GARLAND — What a difference a year makes.
About 12 months after the town of Garland received a scathing letter from the N.C. Local Government Commission (LGC) detailing the poor state of the town’s finances, a laundry list of operation deficiencies and serious weaknesses that required “immediate corrective action” for the town’s sustainability, this year’s report from LGC represented a complete turnaround.
In a Feb. 21 letter, Garland officials were informed that the State and Local Government Finance Division, in its role as staff to the LGC, analyzed the audited financial statements of the town of Garland for the fiscal year ended June 30, 2012.
“During our review, we noted the following: fund balance available is now positive; expenditures did not exceed appropriations; the Water and Sewer system is now self-supporting; personnel problems have been corrected; and the town was selected to receive an N.C. STEP Grant,” the opening statement of the letter read.
The letter, signed by Sharon Edmundson CPA, director of the division’s Fiscal Management Section, did note some steps still to be taken, and asked the town to respond in writing within 30 days. That response — the town’s Corrective Action Plan — was approved by the Garland Board of Commissioners during a special session Tuesday.
The corrective plan addresses material violations and, with Tuesday’s approval, will be signed by commissioners to be submitted this week.
“This is done as a response to our audit. Based on what they find, they send us a letter telling us what is right and wrong and we have to address those concerns,” said Garland mayor Winifred Murphy. “Last year’s letter was worse than this year’s. We’re on the right track.”
“It was much better,” said town clerk Jennifer Gray.
In January, Bryon Scott of Thompson, Price, Scott & Adams Co. PA of Elizabethtown lauded the work done by the town, its staff and independent auditor Scott Bridgers, who was hired by the Garland board in March 2012 to help guide the town through extensive repairs in its finances. For the last year, town officials, with the assistance of Bridgers and under the watch of the LGC, identified areas where costs could be cut, rates could be raised and finances needed to be fixed.
“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 recently. “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 LGC’s letter said as much — but also offered that the job was not done.
“We commend the town’s management, staff and citizens for these improvements,” Edmundson stated in the letter. “However, the town still has serious financial problems that must be addressed in order to further your efforts to improve both the town’s financial condition and operations.”
The town’s audited financial statements were not received until Jan. 18, 2013, well after the due date of Oct. 31, 2012, limiting the town’s ability to take corrective action for the following fiscal year if needed, the letter stated. The delay was due in part to the audit firm having time constraints with other audit obligations “and the additional time needed to gain an understanding of previous findings and the work completed by the town to correct these issues,” it was noted.
“We urge the town council to analyze these issues or concerns and take the appropriate action to ensure that the audited financial statements for the current fiscal year are completed and submitted by Oct. 31, 2013,” the letter stated.
As of June 30, 2012, the amount of available fund balance was $113,061 or 25.73 percent of total fund expenditures. Without the $82,145 of restricted Powell Bill money, the town had only $30,916 or 7.03 percent, a little less than one month’s expenditures.
“This is a tremendous improvement over the negative 1.79 percent held at June 30, 2011 without Powell Bill funds, but it leaves little margin for error,” the letter read. “Fund balance represents a reserve that can be used for emergencies and other unexpected expenditures or to take advantage of financial opportunities that may unexpectedly arise. The town council should continue its conservative measures to rebuild General Fund reserves.”
The state noted the necessity for daily deposits if funds received were $250 or greater, as well as “various weaknesses” concerning the town’s internal control system, notably timely reconciliation of significant accounts that required management oversight of payroll and compensation.
“We are aware that several of these items arose out of the issues with former personnel,” the letter stated. “A strong system of internal control must be put in place to help prevent those issues from recurring. We urge the town council to develop a corrective action plan and begin eliminating these serious internal control weaknesses.”
In a five-point Corrective Action Plan, the Garland board notes that accounting problems are being addressed and all accounting books and records are being kept timely and up to date. They will be made available for audit “in sufficient time for submission by Oct. 31, 2013,” the plan states.
The town is “proactively addressing” the need to boost reserves in the General Fund through budgetary controls, with the intention of showing a steady increases in unreserved fund balance each fiscal year. Deposits have also been addressed by ensuring they are made on a daily basis, a process being overseen by management, the board stated.
Bank reconciliations are being performed in a timely manner and the reconciliation of sub-ledger accounts are a work in progress, with an estimated completion date of June 30, 2013 for that process. Payroll transactions are being overseen by management and time cards are reconciled to payroll to ensure payment is only for time earned, the plan detailed.
“The board will continue to monitor internal controls and will take appropriate action as necessary,” the plan stated. “The board continues to utilize the services of an independent CPA as a consultant to assist in internal controls.”
Murphy said the independent auditor, Bridgers, who has been working closely with the town for the past year, was similarly satisfied with the strides made, and the state’s reaction to Garland’s progress.
“Scott Bridgers was here Tuesday morning and helped put together the Corrective Action Plan,” the mayor remarked. “He was very pleased.”
Chris Berendt can be reached at 910-592-8137 ext. 121 or via email at firstname.lastname@example.org.