Jackson officials say a skeleton crew in finance are a major reason behind the city’s audit woes.
Recently, auditors completed the 2017 Comprehensive Audited Financial Report (CAFR).
The document was nearly a month late, in part, because auditors noticed several housekeeping problems not reported in recent years.
Because of those housekeeping issues, in 2017 Jackson was out of compliance with state statutes or regulations in at least 13 instances and was in violation of the covenants governing water and sewer bonds.
The audit covers budget year 2017, which ran from October 1, 2016 to September 31, 2017. Mayor Chokwe Antar Lumumba took office in July 2017, with only three months left in the budget year.
The issues were found by a new audit team that was brought in last year to replace the firm that had been conducting the audit for many years prior.
City officials say the violations were mainly procedural and attributed the problem to having too few staffers in city finance.
“We’ve been trying to do this work with a skeleton staff and that is one of the first or second findings in the audit’s report,” said Council President Melvin Priester.
The CAFR was presented to the city council last week. Members were expected to be briefed on the findings at a council committee meeting earlier this week.
Even with the findings, Priester was mostly pleased with the audit’s findings.
“I would say it’s a mixed bag. We were very pleased to see certain parts of it. I think it shows we have a lot of challenges, but we’ve been in ‘a lot of challenges’ mode now for several years,” he said. “This year, the audit gives us a blueprint of things to do and how to move forward.
“What would have terrified me was if the money had been improperly tracked and unaccounted for. There were no findings like that – the cash added up. We just didn’t have people doing the detailed stuff.”
Jackson has 28 people working in finance, about half of what is needed to keep up with changing procedures and ensure funds and expenditures are properly recorded, said Chief Administrative Officer Robert Blaine.
Those individuals manage an annual general fund budget of more than $300 million and thousands of accounts.
Blaine said the city is already working to resolve auditor’s concerns.
“We … sent the material findings to every department and they came back with a set of initiatives to create corrective action plan(s),” he said. “Some have already started (implementing them).”
The audit was conducted by Tann, Brown and Russ Co. of Jackson, an independent contractor. The group replaced Banks, Finley, White and Co., who had completed the audit each year since 2009.
Most issues uncovered by Tann were not reported in the 2016 audit, the last conducted by Banks and Finley.
Even with concerns, the city received a “clean opinion,” Blaine said.
Among violations, the administration had not adequately reported revenues and expenditures to the city council and had spent more than allowed under some budgeted line items.
State law prohibits spending beyond approved line items, except when the overages are court-ordered, occur as a result of emergency spending, or are the result of capital outlay expenses.
“Several expenditure line items … were exceeded with no known applicable exception to the budget compliance requirements,” the report stated.
The administration also is required to submit monthly revenues and expenditures to the council, something that had not been done, according to the auditor.
Jackson was in violation of state statute when it comes to municipal deposits.
According to the audit, every two years the city must bid out and approve a municipal depository to hold city funds. Other banks where city dollars are held must match the approved bank’s bid to hold funds.
In February 2017, the city approved using one bank which agreed to a 0.53 percent interest rate. In September, though, one bank being used by the city was only paying 0.15 percent interest.
That bank was holding $12 million in city monies, the audit reports.
Other deficiencies were related to collections in water and sewer billing, as well as with violations of Jackson’s water/sewer bond covenants.
Under the city’s bond covenants, Jackson is required to collect 120 percent of its annual debt service through water and sewer billing and other fees. Under the city’s Water and Sewer Bond Ordinance, Jackson is required to maintain restricted funds in the amount of one-twelfth its operation and maintenance budget, one-twelfth of its actual debt service amount, and one-sixth of its operation budget as a contingent fund.
All accounts and collections were below the required amount, Tann states.
According to the audit, part of that problem stemmed from “difficulties” in the city’s water and sewer billing system.
Those difficulties resulted from the city’s energy performance contract with Siemens. In 2012, Jackson brought on the international firm to completely overhaul the water billing system. This spring though, months after the work had been completed, city officials reported that some 20,000 customers were not receiving statements.
In late April, the city brought Siemens back on to help sort out the billing issues and train staff to better handle accounting problems.
