Audit details shortfalls in financial procedures (September 9, 1999)

By Ron Fonger, JOURNAL STAFF WRITER

Auditors are suggesting there are not enough workers in the city’s Finance Department to keep financial records properly maintained.

In a five-page report to Mayor Woodrow Stanley and the City Council, auditors Dupuis & Ryden said it found significant deficiencies in the city’s internal controls over financial reporting.

Among the firm’s findings:

The city apparently violated state law by spending beyond the budget adopted by the City Council in some areas.
A lack of employees in the city finance and budget departments has resulted in transactions not being recorded on the city’s general ledger in a timely way, making it impossible to compare the city budget to its actual spending on a monthly or quarterly basis.
Procedures have not provided for an interim review of the general ledger account balances, resulting in errors not being detected until the annual audit.
During 1998, bank reconciliations for some accounts were not performed on a timely basis — some not prepared until seven months after the close of the year, including the main pooled cash checking and investment account, which had more than $97 million in cash and investments.

Brian Ross of Dupuis & Ryden said some of the conditions have continued for years, but have risen to the level of reportable conditions, which mean there are significant internal control deficiencies.

Council members, who have watched a series of financial calamities unfold inside city hall in 1999, said they hope the audit report, covering the fiscal year that ended June 30, 1998, signals an end to the fiscal problems.

Since I have been here, all I’ve heard is what a mess the city’s finances are, said 3rd Ward Councilman Johnnie Coleman. I don’t want to see this another year.

Top Stanley officials said the report to the City Council on Wednesday produced little new information and said most issues identified in the audit letter have been or are being addressed.

I am glad to see it … I want to say, ‘This is what’s happened. What are we going to do about that? How do I keep that from happening again?’ said Finance Director Matthew Grady.

Council members have been supportive of Grady since Stanley appointed the former budget director to replace Marc Puckett, who resigned as the mayor’s finance director after revealing the city’s failure to properly transfer $19 million to its pension fund over two years.

That mistake alone cost Flint taxpayers nearly $1 million as lost interest was paid back to retirees with money that could have been used for street sweeping, police protection or other services.

Flint officials also acknowledged this year they had incorrectly distributed some $6 million in tax dollars collected for city schools, Bishop Airport and other Genesee County entities — a problem that has yet to be fully resolved.

And the city and state continue to discuss Flint’s failure to pay industrial and commercial facility taxes since 1996.

The financial difficulties led Stanley to roll out a four-point fiscal integrity plan designed to restore confidence in Flint’s ability to manage money.

One piece of that plan was Grady’s appointment. The new finance director said he is taking a different approach to dealing with problems he inherited, including involving more of his staff in discussions of problems and increasing the responsibility of division heads.

In previous years, he said, Puckett often didn’t share information as freely. City Administrator David H. Ready said some key accounting positions remain vacant in the city despite efforts to fill them. Staffing shortages are getting more manageable, he said, as the city institutes new accounting software.

Ron Fonger covers government in Flint and Genesee County, and Bishop Airport. He can be reached at (810) 766-6317.