2017 Eldon audit completed: Here’s what you need to know
The City of Eldon has completed an independent financial audit of 2017. In a review of the audit, City Administrator Don Smith sent out a letter to city officials, stating that the audit identified significant shortfalls in the city’s accounting controls and processes.
“I have reviewed these findings and have assumed responsibility to resolve each issue. As the list is extensive, this process will take some time,” Smith said in his letter.
Now that the findings are available, Smith took the time to explain how the city will move forward with its findings. Here’s what you need to know:
What does the audit say?
With over 65 pages of content, there are a number of points that stand out as being most significant.
Firstly, the auditor did not express an audit opinion, stating that “The records provided are not sufficient to permit the application of auditing procedures that would be adequate for us to express and opinions on the accompanying financial statements.”
Even so, there are areas within that audit that may shed some light on the financial stresses seen in 2017.
Within the fiscal year ending in 2017, the city’s net position was $18,289,160.57. The city’s total revenues, including special and general revenue, were $65,482,535.15 while expenses were $5,987,191.66. The city’s net position on funds pertaining to governmental activities, business-type activities and total were all improved compared to 2016. However, the city did see an increase in total expenses, $1,150,316.69, which was primarily due to service expenses connected to water and wastewater improvement funds.
One point of concern seen within the audit was the number of late payments made by the city. Tihs including the fourth quarter Form 941 for 2017 not being filed until 2019 and not remitting sales tax collections to the state in a timely manner, putting the city not in compliance with the IRS.
How does the city explain these shortcomings?
Since 2017, Eldon has seen a number of major city roles being turned over to a new person, including electing Mayor Trevor Vernon and new City Administrator Smith. Because of this, many specific elements of the audit were difficult because these new members were not part of the fiscal year being examined.
Smith says that a key point for people to recognize with some of the city’s financial shortcomings in 2017 is the turnover in software usage at this time. With multiple software transitions happening with city data, Smith says they lost some information.
“It’s one of the most difficult things a city can do, to take all of your information systems and change them to something new,” Smith said. “It’s like changing to another language.”
This loss of data created a visibility issue to the 2017 financial window, which Smith credits as a major part of the audit returning with no opinion.
What is the plan to improve the city moving forward?
Smith took an extended amount of time detailing the plans he has introduced to city leaders to help make sure these issues aren’t faced in the future. One of the largest systems introduced is a master calendar and problem-solving file for the entire city to use.
Essentially, this calendar is a list of notable bills and action items needed to be completed by the city in a timely manner. The list goes on for multiple years so that recurring items can be planned long term. This is also designed to be usable by any new city members in the future to see what they need to complete right away when taking a new position. Smith says this system would have solved many late payments seen in the audit, as many times late payments occur because no one is aware they still need to be made.
Smith has also implemented a sales tax tracker on a monthly basis to see how sales tax is increasing or decreasing within a year’s time.
Another point of emphasis for Smith is to not change data systems anytime soon. He says the city needs to master the systems they have in place before any updates to the software are made.
“We need to stabilize what we have,” Smith said. “We know the weaknesses of it, so we’ll work around those weaknesses and focuses on the strengths to make it work.”
With the mastering of city software comes a need to also stabilize the workforce. Smith says that they hope to keep the city members in place with little turnover in the coming years in order to cement a group that understands the current ins and outs of the city. With less turnover, Smith says they will be able to avoid confusion, like what they are currently facing with 2017.
Finally, Smith confirmed that Eldon would be moving forward with plans to independently audit the city’s financials of 2018, 2019, 2020 and so on moving forward. The 2018 audit should be available by the end of the year, with 2019 and 2020 being completed by the end of 2021, getting them back on track to do a yearly audit afterward.