As of June 2011, Macon was in better shape, financially and managerially, than at the same time a year before; but there’s still a long way to go, according to reports from the city’s external auditors Mauldin & Jenkins.
The annual audit report, delivered to Macon City Council last week, gave a clean opinion on the city overall. That means the existing documentation appears to fairly present the city’s financial status. And the city’s fiscal health did improve in fiscal 2011, which ran from July 2010 to the end of June 2011.
But along with that came a list of 44 problems -- not evidence of wrongdoing, but generally a lack of documentation and financial oversight that makes it hard to track money on a regular basis. That’s still an improvement from the previous fiscal year, when auditors found 52 such issues. Many of those problems were resolved, auditor Miller Edwards said; but some from the previous year’s list remained, and some new ones cropped up.
“The audit is a snapshot of what things looked like at the close of last fiscal year,” said Councilman Tom Ellington, newly elected chairman of the Appropriations Committee. “What we want to do is make sure that we don’t get in trouble in future.”
He agreed with Edwards that many of the problems stem from insufficient centralized control and infrequent communication. Departments should communicate with Finance Director Dale Walker -- who’s also interim chief administrative officer -- at least monthly, instead of once a year as the audit is being prepared, Ellington said.
“That way if something crops up that’s a problem, they can deal with it right away,” he said. “I think the administration understands that. I expect that they’re going to work on that.”
Edwards told council last week that a particular problem is the level of internal control and monitoring on federal funds in nine major programs.
“You all had about $11 million in federal funds that ran through here last year,” he said. “Of those nine (programs), we could only give you a clean opinion on five of them.”
Several of those programs are connected to the Economic & Community Development Department. Some of the financial control issues there have appeared on at least the two previous audits.
The way to solve many of those problems, both in ECD and elsewhere, is by centralizing oversight of all grants so one person can monitor reporting requirements and frequent rule changes, instead of leaving that task to staff in miscellaneous departments, according to the audit report.
Indeed, some departments were “operating separately from the city with little or no oversight from the Finance Department,” auditors said, singling out ECD and the Macon-Bibb County Office of Workforce Development. That could lead to undetected fraud, the report said.
“This appears to be a problem that developed over a long period of time,” auditors said.
The city administration’s response agreed with auditors’ conclusion, on that issue and most others.
“The concept of a centralized grants (administrator) has been explored but the process was unsuccessful,” says the response included in the report. “It will be reviewed and resolved within the next fiscal year.”
There are plans to have all grant accountants report monthly to the finance director, the response says.
ECD Director Wanzina Jackson said that’s already under way.
The Finance Department is getting monthly reports on the status of grant spending, instead of just reporting quarterly or annually, she said.
“That’s a new form that they’ve asked us to start submitting,” Jackson said.
Auditors found several instances of noncompliance with state and federal rules. One issue that drew lots of attention in the fiscal 2010 audit was the use of HOME program funds from the U.S. Department of Housing and Urban Development. They’re meant to build new low-cost housing, but about $1 million had been used instead to maintain and pay regular expenses on houses that were already built but remained unsold.
That issue returned on the new audit. HUD told the city to stop using HOME funds for maintenance and routine costs, but the back-and-forth between the city and federal government continues, Jackson said. Despite some council members’ fears last year, thus far HUD has not indicated that the city will have to repay the money.
Overall, auditors found a lack of security for files, absence of required supporting documents and too long between reviews of documents. It was poor record-keeping that delayed a $669,000 payment to the city from its insurance plan manager for months, auditors found; that could have come more quickly if the city had signed the necessary paperwork.
Lack of awareness and training on the part of city clerical staff caused several problems, the audit said. One of the fiscal year’s major financial issues was the promise to pay more than $4 million into city pension funds over several years, but due to that clerical problem the agreement was not recorded on the books of either of the city’s two pension funds.
Auditors found some gaps and errors in city pension files, which probably would have been caught if the files were centralized and organized. One pension recipient got a “modest amount” of excess benefits for almost a year, due to an error by the third-party administrator which issues pension checks; but that could have been caught if pension reports were reviewed monthly instead of annually, the audit said.
As with almost all issues, the city’s response was to agree and promise that the files will be reviewed more often. The administration also promises more clerical training and monitoring.
Likewise, tax and billing rolls are often outdated, but some of that should be taken care of by the city’s newly established collections policy, which went into effect Jan. 1, auditors said.
Ellington said he plans to ask for regular updates in Appropriations Committee meetings on changes provoked by the audit.
“I think that the audit does provide us with a good road map on what to do,” he said.
The city’s overall fiscal picture, presented in the annual comprehensive financial report, shows increased assets, a still-high bond rating, a fund balance that nearly doubled to $10 million, and the prospect of dramatically reducing long-term debt with the recently approved special purpose local option sales tax.
That report was assembled by Walker, and Edwards praised him for the work he’s done since arriving less than a year ago.
Clay Murphey, the mayor’s interim director of External Affairs, noted that Walker only started work three months before the last fiscal year ended, and most of that time was taken up in assembling the city budget. Since then Walker has made many positive changes, but those will only be reflected in next year’s audit, Murphey said.
Ellington agreed, but also praised former Finance Director Tom Barber. Both have done well, but there was -- and is -- lots of work to be done, Ellington said.
“We’re not exactly where we want to be, but that’s a far better situation than we were in,” he said.