At the most recent Claxton City Council meeting, city auditor Richard Deal of Lanier, Westerfield, Deal & Proctor, presented the findings of the FY 2016 audit – July 1, 2015 thru June 30, 2016.
NOTE: The findings of the FY 2016 audit were nearly completed BEFORE the council voted to have a three year look back on previous year audits. Therefore, some of the issues presented in the FY 2016 year audit have been corrected for the FY 2017 budget period. All numbers below are as of June 30, 2016.
The net revenue and changes show a troubling outlook:
TOTAL FUND BALANCES for governmental funds: — $1,491,858
- General total assets – $1,421,136
- The amount of the General Fund decreased 33% from the previous year, or $416,000
- SPLOST Capital Projects Fund – $69,861
- Non-major fund – hotel/motel tax – $861
REVENUES FOR FY 2016
- $1,138,947 in taxes –> to the general fund
- $695,759 in intergovernmental funds
- $43,338 in licenses and permits
- $520,055 in service charges
- $35,836 in fines and forfeitures
- $1,378 in interest
- $34,999 in “other funds”
TOTAL revenues for governmental funds – $2,470,312
EXPENDITURES FOR FY 2016
- $391,741 in general government
- $1,257,211 in public safety
- $435,344 on streets
- $351,469 on sanitation
- $1,525 on recreation
- $676,815 on the airport
- $108,627 on community development
- TOTAL expenditures for governmental funds – $3,222,732
So expenditures exceeded revenues by $752,420 for general funds and $28,116 for SPLOST funds for a grand total of $780,536 in excess.
The city budgeted for $1,871,380 in revenues for FY 2016, but collected $2,470,312. The problem, however, is that the budgeted expenditures were set at $2,137,496 but came in at $3,222,732. The city planned for a $266,116 deficit but ended up with one totaling $752,420.
The water/sewer and natural gas funds also showed a loss.
- Water and sewer revenues — $1,024,663
- Water and sewer expenses — $1,205,344 — LOSS $180,681
- Natural gas revenues – $1,391,881
- Natural gas expenses – $1,610,273 — LOSS $218,392
- Total loss for two accounts = $399,073
Also of concern was the city’s loans from one account to another without repaying the loans back to the respective accounts. The natural gas fund loaned the general fund $171,450 for a new roof on the old city hall building while the water/sewer fund and natural gas fund offered $200,000 and $149,467 respectively for general fund expenditures and operations. In all, the general fund owes other accounts $1.25 million.
In FY 2016, accrued vacation was paid out totaling over $100,000. Employees were cashing out more than 96 hours of earned vacation time. Deal said some employees were accruing 400-500 hours and cashing out.
Councilman Risher Willard questioned Deal on how such a thing happened, and Deal said the policy in place was not being enforced. Willard said a more stringent policy needs to be addressed with a maximum collected.
“That needs to be looked into further. Whether it was on purpose, wrongdoing, or by accident, I don’t know at this point. But for us to have to pay out over $100,000 over the last few years, that seems a little excessive for a town our size,” Willard said.
At one point, Deal was asked if there was any good news to report. He just laughed.
In all, four significant deficiencies and five material weaknesses were disclosed during the audit, but the City was in compliance with all federal grant and funding regulations.
- Customer accounts receivable and customer deposits — material weakness
- Accounts receivable details are not reconciled on the General Ledger on a monthly basis
- Bank reconciliations – material weakness
- Incomplete reconciliations and inaccurate listings of outstanding checks
- Improper recording of transactions – material weakness
- Airport funding was incorrectly posted to the miscellaneous revenue in the City’s general fund
- Renovations for old city hall were posted to supplies and materials instead of capital outlay expenditures
- Improper allocation of insurance and retirement costs to city departments
- Properties purchased by the city were mislabeled
- Payroll Liability Accounts – material weakness
- Payroll liability accounts were not being reviewed and reconciled on a regular basis
- Recording of Year End Accruals for the Financial statements – material weakness
- Inadequate procedures to ensure year-end accruals of receivables, accounts payable, prepaid items, an accrued payroll are included in financials statements
- Budget Amendments – significant deficiencies
- Expenditures exceeded appropriations at the legal level of control for some general fund departments
- Inadequate documentation for expenditures – significant deficiencies
- Several inadequate or lacking documentation for certain expenditures
- Credit card transactions – significant deficiencies
- Several credit card transactions were recorded without support documentation of receipts
- Utility billing – significant deficiencies
- City was unable to provide monthly billing reports in support of water, sewer, and natural gas revenue
The City formally acknowledged all weaknesses and deficiencies and agreed to implement reforms and procedures to remedy the issues. Still, the City of Claxton was determined not to be a low-risk auditee. Deal specifically said, “The revenue is not enough to cover your expenses. Either increase revenue by raising taxes or cut spending – or do both.”
Councilman Mel Kelly made a motion to forgive the loans owed to the general fund in the amount of $349,467 for the purposes of accounting and address the current deficit. The motion passed unanimously.
Kelly said, “This is unsustainable. Especially if something catastrophic were to happen. We’ve got to make changes.”
Mayor Branch concluded the report overview saying, “The best way to solve a problem is to know what the problem is.”
Deal will submit the report to the State Department of Audits and the City of Claxton will then be in compliance with all state reporting requirements.