Improper handling of city's finances is troublingBy BUSTER WOLFE,
Procedures that apparently were not followed in Hattiesburg’s city departments led to some areas where the current budgets were in the red by hundreds of thousands of dollars, the city’s interim chief financial officer told the City Council this week.
Connie Everett told council members Monday that she had come “across quite a few things that troubled me.” The budget amendments that she recommended were approved during Tuesday’s City Council meeting unanimously.
In going over the current fiscal year’s budget, Everett said she found several things that troubled her, some of it because of recovery efforts after the Jan. 21 tornado.
“Several expenditure lines were allowed to go over budget,” she said. “A lot of them were due to tornado repair costs. Some of those were over budget in the six figures and that absolutely should not happen.”
Everett said the procedures are in place, but they apparently weren’t being followed.
“There is not any one person or department that I can point to and say is responsible for that, at least since I was here previously,” she said. “From the very beginning when a requisition is generated by a department head, they are supposed to be looking at their budget to see if they have funds available before they cut that requisition. If they don’t, they should be asking that funds be moved around within that department or they should be asking for a budget amendment if that’s not possible.”
Everett said one area that she worked with was workers compensation, which is billed three times a year.
“There is an estimated premium based on the estimated payroll,” she said. “There is an audit done at the end of the calendar year and the actual payroll is completed. They will determine if there is an additional premium due based on actual payroll costs or credit due. … During the time that is going on, we do not expense that cost out to the various departments. … A journal entry is actually prepared that expenses that out to various departments. That was not done for fiscal year 2016. It had been done for 2017, but it was not late.”
Everett said the invoice was paid and the city was not behind in the payment.
“The cash flow was not handled properly,” she said. “So this year’s budget is overstated in terms of expense by reflecting two years’ worth of costs when it only should be one year.”
The lack of financial control continued to escalate, Everett said.
“I don’t know where things failed to happen, but it seems like mushrooming effect of things not happening that led to the reports getting in the shape that they got to,” she said. What happens when you do that is you fail to have good control over your budget and cash flow. It’s hard to determine what you’re looking at because you’re not getting up-to-date information. It is difficult for us to know what we’re looking at, it’s difficult for you to know what the expenditures are and an accurate reflection of the city’s finances.”
Everett said the bills got paid.
“It’s a matter of not following procedure internally,” she said. “I think we have addressed all of that as far as procedure and we are back on track as far as following the procedures that are in place so that these kinds of things don’t happen again.”
According to Everett’s memo to the City Council, “The proposed amendments will set the budgeted ending cash at $2,292,965. … This amount falls below the amount of ending cash I recommend having (a minimum of $4 million). Inasmuch as the City must retain enough cash balance to operate for the first three months of the fiscal year, along with sales tax revenue and other General Fund revenues, until we begin to receive ad valorem revenue.”
Among the cash flow items that will be affected by the FY 2018 are the shortfall in expected insurance and federal reimbursements after the tornado, the rebuilding of several facilities (the Mass Transit facility. No, 2 Fire Station and Timberton ballfields, as well as auxiliary structures at other locations), debt service on the energy performance project with Johnson Controls, debt service on Phase I of the new Public Safety Complex and costs of infrastructure development to sites in the Midtown project area, west Hattiesburg near the site of the new Regions Bank facility and at the Industrial Park.
Everett also addressed the issue of employee salaries.
“Lastly, but no less important, is the city’s ever-present need to evaluate and address employee salaries and capital equipment needs,” she said. “Organizational structure and pay scales are currently being evaluated so the administration can develop an action plan. Equipment and vehicle purchases will be restricted In FY 2018 until an assessment of the city's finances can be made and a capital replacement plan developed.”
The public hearing on the proposed FY 2018 budget is scheduled for Sept. 7, with adoption scheduled for Sept. 14.