PORTERDALE -- City Council members voted to accept a 2011 audit report Tuesday that was fraught with accounting adjustments made necessary by errors in the way revenues and expenditures were recorded throughout the year.
In general, the audit found that the city did not have employees on staff "with adequate training and expertise in generally accepted accounting principles and governmental accounting standards" to prepare necessary documents or to properly record transactions.
On Friday, City Manager Bob Thomson said that the city has taken steps since the first of the year to correct problems with its accounting practices. In April of this year, the City Council passed an ordinance placing the clerk/treasurer function under the direct day-to-day supervision of the city manager. The city's clerk, Judy Johnson, resigned in April; subsequently the city engaged the services of Capeable Solutions for accounting and payroll functions. Megan Reid, formerly the city's court clerk, was appointed acting city clerk and later permanently appointed to the position.
Since then, Thomson said the financial statement for the first half of the fiscal year was described by the city's auditor as "night and day" in comparison to previous reports.
According to the audit presented to the council Tuesday night by CPA Mark Hardison of Clifton, Lipford, Hardison and Parker LLC in Macon, the city ended 2011 with a general fund balance of $115,946 compared to a beginning general fund balance of $97,808, which Hardison said shows some positive momentum compared to prior years. General fund revenues totaled $875,378, with expenditures at $812,838. In addition, the water fund showed an increase in net assets of $108,000.
However, Hardison had some unwelcome words in terms of the city's accounting procedures in the past year.
"The accounting was not done properly during the year," Hardison said. "The effect on that is that as an auditor we came in and made a lot of adjusting entries."
Hardison said problems were found in multiple areas.
"The numbers were wrong in payroll; they were wrong in accounts payable; they were wrong in expenditures; they were wrong in revenues," Hardison said. "You didn't have a CPA on staff; you didn't have someone with a lot of experience. I thought we were going to make a lot of progress (over the previous year), but we didn't make any progress. In fact, it went downhill."
In addition to posting errors, the audit found that the city had not filed 941 payroll reports with the Internal Revenue Service for the fourth quarter of 2011 and had not filed other 941 reports in a timely manner, resulting in interest and penalties against the city of more than $10,000. The city was able to have most of the penalties abated and ultimately paid the IRS about $500, according to Hardison. The audit also found that the city did not file payroll tax deposits in a timely manner in 2011, resulting in penalties and interest of $1,242.
In response to a question from Councilman Lowell Chambers, Hardison said it does not appear that there was any fraud involved, just "extremely poor accounting, extremely poor."
Hardison also reported difficulties in getting documents necessary to conduct the audit. In a June letter to the city he cited "significant difficulties due to the abrupt resignation of the former city clerk prior to fieldwork. We experienced significant delays in obtaining requested information from the city causing delays in the audit."
As a consequence, the cost of the 2011 audit was about $11,000 more than for 2010, or $30,000 compared to $19,000.
Reid said Friday she believes having support from Capeable Solutions will be cost-effective in the long run. The city will pay Capeable Solutions about $800 per month to handle payroll, accounts payable, accounts receivable, and financial statements. In addition, with the assistance of Capeable Solutions, Reid said next year's audit should cost about $13,000.
"Basically we have a fulltime CPA at our fingertips," Reid said.
Councilman Mike Harper said at Tuesday's meeting that he also expects improvement in the audit process in the future.
"We realize that we had problems," he said. "We've taken care of them. We have a new city clerk. This is one of the worst reports I've ever seen."