GARLAND — An audit report confirmed what Garland officials already knew about 2011-12 — there were irregularities in finances, a fund balance so low it was actually in the red and some purchases not accounted for in the books. It also revealed the great measures the town took at the end of that fiscal year to right the ship through vigorous cost-cutting and internal controls that have produced a positive outlook for the future.
Bryon Scott of Thompson, Price, Scott & Adams Co. PA of Elizabethtown gave a brief overview of the audit conducted by his firm late last year.
He lauded the work done by the town, its staff and independent auditor Scott Bridgers, who was hired by the Garland Board of Commissioners in March 2012 to help guide the town through extensive repairs in its finances. For nearly the last year, town officials, with the assistance of Bridgers and under the watch of the N.C. Local Government Commission, identified areas where costs could be cut, rates could be raised and finances needed to be fixed.
Scott reiterated some of those issues found in his audit.
“There were a few irregularities, I think you all pretty much know a lot about this stuff,” said Scott. “The fact there were some paychecks that were advanced and out of the normal payroll schedule was the main one. A lot of the stuff I’m going to mention happened during the audit year and we, by professional standards, are required to mention it. You all know about it. You have done a fantastic job in what you have done to get a lot of that controlled.”
He said Bridgers was an “excellent asset” to the town. Scott emphasized that an audit was not a detailed line-by-line examination at financials, but rather a cursory look at general target areas.
“We don’t look at every detailed transaction,” said Scott. “An audit is a lot of sampling, pulling from areas — based on our experience, on conversations and letters that we mail to you — where we would like to concentrate based on feelings you all have. We discuss the procedures we plan to form and we communicate to you any deficiencies and internal control.”
The town, he said, has already done a good job in making internal controls.
Those controls included the dismissal of both the longtime town clerk and deputy clerk in March 2012 after a prior audit report raised concerns with the town’s accounting and reconciling financial records. When the ex-employees sought accumulated vacation leave pay at the end of April 2012, the board adopted resolutions withholding that pay, noting payroll deposits issued by the clerk to herself and the deputy clerk before the payment period was completed and that pay had been earned.
Along with irregularities, Scott said there was a “segregation of duties” issue in Garland, not out of the ordinary for municipalities.
“That is a finding I have with every town,” he remarked. “It basically means there are not enough personnel to cover all of the accounting policies and functions within your government. It’s very common and you will continue to have that. Although Scott is an excellent addition to those controls. His reviewing of things will continue to be an asset to the town.”
Scott also noted “failure to perform timely reconciliation of significant accounts,” an issue for the town in the past but not expected to be a problem down the road, as it is being addressed for the current year, he said.
“That is a finding that I have seen you have repeatedly, which I do not see coming in the future,” said Scott.
During 2011-12, deposits were also not made in accordance with North Carolina General Statutes, he said.
“The General Statutes require that over $250 must be deposited daily,” he pointed out. “There were instances where it would be days and days where money was sitting in the safe. That has been rectified as well.”
The town of Garland’s available fund balance excluding the Powell Bill funds is below the Local Government Commission’s recommendation of at least 8 percent of total general fund expenditures, according to the audit.
“You got a letter last year that said your fund balance percentage was 17.24 percent. If they were to take out the Powell Bill cash (restricted fund balance), then you would be a -2 percent.”
That has also improved for the current year.
“That -2 percent has grown to almost 7 percent. That 17 percent is 22 percent,” said Scott. “So you all have made a great stride in reducing costs in 2011-12. I hope we will see that continue where your fund balance will grow. The Local Government Commission recommends 80, 90 percent (for towns Garland’s size). I don’t see that you’re required to get that high, but 50-60 percent is high. It will be a high range for you to get to, but 50-60 percent is where I would like to see you. That would be a comfortable fund balance.”
Scott said fund balance essentially represents the town’s savings account, which could be used in a natural disaster or emergency situation.
“When tornadoes, hurricanes, snowstorms or whatever natural disaster may occur, or the well goes out or something significant,” said Scott, “you need to get cash immediately. That’s when you fall back on your savings account. That’s why the Local Government Commission wants you to have a fund balance — so you can get your citizens through their time of need.”
Cutting costs have assisted in boosting fund balance, while revenues have risen in other areas. Ad valorem tax levied rose due to the 2011 countywide revaluation and water fund revenues increased due to rate increases implemented by the town board last year, Scott said.
“I commend you on what you’ve done to cut costs,” said Scott. “Continue to do that.”
The Garland board extended the contract for Thompson, Price, Scott & Adams Co. PA to Jan. 31 to complete the audit. The full audit was to be submitted to Local Government Commission this week.
Garland mayor Winifred Murphy thanked Scott and his staff for their patience and accepting the audit contract, and offered gratitude to Bridgers. She also expressed her thanks to former town clerk Pam Cashwell, who took over during the transition during the probation and subsequent dismissal of the previous town staff. Murphy also thanked the current town staff and the Board of Commissioners.
“Everything that we’ve done, from all the things that we did when we first got started, was trying to decrease expenditures. I think that helped us have a better audit,” the mayor said. “Two-thirds of the year was over when we started, so really we had from March 1 to June 30 to try and clean up a lot of things with the internal controls. Throughout the four months we had, it made a significant difference in our fund balance being higher, our revenues increasing and our expenditures decreasing.”
The mayor noted that changing the banking relationship to Southern Bank in Garland last year helped a great deal in making daily deposits, which used to involve making trips to Clinton. Information provided to the board, including up-to-date “budget vs actual” printouts and all checks that are written by the town, has also grown immensely.
“We now have different people signing checks and taking things to the bank. We’ve put a lot in place. It’s not that anyone was trying to steal or be fraudulent,” said Murphy, “but all of us make mistakes. It’s always good having another pair of eyes looking at that. The internal controls are in place now.”
Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at firstname.lastname@example.org.