CITY’S MONEY METHODS RISKY
By AmyJo Brown/OF THE COMMERCIAL STAFF
The way Pine Bluff handles its money is risky and could lead to mistakes or theft, according to the adverse opinion of an audit released this week by the state Division of Legislative Audit.
The audit, released Thursday at a meeting of the Legislative Joint Auditing Committee in Little Rock, covered the municipality’s 2006 financial statements but it reinforced issues documented in annual audits of the city’s finances since 2003.
The audits said contributing factors to the adverse opinions are the city’s use of minimal accounting standards and a poor internal checks and balance system.
“To ensure the proper safeguarding of assets, financial accounting duties relating to initiating, receipting, depositing, disbursing and recording cash transactions should be distributed among appropriate employees,” according to the most recent audit. “All city officials ... did not segregate these duties to sufficiently reduce the risks of fraud or error and properly safeguard the city’s assets.”
The city also uses an accounting method that — although it is allowed under state law and used by cities across the state — does not conform with higher standards issued by the comptroller general of the United States.
The method used by the city, called a regulatory basis of accounting, looks only at cash transactions — leaving out receiveables, fixed assets, deposits and investment risks and thus failing to provide a complete picture of the city’s financial position, according to the audit.
Steve Miller, the city’s finance director, said the city uses the accounting method because it is too costly to try and comply with the higher standards, which would require more staffing and other resources.
“You can’t achieve an ideal state because the cost is prohibitive,” Miller said.
He said the financial duties have been segregated where possible, but again, manpower is an issue.
“The position you get into is having enough people to do it,” he said.
Although the city relies on the audit and its submitted financial statements to obtain financing, Miller said the adverse audit opinions haven’t hurt the city in the past.
It was not an issue, he said, when the city borrowed $650,000 from Simmons First National Bank in March to purchase a new hardware and software system for the courts and the police and fire departments. The city secured a 4.5 percent interest rate on the five-year note.
“That’s pretty competitive,” Miller said, adding that the city received five competitive bids at the time.
Also noted in the audit of the 2006 financial statements released Thursday:
“I will submit an ordinance to the council for all auto lease contracts in the annual budget,” he said.
The same issues have been noted in each audit since 2003.
In response, Miller said the problem would be fixed this year. A corrective action plan has been established that will have the courts preparing listings of unadjudicated receipts by month for the last three months and continue to so monthly from there on out.
Eventually, Miller said, the cash balance that cannot be matched to the receipts will become constant and that amount will be transferred to the city’s general fund.
Division 1 court clerk Debbie Drake said she believes most of the money that is unaccounted for in the accounts — about $225,851 in the one account and $61,552 in the other — is interest that has accumulated over the years and refund checks that were never cashed.