Lazaro Aleman
ECB Publishing, Inc.
After an hour-long workshop last week intended to explain the final audit report for the fiscal year 2019-2020, the Jefferson County Commission voted to adopt the 200-plus-page document as presented, although some had concerns about the findings.
Chris Moran, of Moran and Smith LLP, the county’s auditor, made the presentation at the request of Commissioner Betsy Barfield, who wanted to get a reading on how the county was doing financially, fiscally and in terms of its accounting procedures.
Barfield had previously met with Moran, who, according to her, had expressed concerns about some of the county’s fiscal practices. When Barfield questioned Moran about these concerns at the meeting, he limited his presentation to a summary of the final audit report, without any commentary of his own.
“I must have misunderstood what you told me,” Barfield said, not sounding completely convinced or convincing when Moran expressed confusion over his alleged statements.
The workshop failed to address some of the specific concerns with the clerk’s office that seemed to be swirling just beneath the surface throughout the presentation, possibly disappointing those who had expected a more specific and robust discussion. Moran said the county had overall received an unqualified opinion, which basically meant a judgment that the financial statement was fairly and appropriately presented, without any identified exceptions and in compliance with generally accepted accounting principles.
Moran did say, however, that as things stood now, the budget as adopted didn’t necessarily match the financial statements. He suggested a change should be made, so either the budget adapted to the financial statements, or the financial statements were made to reflect the budget. Which wasn’t the case now, he said.
Moran noted that the clerk presently kept very complicated books, containing thousands of line items. The way it worked, he said, was that all the monies that the county received went into one pot, the general fund, from which monies were then transferred to, or received from, the various departments as needed, constituting a complicated system of internal borrowing and lending. He suggested a different distribution method where each department received and controlled its own funding separately would be preferable.
Another problem, one that Barfield has long been saying needs correcting, is that the board is not presently receiving monthly financial reports so it can keep up with the different departments’ expenditures in relation to their budgets.
It’s a situation that Barfield reiterated at the workshop and insisted needing fixing.
“I would like to see those reports in our packets every month from now on,” she said. “We need to be looking at the budget versus actual expenditures. Everything needs to come before this board. That’s all there is to it; that’s why we’re here.”
Another of Moran’s points was the board needed to amend and update the budget every time new monies came in, such as in the form of grants, a point that Clerk of Court Kirk Reams has made before. Otherwise, Moran said, the budget would not reflect the reality at the end of year.
Another concern gleaned from his presentation was that many of the county’s operations are experiencing losses, especially in the special revenues categories, such as 911, the fire and landfill assessments and grants.
The bottom line, Moran said, “is that you’re spending more than you’re collecting.”
It wasn’t necessarily that the departments were overspending their budgets, he added. It was simply that not enough revenues were coming in and the losses had to be covered with the general fund.
On the one hand, Moran said that the county overall had made a $157,000 profit in the 2019-20 fiscal year. Which was to the good, he said.
“We didn’t have a deficit year,” Moran said.
On the other hand, he said a little later, “You’re going to have to deal with these deficits sooner or later. You’re going to lose about $2 million of your general fund before it’s over.”
This prompted Commissioner Stephen Walker to comment, “If we keep running deficits like this, at some point, we’re going to be in pretty bad financial shape.”
Moran continued in this vein, listing revenue collections, expenditures, transfers-in and transfers-out.
In his presentation, he also touched on deficiencies that were noted in previous audits, such as the perennial lack of segregation of duties in the clerk’s office due to a lack of sufficient personnel.
In the citizens’ comments that followed, Phil Calandra, who is well acquainted with financial and accounting matters, offered his take on the audit, adding a little clarity in the presentation. Moran, Calandra said, had done a good job as far as it went, accomplishing exactly what he had been hired to do, which was to focus solely on the financial statement. In fact, Calandra noted, state law limited him to exactly that, as the statutes explicitly excluded commentary on an organization’s efficiency or effectiveness.
“But what was hidden in some of his comments was pretty disturbing,” Calandra said.
The board, he said, was accountable for the county’s finances, not the clerk of court; and so the board should receive the financial data regularly, he said. It seemed, however, that the board presently was getting the information late or not getting it at all, he said.
“What struck me about the audit presentation was, how much of this you didn’t know,” Calandra said. “It was almost like it was being sprung on you as a surprise.”
The board, he said, should know about the budget and expenditures on a monthly basis. Otherwise, how could it set a realistic millage or plan for the future, he asked.
“If you don’t know what the expenses are, you can’t forecast and how can you set the millage rate?” Calandra asked. “You’re really in a handicap; you’re in the shade.”
He was concerned about the county’s long-term sustainable financial health, he said. He worried, that the county would one day find itself without enough money to pay the bills because the board didn’t really know what was going on.
“The other thing that popped out in an enormous way is that the accounting system is far too complex,” Calandra said. “The executive management, which is what you are, shouldn’t be surprised, ever. You should be getting the information consistently, clearly and timely, in the way that you want, so that you can make informed decisions.”
Currently, he said, the accounting system was a big pot of money from which monies entered and left without board oversight.
“The money moves around,” Calandra said. “It doesn’t seem to me like a normal accounting system. When a budget is set, each department has a set amount of money and that’s what they have to spend. That’s their checkbook, and if they blow it, they have to come before mom and dad and ask for money. And there will be a conversation about it. But money now is being spent or committed and moved around basically behind the curtain. I don’t think you know that happens. Nobody out here in the audience I’m sure knows it happens.”
He challenged the commissioners to make the situation right, now that they had the information before them.
“If you choose to do nothing and let things be just the way they are, that’s a decision that’s now in the public eye,” he said. “And it’s just not right. Things need to change.”