Thursday, September 24, 2009

2007 Audit Response Letter

September 23, 2009


Mrs. Pat Carson-Williams

812 North Main

Monticello, AR 71655

Re: Response to 2007 Audit Findings

Dear Mrs. Carson-Williams:

I am hereby submitting my response to the findings of the 2007 Audit. Initially we believed that we had two (2) weeks following the exit interview in which to respond. Because there will be an "Early Release" of this report, our response time has been reduced.

Let me begin by saying thank you. I appreciate the efforts and the professionalism shown by you, Jerry, DeAnna, Bridgett and Steve. I have had a pleasant working relationship with each of you.

I do not envy either you or the people surrounding you. You job is serious and tough. I do hate, however, the political or seemingly political nature of this process.

In addressing the Audit Findings, let me say this: these findings in this report are not a proper reflection upon the people against whom the finding are made. The terminology used here is too broad and too condemning to be both fair and accurate at the same time. You have categorized items as improper and undocumented. I have not been presented with an objective definition of either term. However, experience with this process has shown me that undocumented does not mean that nothing has been provided. Furthermore, improper is not equal to illegal.

I cast no aspersions on the intentions of any of the people making these findings. However, the State General Assembly would serve us all well in authoring definitions to those terms.

2007-1: In the next proposed budget, I intend to ask for sufficient staff to comply with the “duties relating to initiating, receipting, depositing, disbursing and recording cash transactions.” I then will make sure that the duties are segregated among those employees.

2007-2: (A) This finding puts several employees in the awkward and unfortunate position of being required to re-produce receipts for items on which they have been reimbursed. In other words, the employees have provided proper documentation in order to get the funds paid to them. Now, the records are no longer present as they should be. There is legitimate dispute as to where these records are.

I am not aware of any incident relative to some of the items listed within this finding. I have not been presented, for example, with anything that shows that an employee or elected official was reimbursed for mileage while using a City-owned vehicle. The sentence “[s]imilar improper transactions were also reported in 2006” is overly broad in that it appears to state that all of these findings were also in the 2006 Audit and they simply were not.

I make no excuse for the hotel receipts. Actually, I have provided thousands of dollars in hotel receipts. These receipts should have been included in the documentation present to the auditors upon arrival.

To fix these concerns, I will emphasize the need for training from the top to the bottom. All employees and elected officials will be provided with a soon to be produced primer on how reimbursements must be handled including having adequate documentation to satisfy the higher standard presented by auditors. I will that require the staff people handling these items be trained and follow check lists to assure that the city and the employee or elected official are protected by having adequate documentation to justify the business purpose of the expense and/or reimbursement. Additionally, I will aggressively seek repayment of monies to the city for those expenses that cannot be justified with proper documentation.

(B) I do not agree that the funds listed in this section were improperly used. First, the sales tax money was raised from private citizens, including me, for the purpose of promoting the sales tax campaign in 2007. The City of Helena-West Helena did not pay expenses associated with an alderman’s funeral and such a statement casts bad light on his family and his legacy. Otherwise, I have explained, adequately, what the city did in providing a proper funeral for one of its currently serving elected officials including having our Police Officers and Firefighters to present the Colors and to handle the Flag Ceremony. The City of Helena-West Helena purchased no uniforms for anybody. We, again, received donations from churches and individuals for the purpose of providing the indigent of our community with a helping hand on school uniform purchases. No tax dollars were used in this vein.

To fix these concerns, I will require the Parks and Recreation Department to itemize the sources of funds in a journal. This journal will include the receipts and expenditures such that the auditors can tell that no taxpayer monies were used. Alternatively, I will have the Department Head to open an account that does not bear the City’s name for the purpose of management of these monies. We should not be getting written up for good deeds done by good people. Additionally, I support the Chamber of Commerce. I will continue to do so.

(C) As it relates to the $3,800.00 of merchandise charged to the City’s Wal-Mart card, it was my understanding that the accused was being prosecuted and that Wal-Mart was reimbursing the city. I am in the process of substantiating that information. I am aware that the officer handling the case in 2006 was removed from the investigations division and many of his cases were not filed.

However, in the meantime, I have directed the city attorney to begin the debt collections process in the Helena-West Helena District Court by filing suit against the accused and seeking full reimbursement of the monies for the benefit of the City of Helena-West Helena.

Finally, training from top to bottom of all staff as to their respective roles on fiscal management is in order and will be directed without delay.

2007-3: This finding deals with areas over which I have no direct supervisory control. Our City Clerk has three staff people. Our City Treasurer is has no staff person provided. These monies are usually direct deposited by the State of Arkansas into the city’s general fund account. I will request that the city clerk and/or city treasurer comply with Arkansas law as it relates to the handling of these monies.

I am not aware of the Certificate of Deposit accounts that have not been reconciled. I will, however, request that this problem be eliminated immediately.

I will work with the City Clerk and City Treasurer to make sure that the Cash Receipt and Disbursement Journals are maintained and reconciled on a regular basis.

It is my understanding that the Monthly Bank reconciliation were presented to the council.

I believe that the Six Month Financial statements were submitted to the local newspaper at least twice in 2007. I will double check this matter with the local paper and city treasurer.

I have had to rely on the City Clerk’s staff and to get the records ready for the audit. My staff has had no direct role in preparing for the audit engagement. However, if I am to be held responsible for these matters too, then I will be asking for additional staff to replicate the work of the clerk’s office.

I would like to propose a solution. However, I am truly conflicted in so doing. The clerk’s staff has been doing this kind of work for more than 20 years. These same people were audited in 2001, 2002, 2003, 2004, and 2005. I have found neither this level of scrutiny present nor the apparent criticism in the prior audits. I would sincerely appreciate some guidance on where we should go from here. The clerk’s staff is basically doing what has been done for years and it seems that there’s been a sudden change in what is acceptable for audit purposes.

To fix this, I will encourage those having anything to do with the audit and the records kept for such purposes, to attend trainings and seminars on record management. I will also encourage more extensive use of computers and record imaging software such that receipts are more easily kept and tracked.

2007-4: I will direct that the Department Head at the Golf Course and Landfill make every effort to comply with the audit concerns listed here. I do not have specific response to each listed item, however, I do believe that the controls are better than presented.

2007-5: The financial records are neither prepared nor kept by me. However, I will work to implement procedures which will ensure that financial records are properly posted. I will suggest the partnering with a Certified Public Accountant for a limited period of time such that the posting of these records is properly done.

Other Findings: (1) I have submitted ordinances addressing this issue to our city council. Our city council failed to pass the ordinance. I do not foresee such an ordinance being passed until the composition of the council is changed because they, some of them, erroneously believe that negative audit findings makes for good political conversation. Therefore, I suspect that this matter will not be changed prior to a substantive change in the composition of the city council. I will, however, present the ordinance to the body again.

(2) There was ample documentation of the vehicle purchases at the time the purchases were made. I cannot explain what happened to the documents between the purchases and this audit. No competitive bid was necessary for the hauling of leachate. We tried to find haulers to move the leachate. Political acrimony led to several attempts to change the leachate hauler from the company that does such to another person. However, what has happened is that the company hauling the leachate has become, more or less, the single source provider. Actually, the company has always been the single source provider. More importantly, the arrangement on the leachate was a simple contract to haul the leachate at roughly three and one quarter cents per gallon ($0.325). The documents provided to me by our engineer and perhaps some ADEQ staff stated that hauling leachate would cost between five and eight cents per gallon. The hauling of leachate is akin to the purchase of gasoline and therefore is not easily subjected to bidding. Furthermore, the city operated under emergency conditions during the primary time we hauled leachate. Our landfill was closed in part because of the leachate was present and should not have been. We were facing financial ruin. We had a crisis; we answered the crisis; and we make no apologies for that.

(3) (A) The city council did pass an ordinance in 2009 addressing employee relationships. However, I take issue and will continue to take issue with this audit and anybody else trying to make it appear as if something is wrong with my brother being city attorney and being paid for so doing. Andre Valley has been elected in four (4) separate elections by the people of this community. I have been elected to this current position twice. Everybody in town knows that we are brothers. A substantial number of people erroneously believe that we are twins. When Riley Porter was Mayor and his brother Jesse Porter was Municipal Judge, I read of no such findings. I believe this demonstrates a difference in the treatment of these elected officials and other elected officials. It is not good policy. It is not good politics and it is downright wrong.

I am not sure who the auto mechanic employees to whom this audit makes reference are. However, Mr. Walter Vaughn was paid by the new city for work down prior to the consolidation. I decided to hire him instead of paying his fees for work on our heavy equipment, because I thought it would save the city money. It worked. His billings in 2005 exceeded $50,000.00. We paid him a salary of just under $30,000.00 and had his exclusive work between 8:00 a.m. and 5:00 p.m. Monday through Friday. The employee who was paid $510.00 for bookkeeping was first an independent contractor. The employee was later hired as a part-time employee to do a totally different kind of work. If I had the information, I could probably illuminate these matters even better. The Plumbing Inspector had has the same relationship with this city for a number of years. The Council passed an ordinance which I believe permits his continued relationship. However, once again, these items were not cited in prior audits.

(3)(B) I do not believe it was a violation of any law for the employees to use the travel agencies. I do not have any idea how the auditors even know who is related to whom particularly when the auditors do not live here and some of the persons impacted by this finding live in Virginia. I do not have the luxury of knowing the family members of many of the business owners with whom we regularly do business. I am not so privileged. This finding is inappropriate in that it ratifies some local political jockeying to make mountains out of molehills in an ephemeral effort to achieve political gain. The audit should be above such tactics. There has been no assessment made as to whether the city paid more for these expenses. Matter of fact, I believe the city paid less that the benefit to those who made any money in the transaction is not sufficient to justify the presentation made hereby. Everybody knows that we have agencies in this community that does business with board members and local elected officials that are never mentioned in audits.

(3)(C) Michael Boone was elected twice by the people of this community with more than 70 percent of the vote. His employment status with the local bank was known then. There is no problem with the city treasurer working for a bank. We need, in local government, people with skill sets that match the demands of office. Looking back at these audit findings and my agreement that more training of staff is necessary to comply with state law and the particular wishes of this particular set of auditors, I find it hard to believe and disheartening that an issue would be made of a person of Mr. Boone’s caliber and character serving in the roles he does. I find that incredible. In addition, when James Bogle was treasurer, he was loan officer and probably vice president of the local bank. Mr. Bogle, a good man, was the city treasurer long enough to retire and receive a local pension check. That was not mention in any audit that I have ever seen. There is a difference between Mike Boone and Jim Bogle. I just hate that it is state officials who reminds us of the differences. I have no plans for asking Mike Boone to change his employment status.

4. I cannot believe this finding exists. It makes no sense that the city would pay $34,000.00 in cellular phone bills and have no idea for whom they were provided. I was not provided the opportunity to verify its veracity. I think the finding is wrong. However, I will make every effort to make sure that the employees using city phones understand and follow our policy and the IRS guidelines.

5. Our governing body did discuss the 2006 Audit in open session. Joe St. Columbia read them allowed as if he was trying to condemn some of the other elected officials. There was a discussion of the findings. This happened at the next meeting immediately after the Division of Legislative Audit submitted the audit report to the council via mail. Actually, members of the council received their copies prior to me receiving a copy.

6. This finding makes reference to invoices not being “retained.” I do not know what happened to the invoices. However, those same said invoices displayed that the city bought the police cars at state contract price. I will stress the need for better management of the documents by our document handlers.

In closing, I intend to comply with Arkansas law. I also intend to seek additional training for all persons involved with city finances.

Sincerely,


James F. Valley


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