Receiving the city’s financial information in a timely manner has been an issue that the current council has wrestled with since taking office in 2016.
It was a subject brought to the podium by auditors at the Enterprise City Council meeting Aug. 6.
“It’s critical that you have timely and accurate financial information to base your decisions on,” Bruce Averett, Carr, Riggs and Ingram Certified Public Accountant, told the council during the annual audit report. “This just has not been occurring.”
Averett, CRI CPA Hilton Galloway and CRI accountant Tyler Dunaway presented the 135-page report for the fiscal year ending Sept. 30, 2018 and issued an unqualified opinion, which means that the city’s financial statements are in compliance with “Generally Accepted Accounting Principles.”
“The lack of timely and accurate financial reporting impacts the city in numerous ways,” Averett said, citing decision making based on “incomplete and inaccurate financial data,” failure to meet bond requirement deadlines, incurring additional accounting fees and delays in identifying reporting issues.
“The lack of timely and accurate financial reporting” encapsulated a list of other deficiencies that the auditors cited as areas of improvement required, Averett said.
“Basically we’re noting that the audited financial statements are being issued 10 months after the year end for Fiscal Year 18…for Fiscal Year 17, they were issued 13 months after year end,” Averett said. “The final closeout of the FY18 year end financial statements was not completed and available for audit until eight months after year end.
“The external auditors were allowed to begin limited procedures five months after year end,” he added. “The result was a delay in producing financial reports needed by management and 47 audit adjustments to present the financial statements in accordance with GAAP.”
“Some of the issues mentioned by CRI went back a number of years and were not identified in previous audits,” said Enterprise City Council President Perry Vickers following the audit report. “We, as a council, were told by the city clerk last summer that we had a big mess and we immediately took steps to get the issues corrected.”
City of Enterprise Finance Director Stephanie Crowe, selected by Enterprise Mayor William “Bill” Cooper in December 2018, resigned Aug. 9.
Prior to Crowe’s hiring Beverley Sweeney and Danielle Jackson had served as interim city clerk and interim city treasurer, respectively, after being officially appointed by the Enterprise City Council Oct. 4, 2016. Both had served as assistants to former Enterprise City Clerk-Treasurer Steve Hicks.
One year later, the council hired former Anniston Public Works Director Robert “Bob” Dean to the position of City Clerk-Treasurer in October 2017.He began work Dec. 1, 2017.
Jackson resigned July 1, 2018 and Dean met with the mayor and Vickers to discuss hiring an outside accounting firm. “Let me just say that the train is off the tracks,” Dean said at that time. “We need this firm and their help to formulate a standard operating procedure and get things corrected and moving forward to stay compliant.”
Dean recommended that the council contract with the Dothan-based accounting firm of Bevis, Eberhart, Browning, Walker and Steward and introduced Ryan Hendrix from the firm. “He is going to be the point man working with this,” Dean told the council at that time.
Hendrix told the council that his specialty is accounting systems. “There is a lot of stuff that is not being done to the balance sheet. I think that is what is causing most of the problems with the books being closed out on time,” Hendrix told the council at that time. “There’s a lot (of information) people aren’t looking at on a monthly basis and if you are getting reports on a monthly basis or even a quarterly basis that have revenue and expenses on them, there’s some stuff on there that is just wrong—accounting fundamentals.”
During the Aug. 6 audit report, Averett and Galloway both cautioned the council about hiring outside consultants without experience in governmental accounting. “If engaging outside consultants, proper due diligence should be applied to insure that the consultants have sufficient experience in governmental accounting to address the complexity of the issue they are engaged to resolve,” Averett said. “Governmental accounting and regular, for-profit accounting are two different animals. Governmental accounting can be very complex.
“Our recommendation is basically that the finance personnel or the consultants or whoever is engaged to assist the city should have adequate knowledge, skill, and expertise of governmental accounting to accurately record debt activity in accordance with all debt agreements and GAAP,” he added.
Galloway agreed. “Y’all run Munis (financial software) which is fairly common, especially in the governmental arena so if someone does a lot of governmental work, they are going to be familiar with Munis.
“The consultant that was brought in was not familiar with Munis and the city incurred about $1,200 in software training to help him get him familiar with Munis,” Galloway said about Hendrix. “That is a critical component when selecting your consultants. Make sure they are familiar with your system.”
Dean said that the $75,000 spent on a consultant was to help finalize 2017 financials as well as some four month’s backlog in the current year.
Hiring a consultant was better than having no one to do the job at all, Townsend said. Galloway conceded that point. “Absolutely,” he said. “But I’d make sure that their background is such that they solve problems, that they don’t create problems.”
The incomplete 2017 financial audit was also the topic of a July 17, 2018 council work session. Brunson, Wilkerson and Bowden CPA Misty Tindol was asked by the council why the city’s financial audit was still not done four months after she had expected it to be complete.
The reason for the delay, Tindol told the council at that work session, was that even as late as July adjustments were still being made. “The year end was not completely ready for us to begin auditing,” she said. “My plan was to start it Nov. 27, 2017.
“We were finally able to come in on Dec. 20 but the books were not completely closed and you were not completely ready at that point for us to do an audit,” Tindol told the council. “We really didn’t have sufficient information to continue so we pushed back until the end of February.
“The biggest problem was the trial balance,” Tindol said. “That has delayed us significantly because we had to work through all that,” she said.
Tindol said she had experienced problems the year before also. “Last year it drug out a long time but I chalked that up to a huge change in personnel,” she said. “This year we saw some of the same issues and I knew that there was a problem we needed to fix so that this didn’t keep happening every year.
“Before now, our goal is to be through (the audit) by March 31 but that’s just not been possible the last two years,” Tindol said.
At the meeting Aug. 6, Averett cited several areas of “material weaknesses” and “significant deficiencies” that were found during the audit to include municipal court revenues, accrual accounting, disbursement approval, review of receipts, recording and allocating debt and timely and accurate financial reporting.
Questions about the city’s financial procedures have been addressed since the new council took office in November 2016.
At a May 2, 2017 work session the Enterprise City Council did vote to pay the city’s bills but only after a half hour of sometimes heated discussion when Cooper, then council president, said that authorizing the payment of bills in the amount of $775,130.20 was on the voting meeting agenda.
Councilman Turner Townsend asked then-Mayor Kenneth Boswell why the council did not receive the list of accounts payable for review prior to the work session. “We’re about to approve $775,000 worth of accounts payable and I have not had the benefit of reviewing any of this,” Townsend said at that meeting. “Is this (vote) just a mere formality?”
Townsend then suggested that the vote on accounts payable be tabled and asked that the financial statements be emailed to the council prior to the meetings. “I just got this 10 minutes ago,” he added pointing to the list of accounts payable.
“The council is charged with the purse strings of the city,” Townsend added at that meeting. “It is not too much to ask to get a monthly report.”
Timely and accurate financial reports should be expected, Averett told the council at the Aug. 6 meeting.
That was also an issue discussed last year by the council after Hendrix and Tindol said that they would create a standard operating procedure for the finance department. Vickers had asked whether such a document currently existed. No, he was told by the auditors, there were currently no standard operating procedures being followed in the finance department.
At the Aug. 6 meeting Galloway reiterated the need for policy and procedures. “You’ve got to have specific procedures with specific dates of completion and then you’ve got to hold them accountable,” Galloway said, adding that the city should focus on cross training personnel.
Averett recommended that the city “develop a logical order for closing procedures and assigning responsibility for closing procedures to specific personel and keeping these procedures documented in a thorough checklist.”
Municipal court revenue was cited as an area of concern and the auditors’ recommendation was that the city implement a process that ensures all municipal court fines applied to cash bonds are recorded and transferred in a timely manner to the general fund. “The failure to record fines and fees when earned caused judicial bonds payable to be overstated on the city’s financial statements by $132,785 and the current year municipal court revenue and general fund balance to be understated,” Averett said.
Galloway said that timeliness, reviews and documentation are paramount. “Also its essential that you have competent personnel in every position with the skill and expertise and knowledge to execute the financial process,” he said. “That’s critical.”
The city’s revenues exceed expenditures by $3.9 million, Averett said Aug. 6, adding that the Government Finance Officers Association recommends a 90-day financial reserve for most municipalities. “The city of Enterprise on Sept. 30, 2018 had about a 110-day reserve, well in excess of what GFOA recommends. That’s a pretty strong financial position right there,” he said.
Galloway agreed. “The city invested $4.6 million, almost $4.7 million, in capital assets last year,” he said. “That’s how much money you are putting back into the community. That’s how much the city reinvested in its infrastructure and its buildings and land.
“If you’re taking your capital and investing it in the community, that’s what we want to see,” Galloway said. “It’s always relevant to see how much was invested back into the city.”