In which direction is our city headed?
Published 9:04 pm Friday, July 25, 2008
I am a Certified Public Accountant and have practiced public accounting for approximately twenty years. During those years I have been involved in the audits of numerous municipalities, other governmental entities, nonprofit entities and other businesses. As I reflect back over the ongoing discussion of the recently released September 30, 2006 audit report and the news coming out of City Hall in recent weeks, there are two things that are truly more troubling than the million dollar loss incurred by the Utility Fund. The first is the tone of the responses we have heard from our City Officials, in that there seems to be some degree of surprise and a lack of full understanding as to why we have a million dollar loss, and second, is the timing of this discussion which is essentially two years late. I say these things in light of what I know to be required of our City Officials under State law.
The responses offered by our City Officials to date include: the city has lost major customers; lack of communication between City Officials and staff; it could be gas leaks; it is a mystery how this system is off like it is; it is due to staff turnover; I thought the rates fluctuated; it is estimated there could be more losses when subsequent audits are completed; if the millage rates had increased like they should have, then we would be in great shape; and finally, to be perfectly clear the city is not broke but is experiencing growing pains.
The problem with these responses is that state law requires certain things, at a minimum, of our City Officials. Sections 21-35-5 and 21-35-9, Miss. Code Ann. (1972) as well as the “Municipal Audit and Accounting Guide” as prescribed by the Office of The State Auditor, require certain municipal funds including the Utility Fund to be budgeted. Section 21-35-13, Miss Code Ann. (1972) requires that “The city clerk must prepare a monthly report to the governing authorities showing for each budgeted fund, the expenditures and liabilities incurred against the budget during the prior month and year-to-date, with like information for receipts and unencumbered balances.” This report is required to be presented to the governing authority at each regular monthly meeting.
Considering the requirements of State law, as described above, I have only been able to come to the following three possible conclusions regarding this matter.
First, is it possible our Elected Officials did not receive financial reports as required by law, and did not compel that they be produced, and therefore, had no idea there was such a large loss?
Second, is it possible our Elected Officials received all financial reports as required by law, and they knew and understood there was a substantial loss and did nothing?
Finally, is it possible our Elected Officials received all financial reports required by law but they did not fully understand them or the reports were not accurate enough for them to identify the loss and formulate a response?
I don’t know which of these conclusions is the most accurate or if this situation is the result of a combination of them. Only our Elected Officials can explain why they appear surprised by a two year old million dollar loss and why they, to date, have made no coherent explanation for why the loss occurred. It is possible the City technically complied with the law, but it is apparent that even if there was technical compliance, the intent and spirit of the law were not complied with or we would not be discussing this in 2008—it would have been addressed in 2006.
A Picayune Item article dated July 2, 2008, attributes the following comment to Councilman Leavern Guy, “to be perfectly clear, the city is not broke” as if to insinuate it does not matter if we lost a million dollars, because we still have money in the bank. It would appear that Councilman Guy and possibly the rest of our elected officials still don’t get it.
I would like for Councilman Guy, his fellow Council Members, and our Mayor to imagine if they would that they wake up after being asleep since September 30, 2006, and they find themselves in a car traveling at a high rate of speed (say about one million dollars per year) toward a sheer cliff. They don’t know exactly how far it is to the edge, (because they have been asleep for the last twenty one months) but they know the cliff is there. As they sit up and look around, they make the assessment that because all four wheels are still on solid ground (the city is not currently broke) that everything is OK. This would most certainly be a disaster, because unless someone takes action, such as turn the wheel or apply the brakes, they (along with all of us) will soon be at the bottom of the cliff.
It is not a matter of questioning whether the City is broke after the vendors and employees have been paid for the month. The question at hand is, in what direction is this City moving, and is anyone paying attention as we travel toward the edge.
I understand the rate structure within the Utility Department has recently been addressed. Although these increases may very well be required, I would hope that there has or will be some evaluation of the operating efficiency of the department, which will be made public, in order to justify any increases to the customers. I would also like to see our Elected Officials address the operating results of the Utility Fund for the year ending September 30, 2007 and year-to-date for the current year. None of our Elected Officials have dared to offer any results of operations of the Utility Fund for the last twenty one months, but as was noted at the beginning of this letter, State law requires them to receive this information monthly.
To be fair to everyone involved, our current City Clerk and City Manager have a short history in those positions, and most of what is being discussed has taken place prior to their employment. However, our City Council and Mayor have held their offices during this entire period, and the financial well being of the City and compliance with applicable laws and regulations ultimately rests with them.
And lastly, Mr. Sulivan, I must agree with the assessment made in your article dated April 4, 2008 concerning the news coming out of the city council these days — ludicrous it is.
Certified Public Accountant