Burnside —

Audits are typically considered to be no more fun than a root canal, and the City of Burnside had its financial mouth peered into during the August city council meeting. David Smith of Wilson and Company, the local firm which performed the annual audit for the city (the 2008-09 fiscal year in this case), stopped by at Monday’s meeting to present the list of concerns raised during the review of Burnside’s financial picture. And though that picture is hardly bleak, the city does have some areas where it could improve. “There were some procedural things we could brush up on,” said Burnside mayor Chuck Fourman. “It’s a small city, and some of these things happen, but there are some changes we could make.” Specifically, Smith said that: • Checks are being made out and not immediately and properly distributed, increasing the risk that city funds could be stolen or tampered with. A number of the checks appear to have been held as long as 45 days — ”some less time, some more time,” said Smith. Three types of transactions were primarily at the root of this concern. In the first, as Smith described it, the city’s water department reimbursing Burnside government for bills paid on the utility’s behalf. “You can see a check date with a rough example of January 1, (and) you see the city depositing that check on January 31,” said Smith. “(The check) has probably been laying over there in a drawer. It’s just not a not a good policy to have. If you cut a check, it’s been signed, get that thing in the mail.” Additionally, the state’s Rural Development office requires a “sinking fund,” that covers bond payments at the end of the year, and a depreciation fund, which builds up to pay for repairs to the water system. Checks going to those accounts were also being cut and held, in violation of bond covenants with the Rural Development office. “You know what your payment’s going to be at the end of the year; divide that into 12 payments and put it in every month so you make sure you’ve got enough money there at the end of the year,” said Smith. “In that one particular account, there wasn’t enough there at the end of the year.” Finally, deposits into the city’s sewer department’s “sinking fund” for the year were nonexistent, and funds from both the city’s waterworks and general fund have been used to make the required bond payments during the year. Wilson and Company recommended that the sewer department should budget for and make the necessary deposits. “The cash flows have been a problem in the sewer department, so the sewer department has not been depositing money there as time goes by; even in the year we were auditing, the main city fund had to loan money to the sewer fund to make that payment,” said Smith. “It’s my understanding the sewer department(’s) cash flow is doing much better, and possibly there are funds there now. Maybe the council could watch those funds and make sure that when there’s enough there, they start putting money into that sinking fund.” • The city’s tourism commission came under the microscope as well. The tourism board has traditionally operated as an all-volunteer set-up, though last year Johnda Barker was hired as a part-time contract worker to help promote the city and provide information. In one case, auditors reviewed the telephone expenditures due to issues noted in the prior year. Upon analysis of the telephone detail, they noted that reimbursement of tourism commission president Dona Howard appeared “abnormal.” The entire cost of two phone lines, including one with data usage only, was reimbursed, as opposed to a prorated portion of the phone charges related specifically to tourism commission business. “I would suspect that she gets personal calls and business calls on that phone, and that only a prorated portion should be reimbursed,” said Smith. “We’re not talking tens of thousands of dollars or anything, but it pass the smell test for me as an auditor, to turn in 100 percent of the cell phone bill.” (Howard told the Commonwealth Journal that a couple of years ago, the tourism board had voted for her phone bill to be paid in exchange for her working the phone lines at the time. Fourman noted that Howard was doing a lot for the commission and not being paid for her time — unlike Barker, who is currently being paid $20,000 for the job Howard was largely performing — and suggested that reimbursing her phone bill was a minor concession for the enormity of her tasks.) Additionally, Smith had issues with Barker being classified and paid as a contract worker. Smith believed tat she should be classified as an “employee” of the city. “A contract laborer is that guy you hire to come over and build you a garage,” said Smith. “What scares me as an auditor and an accountant is if (Baker) is paid as a contract laborer, then the IRS come in and says she should have been an employee, then the city and tourism commission could be out some money having to pay back taxes that should have been withheld on that person’s wages. ... It’s just an issue that I think you should definitely take a look at.” Smith believed that Barker qualified as an employee because the city and tourism board provide her with equipment and offer direct instructions. Smith also said that a checking account had been moved to a different bank by the tourism commission, and this was not approved by the city council or documented at board meetings. Smith suggested the council make approvals for such transactions. * Audit adjustments from the previous year weren’t posted to the books throughout the year. “That’s something that the accountant should have helped with,” said Smith, who observed that the same problem had occurred the year before as well. “That’s just something that causes us as an auditor more work, to have to come back and post them. ... We’re definitely getting that rectified.” • Issues raised in audits from prior years still existed, such as lack of segregation of duties (a necessarily evil in small towns, a point even Smith acknowledged) and the need to have an experienced account reconcile city records and prepare draft financial statements on an annual basis to better prepare for the yearly audit. The council also approved a motion to look for an auditor. As Councilor Jim Rasnick put it, “I don’t think we have any other option — we’ve got to by law.”