City audit cites need for changes in procedures

Feb. 04, 2013 @ 06:59 PM

The Henderson city budget for fiscal year 2012 that ended in June received a full auditing by independent accountants and several budgeting errors were found.

The overall assessment, according to Curtis Averette with William L. Stark and Co., was good. The rating was an unqualified opinion, which is the best category. The auditor stated there was accuracy “in all material aspects” and presenting a fair outlook on the city’s financial position.

Details needing correction call for changes in procedures moving forward.

“At the end of the fiscal year, your unassigned fund balance for the general fund was $2,005,613,” Averette told the city council and staff at a recent meeting on the audit. “This is an increase of $21,905 over last year’s total. That is the direction that we want it to go.”

Total assets for the city are $82,440,581 higher than total liabilities, and all of the funding factors — ratios and percentages regarding debt to savings, assets to liabilities — exceed by healthy margins the minimum standards set for localities, according to Averette.

Averette concluded there were two matters of “material weakness” and a lesser matter of “significant deficiency” that required attention by city budget workers.

• Uncollectable water, sewer and sanitation accounts had not been written off as bad debt over a six-year period. It is stated policy to do so, to ensure accuracy when measuring up accounts-receivable balances (counted as assets) compared to liabilities.

• Land and ongoing construction project balances reported in statements did not reconcile with underlying accounting records – the balances were incorrectly stated. Land assets were materially overstated primarily because of library improvements capitalized after land transferred to the Embassy Foundation.

• The city provided some money for donations to local agencies that had not been appropriated. As extra revenues became available, they were given, but that disbursement lacked a budget ordinance or amendment. (This was a deficiency problem in the prior two annual city budget reports.)

Averette offered recommendations to correct the problems.

• Review uncollectable water, sewer and sanitation accounts for the ones that should be written off as bad debt, and adjust the roster of accounts receivable accordingly.

• Set effective internal controls to disclose fairly the appropriate amounts of land and construction in progress fund balances so the numbers match the underlying account records.

• Before providing the donation funds that were conditional on there being available extra revenues, adopt the budget amendments as revenues exceeding estimates are received.

There were questions to city staff by council members as to how some of the errors could have continued for several years, especially the underreporting of construction fund balances that did not reconcile with the accounting records.

City Manager Ray Griffin said that it was an oversight, and that it would be corrected.

“I don’t have an answer as to why it was not known, but can only state that it was not known, and now that it is, steps are being taken to correct it,” Griffin said.

Griffin said the main problem with the construction project balance issue was an oversight in which the library was not taken off of the fixed assets roster when transferred to the Embassy Foundation.


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