Important Findings of 2004 Audit
The previous posting, which spoke briefly of the finding in the 2004 audit of the City of New Albany, was left open for citizens to discuss what they felt were pertinent issues that merited further discussions.
As we all know, there was little mention of the actual audit findings, but rather a plethora of various perceptions of the Administration and their competence, or lack thereof, as well as a lot of unnecessary personal and political bickering.
Before we delve further into the 2004 Audit, we would like to reiterate our stance that this blog is for the Citizens of New Albany, and will not be used as a platform for any political campaigning.
That said, let's move forward with the 2004 Audit written report, which is a public document produced by the Indiana State Board of Accounts.
On page 4, 4th paragraph, of the Independent Auditor's report on financial statements, they note:
"We were unable to audit the note disclosure relating to capital assests of the City, because capital asset records were not properly maintatined and updated; and we were unable to satisfy ourselves as to the value of the capital assets by other auditing procedures. In addition, we were unable to verify the accuracy of cash and investment balances because monthly cash reconcilements were never compared to the funds ledger so that variances could be identified and corrected in a timely manner."
They further note; "The Wastewater Utility did not maintain sufficient capital asset records. Due to lack of supporting documentation, capital asset valuation cannot be verified." Nahhhhhhhh, not the Sewer Utility!
Surely, with all the other departments that were being supported by Sewer Funds, and all the "loans" that were made out of Sewer Funds, surely they were keeping accurate and detailed records of all such expenditures.
"In addition, we were unable to verify the accuracy of cash and investment balances because monthly cash reconcilements were never compared to the funds ledger so that variances could be identified and corrected in a timely manner."
Well now, doesn't that just take the cake, so to speak? Only in this instance, the cake is made of the hard earned money of the rate payers.
What does all this mean?
"As capital assets and cash equivalents constitute a major portion of the Statement of Net Assets, any uncertainty concerning assets and cash and cash equilvalents similarly affects the Statement of Net Assets."
In other words, because no one managed to do the monthly balancing of the City's books, and reconcile the funds ledger, they really can't tell what the City has in terms of the bottom line.
One other statement early in the report that raises concerns is as follows:
"The City has not presented Management's Discussion and Analysis or Budgetary Comparison Schedules that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements."
Folks, we are only up to page 5 of 55 pages of the 2004 Audit.
There is so much more to look at, but we are going to stop here for today.
When we resume we will be looking at the problems associated with drawing Department funds down below a zero balance, or "Disbursements in Excess of Appropriations".
As we mentioned in a previous posting, the State guidelines say no departments may make expenditures in excess of their appropriated budget. However, New Albany has several departments that show spending indeed exceeded the budgeted amounts for those departments. Namely, the General Fund (duh), Motor Vehicle Highway, Local Road and Street (no, we're not kidding), Park Nonreverting, Ambulance Runs, and Park Cummulative Building.
The total excess spending for these funds was just over $1.7 million dollars.
The Audit notes: "These disbursements were funded by inappropriate available cash balances."
Perhaps you will recall our earlier expressed frustrations with what we termed "mis-appropriated funds".
Only 50 pages left to go!
Hang in there New Albany, things will get better. We will accept nothing less.
Well, we have some more information we would like to share with folks before we turn out the lights tonight.
After perusing through the pages of numbers, looking at balances and debt, disbursements and income, assets and liabilities, we turned our attention to the Audit results and comments concerning the condition of records (pg.38).
There we discovered the profound cumulative effects of the propensity of City Departments to repeatedly fail to reconcile cash accounts monthly with the City funds ledgers.
Such instances are more fully described later in this posting; However, our purpose here is to explore the consequences of such oversights, or simple non-compliance with proper accounting procedures.
As revealed in the documents of Findings and Questioned Costs (pg. 52), the Audit found problems with the condition of City records (2004-1).
The Audit notes: “…reconciled amounts were not totaled and compared to actual cash transactions recorded in the City’s records. As a result of undetected errors as of Dec. 31, 2004, the City [had] $88,947 more in unidentified cash recorded in its records than [was] being held in its bank accounts.”
Folks, that’s almost $90,000 in cash that is unaccounted for. Money that should be among one or more of the City’s seventeen (yes, 17) bank accounts.
In “Notes To Financial Statements”, on pg. 17, item I-C notes: "The government –wide, governmental fund , internal service fund and fiduciary fund financial statements are reported using the basis of accounting that demonstrates compliance with the cash basis and budget laws of the State of Indiana…. Receipts are recorded when received and disbursements are recorded when paid.” Doesn’t sound too terribly difficult to us. How about you?
Back to page 38, concerning the Condition of Records, Indiana Code 5-13-6-1(e) states: “All local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of the local officers, with the balance statements provided by the respective depositories.”
These comments go on to explain: “At all times, the manual and/or computerized records, subsidiary ledgers, control ledgers, and reconciled bank balance should agree. If the reconciled bank balance is less than the subsidiary or control ledgers, then the responsible official or employee may be held personally responsible for the amount needed to balance the fund. (Accounting and Uniform Compliance Guidelines Manual for Cities and Towns, Chapter 7)”.
How ‘bout them apples?
Don’t worry, there’s lots more to come.