $176,000 not being distributed to state agencies who receive a share of collected fines. A similar problem occurred in Fiscal Year 2020.
“We’re all caught up and we reconcile on a monthly basis,” Brigham said.
Now, the court takes payments, posts them into a system that sends a report to Brigham’s office, which reconciles and distributes the funds.
Landfill
Brigham said a complete audit of city landfill books revealed payments applied to the wrong accounts, and customers with charge accounts were billed the wrong amounts.
“It depended too much on people’s honesty rather than internal controls,” he said. “… If you drove in and you’re weighed, and you’re paying, if the same person who’s (handling) all of that is posting to your account, that person better be honest.”
Still, he chalked the issues mostly up to poor communication and “non-accounting people doing accounting.”
Now, Brigham’s office gets daily documentation for all landfill activity, then bills the customers. He can also use video surveillance from the landfill to cross-reference the information he receives.
Credit cards
All department heads had city credit cards at one time, Brigham said. Now, only Gaskin, Brigham, Chief Operations Officer Jammie Garrett and Human Resources Director Pat Mitchell have both purchase cards and travel cards. City council members also have travel cards.
Receipts from purchases made on those cards go to Brigham, who pays and reconciles those bills monthly.
Fixed assets
Tracking fixed assets, Brigham said, is “still a problem,” because he has no starting point.
The city has a complete inventory of its assets, but that only notes the item’s existence, not its value.
“An inventory tells me I have one file cabinet, or a truck, or a building, even,” Brigham said. “It doesn’t tell me when I bought it, how much I bought it for, how old it is or how long I’ve been depreciating it. All of those are key elements.”
Watkins, Ward and Stafford, Brigham said, has kept up with city assets through its own schedule.
“Apparently they’ve been doing it for a long time,” he said. “Why it’s not in the city system is beyond me.”
He plans to take that schedule and use it as the basis for a city fixed assets system he will then maintain.
That system should be up and running soon and will be reflected in the FY 2023 audit, but he said it’s unlikely he will fix it for FY 2022 since that audit is already so far down the road.
“I’m not going to hold up the audit to do fixed assets,” Brigham said. “I’d rather just take a ding for it one more time.”
Zack Plair is the managing editor for The Dispatch.
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