With only four weeks left in the year, City audit still incomplete
By Rachel Madison
For the last several months, promises of a completed 2020 financial audit have been ongoing, but as of the Nov. 22 City Council meeting, the audit has yet to be completed.
While most of the samples needed have been submitted for the audit, said interim finance director Misti Hancock, she is still reconciling some accounts that just aren’t adding up, which has caused some delays, as well as having to spend a lot of time on the day-to-day financial operations of the City.
“There were transactions that were not recorded, so we are submitting adjusted journal entries to the auditors to fix those,” she said. “There was [approximately] $487,000 not recorded, but all of it is just transactions that did not get booked into the internal system. I am going to be dedicated 100 percent to the audit for the next few weeks, so I can get the audit finished. We’re looking at wrapping it up before Christmas and having a presentation of the final draft for Council by then.”
Hancock added that her focus has been shifted to reviewing and reconciling the trial balance. According to a document listing the outstanding audit items still needed, which was provided to The Independent via the Open Records Act, there is a variance of $151,503 in pooled cash, as well as a few missing receipts, invoices and checks. Hancock said the City has had some weaknesses and deficiencies documented in past years’ audits, but not to the extent of the 2020 audit.
“Y’all are losing momentum every time we change finance directors,” she added, citing the termination of the most recent finance director, Becky Wilkins, in August. “There’s a lot to document and do.”
Hancock said as the City “gets out of this mess,” she and the other employees in the finance department have revamped the City’s procurement policy and are working on the investment policy as well as restructuring day-to-day procedures.
“You do not want to be back in this mess again,” Hancock said.
One of the issues, Hancock said, is that there are several funding sources that are in pooled cash, instead of separate accounts based on what the monies should be used for.
“What are some areas that you’ve found as you’ve been digging that we as a City maybe need to hire somebody to look into?” Council member Angela Jones asked. “Are there questions that you might have on things that are not accounted for?”
Hancock said the biggest thing she’s seen as she’s looked at the fund structure is that there needs to be a clear charting of accounts so that transparent reporting can be easily shown.
“The bank accounts and cash management is the next stop after the audit,” she said. “We have some accounts that are empty that I’ll be moving some money back into.”
Hancock said several procedures weren’t documented, which is why she’s had to dig to find out why certain things happened as opposed to it being clearly indicated.
“You really want everything transparent, not only for y’all as leaders, but for the community and the staff that’s trying to pick up whatever’s there and explain it to the auditors. I would prefer to see a more stringent and thought-out documenting process behind all transactions.”
Hancock said she hasn’t found anything fraudulent as she’s worked on the audit; however, she has found a lot of “sloppy workmanship.”
“Things just aren’t checking the boxes and clearly completing the circle, and that’s where your processes and procedures are going to come in,” she said. “We need to make sure things are set up in such a way that we eliminate the ambiguity of how things are recorded. We need to have accounts that we can quickly see and compare things as opposed to having to dig in and reconcile everything. We’re trying to simplify all of those things.”
Council member Chris Pezold said because of Wilkins’ “sloppy workmanship,” the City cannot move forward with any kind of bonding.
“We’ve been told that we’ve got to look at that balance of how many dings we’re going to take and how that’s going to affect our scores and our bonding capability,” he said. “When do we say, ‘okay, enough is enough,’ and we make this happen?”
City Administrator Lacie Hale said the City’s financial adviser, Dan Wegmiller, will provide the Council with an update on the impacts of the audit and how it has affected the bond rating at the Dec. 1 meeting.
Pezold added that the Council was told the audit would be finished in October, and then November, and is now set to be finished in December, which is frustrating for him and his constituents.
“People come up and say, ‘Hey, how are we doing?’ and I have no earthly idea how we’re doing,” he said.
Hancock said she understood those concerns, but the list of items she has to reconcile is manageable. She said she plans on having daily meetings with the auditing firm, Whitley Penn, if that’s what it takes to get the audit finished by Christmas. Hancock added that having a new finance director as well as a human resources director on board will help tremendously. The hiring of these two positions will also be discussed on Dec. 1.
“There’s going to be a significant amount of processes and improvements, and things like that, that we’ll want to make even after the audit is complete,” Hancock said.