Monday, April 10, 2006

County Audit Shows Fiscal Nightmare

It's astonishing how no details of the Hamblen County's fiscal situation emerge in the local press. Instead, the public is fed non-information, such as a recent article noting the achievements of the county's finance director. And the one county commissioner who bothered to point out the problems has essentially been chased out of office and isn't seeking re-election.

I'd bet the majority of local residents have no idea an election begins here April 12 with early voting and few of those who know could identify the candidates. Oh sure, the names may be familiar as the same crop of old hands arrives to make sure no more mention is made of the critical errors discovered by the state auditors.

County Commissioner Linda Noe, a Republican, has kept a faithful blog of the issues, Noe4Accountability, however, she was forced to end open comments after vague and not so vague threats were constantly made against her.

What did the recent audits - conducted at a lower cost to taxpayers - actually find? The county ranked Number One for the most findings in any county of the state. The fiscal problems affect nearly every branch of local government, including the sheriff's office and the director of schools.

Massive deficits are just the beginning. Take just a look at her most recent post on the county's fiscal status, though I urge you to go the her page and read all the information there - and then ask why are no current candidates talking about these issues and why does the local press ignore them?

"It's really funny to look at the dramatic change in audit findings that occurred when the county started using the state auditors in 2003. The 2002 audit (1 solitary finding by the local private auditors) and then the 2003 audit (29 findings by the state auditors with numerous sub-findings) and then the 2004 audit (15 findings and again numerous sub-findings by the state auditors). Click here for 2004 audit findings.

Looking at the audit history, I find it very hard to believe that the county was operating just fine in 2002 with a glowing audit (1 finding) from the local private auditors and then suddenly in 2003 the county was violating state law, not budgeting money as required by law, spending more money than was approved, not controlling purchases, not maintaining a general ledger, totally unaware that the county had to go by the state comptroller's "chart of accounts," and boom there are 29 findings by the state auditors. It just seems more likely that all these violations and irregularities were occurring in 2002 but "somehow" went unreported.

Moving on to the 2004 audit, there were 15 findings. One finding reported problems in making debt payments--or actually making a debt payment for a debt that the county didn't even owe. The audit reported that the county made an interest payment of $45,326 in December 2003 for a debt that was actually owed by the City of Morristown, not Hamblen County. The city finally reimbursed the county for all but $408 in June 2004. The 2004 audit reports that the $408 was still owed to the county as of the audit report date.

There were major purchasing deficiencies. The Mayor's Finance Department apparently selected an employee to serve as a purchasing agent, but the agent didn't keep control over purchase orders. Blank purchase orders were just handed out to departments, so nobody knew what was being purchased (or how much had been spent) until after the bill arrived.

There were no employment work records for certain "exempt" county employees. County departments over the years had increasingly allowed more and more employees to be considered "exempt" employees. The "exempt" employees were salaried and didn't have to keep any time sheets. The state auditors said that all employees should be required to keep a record of time worked. They also pointed out that since vacation time was not tracked in some instances, "(exempt) employees [] obtain[ed] a higher benefit rate than the non-exempt (hourly) employees."

There were deficiencies in controls over travel. Apparently, nobody required an itemized receipt for meals paid with credit cards, so the county didn't know what it was paying for. It appears that the receipt total was submitted and paid without an itemized detail.

There were severe deficiencies in budgeting. The budgeting deficiencies were very important and included five different items (A-E)---four of which are discussed here.

(A) Despite state law, the audit states that the County Mayor didn't even present a budget to commission (and so didn't get approval to spend money) for certain funds (such as the sheriff's special revenue fund). Some budgets were brought to commission, but others weren't.

(C) The Finance Department overspent the legally approved spending amounts in several funds: the General Fund, the Highway Fund, the Special Debt Fund, the General Debt Fund, and the Hospital Debt Fund. If spending limits for county funds are going to be ignored, what's the purpose in going through a long, drawn-out budget process? And this occurred in 2003 as well--for example, the 2003 audit says that spending exceeded appropriations in the General Fund in amounts ranging from $737 all the way up to $296,964.

(E) There were huge budgeting problems. The beginning fund balance estimates provided to commissioners during the budget process were way off. Estimates of fund balance are estimates, but the auditors apparently think (and so do I) that county financial officials should be able to get at least reasonably close to the real figure.

When the county was preparing its '04 budget in July 2003, county financial officers estimated and told commissioners that the beginning fund balance for the general fund was $697,526 when it was really only $208,870. The Commission was told that the fund balance for the solid waste (garbage) fund was $56,265 when the fund really had a deficit balance of ($205,578). In an understatement, the auditors added: "County officials should better estimate the beginning fund balance when adopting the budget."

I've mentioned this problem several times at meetings because this is critical financially. If county officials can't come up with at least a close estimate of what's in the bank (fund balance), then it's no wonder that there is overspending and no one really knows what the county has or exactly where it's going.

(D) Finally, the audit also reported a finding where the County Mayor instructed the Finance Department to transfer money ($89,986) from the General Fund to the General Capital Projects Fund and to transfer money ($274,730) from the General Debt Fund to the General Capital Projects Fund without the required approval of county commission.

County commission not only never approved the transfers, but county commission apparently wasn't even told that the transfers were being made or that payments totalling $360,000 had been made in error for years.

In response to this finding, the Mayor told the auditors that he talked with the trustee and finance director (but not county commission) and then instructed his Finance Department to make the transfers to "restore" the accounts to what county commission had actually approved "over the years." It turns out that these wrong payments totalling over $360,000 included spending errors going all the way back to June 15, 1999 and continuing up to June 9, 2004.

It looks like the Capital Projects Fund was being used for over five years to pay for things that should have been paid out of the County's General Fund or the County's Debt Fund. In 2004, the Mayor talks with two county officials (but not to county commissioners) and instructs them to switch everything back around.

Why such secrecy--to the point that county commissioners didn't even know that $360,000 had been moved around until they read about it in the audit? Why did no one explain to county commission what had happened and then ask for the required approval to make the transfers?

That's just from one posting. Part One of her report is here. The uninformed voters of the county and the misinformed can expect to see the old reliable behind-closed-doors method of government return. I doubt 15% of registered voters will bother to participate in this upcoming election - that would be just about double the amount of city voters in Morristown who turned out for the last city election.

If the community has abandoned all hope of having their voices heard, then that is exactly what will happen - a community which sees no choice, no help and no representation.

3 comments:

  1. Polisimian2:50 AM

    Out of curiosity, what was the name of the firm that did the audit prior to the State's?

    ReplyDelete
  2. OXYMORON5:41 PM

    Despite state law, the audit states that the County Mayor didn't
    even present a budget to commission (and so

    didn't get approval to spend money) for certain funds (such as the
    sheriff's special revenue fund).

    Some budgets were brought to commission, but others weren't.


    So the Mayor's brother has a special revenue account that the Mayor
    tries to keep under the radar. Hmmmmm.

    Oh, I know, its funds used for homeland security!!!!!!

    ReplyDelete
  3. I double-checked the info I had with Commissioner Noe, who confirmed what I had thought. She wrote:

    It was Hiram Jones & Associates through 2001. Then Craine, Thompson & Jones (with addition/merger of Glenn Thompson's firm and Joneses in 2002. (James Craine, Hiram's son-in law; Mira Craine, James' wife and Hiram's daughter; Tom Jones, Hiram's son; Hiram Jones, founder; and Glenn Thompson). That's the best info I have on principals in the firm.

    ReplyDelete