Originally created 08/08/06

Deficit growth raises concern



Augusta's auditors sounded the alarm Monday over the growing operating deficit in the general fund, revenue shortfalls, flawed financial reporting and lack of accountability.

"What concerns us is a significant trend of increased use of fund balance or increased loss in the general fund," Cherry Bekaert & Holland partner Becky Cox told members of the Augusta Commission's finance committee.

In 2002, there was a surplus in the city's general operating fund of $1.8 million. In 2005, the fund was in deficit by $5.8 million, according to a preliminary report of the 2005 audit.

"And that's use of your fund balance, use of your savings, use of your reserves in your general fund," Ms. Cox said.

Cash reserves available to fund operations were down to $11.1 million last year from $24.6 million at the end of 2002.

"The cash reflects the operating deficit that has turned into a trend," Ms. Cox said.

In 2002, there was enough cash to keep the government going for 86 days. At the end of last year, there was enough for only 39 days.

"And that's a significant negative trend that caused us concern while we were looking at the audit this year," she said.

Another trend is that the city is spending all its budgeted money, Ms. Cox said.

"And that again is consistent with the increased deficit in the general fund," she said.

Last year, the city planned to use $3.3 million of reserve funds to balance the budget.

Then revenue shortfalls in court fees, fine and forfeitures, general grants and the necessity to transfer $2.2 million to other funds such as garbage and transit boosted the deficit to $5.8 million.

Auditors found material weaknesses - the most serious internal control finding - in financial reporting with errors and untimely financial information.

Errors in Human Resources included pay-rate calculations, missing personnel files and documentation.

Of 76 payroll records checked, three corresponding employee files could not be found in that department, prompting Doug Cates, the partner in charge of Cherry Bekaert's Augusta office, to suggest that the commission make all employees show up in person to pick up their checks.

"We checked to see if the system is working, that people are getting paid the right amount, so you've got to go to the personnel file to get that," he said.

"When we went to the personnel files to see, out of the 76, we couldn't find (three) files. We didn't go look for the people. We haven't hired any private investigators. We do a financial audit."

Mr. Cates said the problem is that employees are not doing what they should.

Commissioners Don Grantham and Joe Bowles said the commission will definitely take Mr. Cates' advice.

"Absolutely," Mr. Grantham said. "I'm going to recommend it. Let them get in line."

Auditors found numerous problems in federal grants administered by the Housing and Economic Development Department. The department receives about $8 million in various grants each year.

Afterward, Mayor Deke Copenhaver said, "I think this whole thing reflects a general lack of accountability within this government. I think that's an example of bad record-keeping, but it's accountability. Who are our employees who are supposed to be keeping good records answering to?"

Finance Committee Vice Chairman Joe Bowles, an accountant, said he could not understand why auditors found capital asset expenditures unreconciled.

"All we're trying to do is take the equipment we've purchased and add it to a listing to keep track of the assets," he said. "It ain't rocket science. All you've got to do is take last year's ending number, add in everything you bought this year, subtract out everything you got rid of."

Mr. Bowles said the housing and economic development department is "another whole keg of worms" he would like to see privatized.

Reach Sylvia Cooper at (706) 823-3228 or sylvia.cooper@augustachronicle.com.

NEGATIVE TRENDS


Operating Deficit - Increase/(Decrease) To Fund Balance:


2002: $1.81 million 2004: ($2.14 million)


2003: $928,762 2005: ($5.87 million)




Fund Balance (reserves) in General Fund:


2002: $31.23 million 2004: $30.01 million


2003: $32.16 million 2005: $24.14 million


TOTAL EXPENDITURES OF GENERAL FUND:

Year Budget Spent Percent
2002 $98.23 million $93.99 million 95.7
2003 $98.80 million $97.64 million 98.8
2004 $103.57 million $102.44 million 98.9
2005 $104.15 million $104.12 million 99