Legislative Audit, Counties and Municipalities
August 18, 2022
T Garner Order. First agenda item will be adoption of minutes of the June 2, 2022, meeting. Do we have any questions about that minutes? If not, I’ll accept a motion. A motion. We have a second. All in favor, say aye. Any opposed? The minutes are adopted. Next, we go to agenda item C, discussion of noncompliance with the municipal accounting law of the city of Cotton Plant.
Audit staff Thank you, Mr. Chair. Gonna walk through a timeline that the committee has been working through substantial noncompliance with the city of Cotton Plant. On January 7, the full committee, based on recommendation from the standing committee, gave approval to implement the process for substantial noncompliance with municipal accounting law for the city of Cotton Plant. And then on January 15, the mayor received the official notification of that process. So the city had 60 days from that point to comply with the municipal accounting law before consideration of withholding of turn back. And so the 60 days ended on March 16, 2022. On April 7, this committee received word that the city was still in noncompliance, and the committee chose to wait until May. And then in the May meeting, received word again that the city was still in noncompliance and they chose to wait again until June because staff had begun the 2021 engagement. On June 2, staff reported the city was still in noncompliance and this committee voted to recommend to the full committee to place 50% of the city’s turn back in escrow. And the next day, June 3, the full committee gave approval to do that. On June 8, the mayor received notification that 50% of their turn back was in escrow. And the next 60 days ended on August 7, about a week and a half ago. So today, as of today, the city’s in still– is still in substantial noncompliance. We have noted some improvements, but this is the point where you can consider placing 100% of their turn back in escrow. And just to note for this committee, the next 60 days will end after the October meeting. And because we don’t have a November meeting, the city would have until December to comply before this committee would consider having their turn back redistributed to the other cities. So if the city complies before that time, they will receive all their turn back that has been placed in escrow.
T Garner Thank you. Any questions, committee? Representative Berry, you’re recognized.
M Berry Thank you, Mr. Chairman. So when you say that there’s been, we’re seeing some progress, is it significant progress towards compliance, or–
Audit staff What we’re seeing is they have some of their bank reconciliations completed for 2022, but they don’t have their receipts and disbursements records up to date. And so that’s one thing we really would like to see.
M Berry Thank you, Mr. Chairman.
T Garner All right. Here’s the issue. Like, as mentioned, we won’t really have another chance to hold them accountable until after the 60 days has passed and past October meeting. So if we don’t take action today to withhold 100% of their turn back, then the next time they’ll really be held accountable by this committee will be in December. And that’ll be kind of the drop dead date of whether they’re going to get those funds or not. They have shown some improvement, but staff also said they are still severely out of noncompliance. My personal opinion is if we don’t take the next step on them, that may get them to lax off and not complete the compliance that we’re in. As he said, all of the funds, including the 50% they have now, are going into an escrow account and if they reach compliance, then they will get those funds back. So with that understanding, I’m open to making the motion to hold back 100% of their turn back funds to be placed in that escrow account and then come back in December, decide whether they’re in compliance or, I imagine, we could at that time see if they made significant steps, we could release that money to them. I’m nervous about not doing anything, because, if not, there’s no incentive for them to complete that before December. And that’s a lot of months without us having any kind of influence or say over that process. With that, that’s a long saying. I’ll allow the committee to ask a few questions, probably to do that. Representative Rye and then Representative Gonzales.
Rye Yes, sir. If we, if we don’t do this, Mr. Chair, it’s, it’s really going to foul this up, because if we go along with what you’re stating, then they’re going to try to get theirself in a good condition by that point, would you not say that’s right?
T Garner I can’t predict how people are going to act in the future. What we have, the information we have today is they’re severely out of noncompliance. But they have made some efforts, not substantial, but some efforts to improve that. Is that an accurate statement?
Audit staff Yes, that would be accurate.
T Garner Representative Gonzales.
Gonzales Thank you, Mr. Chair. How much money are we talking about in their turn back funds? You all may have said that already, but I–
Audit staff Let us check on that and I’ll get an answer for you.
T Garner I don’t know it off the top of my head either.
Gonzales I mean, I don’t necessarily need that to make up my mind. I’m for withholding it, but I’m just curious. So you can get that to me later.
T Garner Representative Berry, did you have a question or comment?
M Berry No, Mr. Chairman, I have a motion when it’s an appropriate time.
T Garner Any more questions, committee? Seeing none, Representative Berry, I’ll entertain your motion.
M Berry Thank you, Mr. Chairman. I make a motion that we withhold 100% of the turn back funds for the city of Cotton Plant.
T Garner Do we have a second? I’ll second that. Any discussion from committee? Seeing none, all in favor, say aye. Any opposed? The motion is carried. Moving on to the agenda is the review of reports.
Audit staff Okay. Thank you, Mr. Chair. We, what we’ll do is we’ll review reports. We have visitors here today. So we’ll begin with the town of Rondo, and it’s on page 9 of the synopsis you have in front of you. For the town of Rondo for the year 2020, unallowable disbursements were paid from revenues restricted for street purchases of $1,533 in noncompliance with Arkansas Code 27-72-07. Also, restricted funds of $20,848 noted in previous years were not transferred, resulting in a total of $22,381 due from the General Fund to the Street Fund in noncompliance of Arkansas Code 14-59-104. A similar finding was issued in the previous seven reports dating back to 2008. Recorder Treasurer Michelle Holden is here to answer questions.
T Garner Miss Holden, if you can, please come to the end of the table. Right there. Yes, ma’am. How are you doing today? Good. Just go ahead and take a seat. We’re not that formal here. If you can, ma’am, press a button and say your name and title for the record and then any comments you may have about this finding.
Holden My name is Michelle Holden with the town of Rondo.
T Garner Do you have any comments about these findings?
Holden Yes, sir.
T Garner Thank you, Representative Clowney.
Holden Actually, I came today to visit with what the city council came up and what we will try to do to accommodate to fix the issues that was found, I guess, all the way back to 2008 and also the $1,500. We actually moved on August 8 from the street fund back to– from the general fund to the street fund the $1,533. It was moved back into the right account. And also the $20,000, the issue that they have with that, well, when we first had the audit when I came on in 2019, the first audit in 2020, the mayor got the wrong understanding. They was told the money that we had to pay back to, you know, was not our money. But then the last audit, it was saying it was actually the money that was given to the town of Rondo but put into the account that wasn’t put into the right account. So basically what we did on August 8 of 2022, we moved $5,000 of that $20,000 back into the actual account it’s supposed to go into. The mayor did make the city council aware that since this is the last year, she’s going to make it known to try to do her best to have the whole total of that $20,000 paid out before the end of the year when the new mayor come in, whoever the new mayor would be.
T Garner Yes, ma’am. Thank you. Any questions, committee? So it seems like y’all just took action to remedy the $1,533 for movement from your general fund to, to the street funds, then you took an additional $5,000 out of general and put to street. So you’re paying toward that street fund roughly $15,000 left over from this audit report. Is that a good assessment?
Holden It is correct, sir. And the reason why I think the city council did not take action on it, because they understand and they don’t even know where the money went. And basically when we was told the money was in the account, it was paying the wrong account. And it never had been moved.
T Garner Okay. Yes, ma’am. And it sounds like you’re taking remedy. Any questions, committee? Seeing none, without objection, we’ll file this report. Thanks for coming today, ma’am.
Holden All right. Thank you.
T Garner Moving on.
Audit staff Okay. Next, we will look at Madison County. It’s on page 18 of your summary. And this is a report that has been referred to the prosecutor. Madison County, for the year 2020, the county paid $6,615 to the spouse of the county collector for janitorial services without an authorizing ordinance as required by Arkansas Code 14-14-1202. A similar finding was issued in a prior report. County Judge Frank Weaver is here to answer questions.
T Garner Judge, if you can, please say your name and title for the record and any comments you may have for this, on this finding.
Weaver Thank you, Mr. Chair. My name is Frank Weaver. I’m the current Madison County judge. In answering the findings there, in February of 2020, we went out for bid for custodial services in the county courthouse. We received three bids then, and I accepted the lowest bid at that time, which turned out to be the county collector’s husband. And it’s an oversight on my part. I, thinking that she wasn’t his boss, I would actually be his boss, I didn’t really see the conflict of interest. However, in this year’s audit, it was 2020, our Leg Audit lady came and says, you should have gotten a quorum court’s approval of that with an ordinance. So we did pass an ordinance pursuant to Arkansas Code and noted 14-14-1202 to take care of that.
T Garner Okay. Any questions, committee? So you passed the ordinance? Right now, you should be in compliance with this law, is that correct?
Weaver That’s correct, sir.
T Garner Okay. Any questions? Seeing none, without objection, we will file this report. Thanks for coming today, county judge.
Weaver Thank you all very much.
T Garner Yes, sir. Moving on to next report.
Audit staff Okay. We will take a look at the City of Benton. It’s on page 24 of your synopsis. City of Benton for the year 202,. The District Court was unable to identify $203,444 remaining in the bank account, with the receipts issued for cases not yet adjudicated and payments made on all unpaid individual time accounts as required by Arkansas Code 16-10-209. A similar finding was noted in the previous two reports. District Court Clerk Leah Redman is here to answer questions.
T Garner Miss Redman, if you can, please say your name and title for the record and any comments you may have on this finding.
Redman Yes, sir. My name is Leah Redman. I’m the Chief Clerk of the Saline County District Court, Benton Department. Since the finding, I have worked with our programmer. We use a data management program called Vela, which is an older program that is having, was having issues dispersing the money throughout the end of the month. We developed a query to identify these that aren’t disbursing properly at the end of the month. So we’ve been able to identify the cases that have money attached that aren’t disbursing and hope to by the end of this year, December– so far we’ve identified about $133,000 accurately working with my auditor, Kristin Smeckenbecker, who has gone over the query, you know, looked at it with me to make sure she was– you know, it was– the query is in compliance with accurately disbursing these funds so that we can write checks to the appropriate funds to remove this money from the books.
T Garner Yes, ma’am. Any question, committee? I know we’ve had other district courts in here has had issues with the state program. I notice in your findings you said you’re waiting for a new development. Is that part of the issue that is causing the finding in this?
Redman We were, we were hoping to be on context by this time. And, you know, we were kind of in the hopper for context for a couple of years now. And the AOC since terminated that program and is working on a new system. So since that, obviously, you know, we need to– when that will happen, we don’t know. So, you know, we’ve gotten with our programmer to expedite trying to fix this before a new system gets in place.
T Garner Yes, ma’am. Representative, you’re recognized.
unknown Thank you, Mr. Chair. How long has Benton been waiting to get on the state program?
Redman We formally requested it in 2020. The interim judge, Josh Newton, proposed the letter to the AOC and so formally since then.
unknown Mr. Chair, I’d like to point out that that has been a problem that we’ve seen with several of the district courts not being able to get on contact.
T Garner I would, I would note that as well. That’s why I brought it up. It seems to be a systematic issue. And I know we’ve got a new program coming along. It’s hard to be in compliance with the law whenever you have those kind of data software issues. So very have much, much grace toward that issue. Any question– any other questions from committee? Seeing none, and without objection, we’ll file this report. Thank you, ma’am.
Redman Thank you.
T Garner Moving on to the next.
Audit staff Okay, the next report we will review will be the town of Edmondson. It is on page 25 of your synopsis. So the town of Edmondson for the year 2021, the governing body did not review the prior report and accompanying comments at the first regularly scheduled meeting following receipt of the report in noncompliance with Arkansas Code 10-4-418. A similar finding was noted in the previous report. The following issues were noted while reviewing payroll records: salaries and wages reported on IRS quarterly form 941 were less than those reported on IRS Form W-3 in the amount of $9,540. Social Security rates were not applied to salaries correctly due to reporting and rate issues noted. It appears federal taxes of $1,351 were not promptly withheld and remitted to the IRS. In addition, total taxes due the IRS for prior year underpayments of $1,554 also were not paid, leaving a total balance due of $2,905. The Recorder Treasurer’s salary appears to be underreported on IRS form W-2 by $307 and Arkansas AR 3 report, along with state taxes owed of $607 were not remitted to the state. A similar finding was noted in the previous report. Mayor Ira Ewing and Recorder Treasurer Heyward Shaw Jr. are here to answer questions.
T Garner If you can, please come to the end of the table. State your name and title for, for the record, please.
Ewing Mayor Ira Ewing.
Shaw Hayward Shaw.
T Garner Do any of you gentlemen have comments about these findings?
Shaw Well, the findings about the taxes and stuff was due to our software. And what we have done, we have replaced our old software with some new software that will take out the right amount of taxes. That’s what, that was the problem with the taxes were. And the part about the audit, about the auditor of the state, I mean, they just send the money. They don’t separate it or tell us that it was a, was a sale tax or just regular municipal aid. So I wrote, I wrote to the state to see could they send us something like a letter, a letter. They used to send something like a blank check that would tell you the amount of money that was sales tax and other municipal aid. We haven’t been getting those lately. That’s all I have to say about the taxes and the, the sales tax. The part about the, about the meetings, what we’ve done from that point forward, whenever we get anything talking about the audit, we bring it up in the very next meeting. We don’t– whatever day we get it, the next meeting, whether it’s the next week or the next day, we present them with the audit findings. And, let’s see. What else? Y’all read off so much stuff I can’t remember.
T Garner Yes, sir. Any questions, committee? I got one. So I mean, I’m happy you all got some new software to make sure that you’re– know what you owe moving forward. That, that’s a good step. I guess the issue is is that, from my reading of this, you still owe both the federal and state government taxes. Has there been any action to pay those, whether it’s the $607 not remitted to the state? As you may know, the IRS is getting 87,000 new agents, so you might want to be in compliance as soon as possible.
Ewing Well, I have already wrote the IRS. I sent them a copy. Because in actuality they owed a refund to us from 2020. And what I tried to do was get, to get them to take the refund for the amount of money that we owed and send us the difference. And I got a letter right here where they sent me and said they was checking on it right now. Yeah, I have addressed that.
T Garner You did the same thing for the state as well?
T Garner Okay. And what’s the state saying about the–
Shaw I haven’t gotten no response.
T Garner Okay. Any questions, committee? Representative Rye.
Rye Yes sir. Thank you, Mr. Chairman. Sir, the only thing that really stuck out was– well, there was two or three of them, but one thing that stuck out pretty good was the IRS quarterly 941 forms were less than reported to the IRS. Is there a reason for that, you think?
Shaw It was our software. We had old software. And it wasn’t, it wasn’t taking out enough taxes, the right percent of the taxes. And what happened, we had replaced it with some new red wing software and right now everything is up to par. They taking out more taxes out of the payroll and the mayor and all, all of the checks. There are more taxes being taken out. That was the problem with it. We had had it for a long time and we didn’t update it when we should have.
T Garner Any more questions, committee? Yeah. I’d follow through on finding out what you owe and trying to remedy that because this is a repeat finding. And typically, eventually, the IRS and state agencies will catch up to you if you don’t get that worked out. But seeing no more questions, committee, without any objection, we will file this report. Thank you, gentlemen, for coming today.
Shaw All right. Thank you.
Audit staff Okay. The next report would be the town of Pyatt on page 26 of the synopsis. This is for the years 2020, 2019 and 2018. Bank reconciliations were not approved by a municipal official or employee other than the person preparing the reconciliation in noncompliance to Arkansas Code 14-59-108. A similar finding was noted in the previous two reports dating back to 2012. We noted the following noncompliance with Arkansas Code 14-58-202 and 203. General fund disbursements exceeded budgeted appropriations in 2020 and 2019 by $9,152 and $30,380, respectively. Street Fund disbursements exceeded budgeted appropriations in 2020 by $18,466. The 2018 General Fund and Street Fund budgets were adopted. However, copy was not provided. A similar finding was noted in the previous six reports dating back to 2003. To continue on page 27, the fixed asset listing was provided. However, the listing did not include major categories, proper control totals, additions, serial numbers and date of acquisition in noncompliance with Arkansas Code 14-59-107. A similar finding was noted in the previous six reports dating back to 2003. The following issues were noted while reviewing the town’s payroll process. Payroll records IRS quarterly 941 forms and Arkansas Department of Finance and Administration form AR3 were not provided for 2020, 2019 and 2018. And IRS forms W-2 and W-3 were not provided for 2019 and 2018 in noncompliance with Arkansas Code 14-59-114. Budgets were not sufficiently detailed in 2020, 2019 and 2018 to determine the total salaries paid to payroll to prepare were properly authorized. The town was assessed and paid penalties and interest of $120 and $719 respectively in 2020 and 2019 for failure to file and pay payroll taxes for 2017. The town has not remitted payroll taxes to the IRS and DFA for 2020, 2019 and 2018. Documentation was not provided and we were unable to determine any penalties and interest that may be due as a result. Per DFA, the town has not remitted payroll tax forms or withholding since 2006. The similar finding was noted in the previous three reports dating back to 2009.
T Garner Thank you.
Audit staff Continuing–
T Garner Oh, sorry.
Audit staff One more on top of page 28. Disbursements were not always made by pre-numbered check and the electronic disbursements were made without proper approval from the governing body as required by Arkansas Code. A similar finding was noted in the previous report. Mayor Ken Hancock and Recorder Treasurer Kim Sullivan are here to answer questions.
T Garner Thank you. Can you please state your name and title for the record and any comments you may have on these findings?
Sullivan Kim Sullivan, Recorder Treasurer.
T Garner Can you press the button, sir? I think there’s a button to turn on.
Hancock Kenneth Hancock, Mayor.
T Garner Thank you. Have you got any comments about these findings?
Sullivan Yes. We have a new council member now that’s going to help me that’s got a strong financial background to help me get together. He’s dealing with the IRS and the state figuring out what we need to do to get everything caught up. I never had proper training in getting this job and so I have failed in a lot of ways. And so he’s supposed to really help me. I had a guy a couple of years ago on our council, we thought we had the inventory list like we were supposed to. And then I found out that was wrong. So we’ve got a lot of work to work on, but I’ve got a man helping me now so I feel a lot better.
T Garner Any comments? Any questions, committee? Representative Berry.
M Berry Thank you, Mr. Chairman. So the problems that you’re experiencing, they’ve been going back for like 20 years. You know, all the way back to 2003, repeat findings 2009, 2006. And it doesn’t seem like anything’s being corrected. Have you asked for some help from the Municipal League to help figure out what the problem is.
Sullivan I think we’ve had– asked a little bit from the Municipal League. The council members, you know, I’ve always asked them, and I’ve just not gotten much help on it. But I’ve got a good one now, a man that’s willing to, willing to work and help.
M Berry Yeah. So like I say, this has been going on for about 20 years so I think you really need to look close at whatever you’re doing is being done wrong. And also a question about your loan from Arvest, you refinanced the loan. So you’re not making any headway because you refinanced more than what the loan was.
Sullivan Well, I think the deal was it was on a short term note, for some reason. Because we had, I think, they did it on a short term note for a little bit and then they had to set it up on payments. It’s on payments now and it’s paying down.
M Berry Okay. Well, I would encourage you to reach out to the Municipal League, see if they can provide you any assistance to getting on the right track where you don’t have these repeat findings. The challenge for us a lot of times we– people are going to make mistakes. But the repeated mistakes is what’s really hard for us to accept.
Sullivan And I’m– yes, and I’m guilty of the repeated mistakes because, well, Pyatt’s a little town, so they can’t pay somebody full time. And I work a full time job and try to do that. So, I mean, I take the responsibility for it.
M Berry Okay. Thank you. Thank you, Mr. Chair
T Garner Representative Rye.
Rye Yes, sir. Thank you, Mr. Chairman. Ma’am, these three years in particular, 2020, 2019 and 2018, what have you done to clear this up with the federal government? Do you owe the state, too? Or is it just, just IRS?
Sullivan I think it’s just IRS. But I got that guy working for me. You know, he’s ca;lling and setting up and trying to figure out what we’ve got to do to get it, get it caught up and straight.
Rye Well, have you done anything to find out what you owe them and make an attempt to pay them?
Sullivan That’s what that council member is working on up for me with.
Rye So the amount that you guys have went to the bank and borrowed is actually the amount of money that y’all need to pay these three years off?
Sullivan That loan, did you say?
Rye Well, it says 2020 and 2019 and 2018 payroll taxes.
Sullivan 0h. I thought you was talking about that loan. Oh.
Rye Well, I don’t know. Did you– you mentioned a loan, but if–
Sullivan The loan was for something else.
Rye It was?
Rye Well, what– oh, I see. Well, what, what are we going to do about this payroll tax to IRS?
Sullivan Well, that’s what he’s getting, finding out what we got to get done– you know, the right– everything filled out and paying them back and paying them.
Rye Okay. Yeah. Okay.
T Garner So I asked staff how much– how much money do y’all receive from various state turn back and everything like that?
Sullivan It’s not that much. I can’t remember offhand. I don’t have anything with me.
T Garner $19,818 or am I reading that right?
Sullivan For the year, probably. Yeah, maybe.
T Garner $3,000 and then $16,000 street.
Sullivan Most of it’s the state– goes to the state– or the Street Department.
T Garner Yes, ma’am. Well, I guess, I mean most times small towns don’t generate their own revenue because, you know–
Sullivan We have a water department–
T Garner Yes, ma’am.
Sullivan –that generates some, yeah. There’s not much there.
T Garner I’m not insulting the city council member that you’re getting to help you. I don’t know them. But I would suggest you seek professional tax preparer help on this kind of issue. And I know it’s not a substantial amount of money that you have, but if I was you, to get in compliance, I would hire somebody who does this full time and pay them to fix this. Because this problem is starting to snowball on y’all.
Sullivan And we do have somebody that works for our water department. She’s separate from the city and she is a CPA, so we can get her to help us.
T Garner I would do it through the proper channels, talk to audit, how you do the contract and do the, you know, ordinance. But if I was you, I would highly suggest don’t rely on a council member, not insulting them. I don’t know them. I would do this. That would– because you’ve got a lot of stuff to undo here and a lot of taxes owed. And if you don’t start doing it, you’re going to be in some serious trouble in the near future. Is that understood?
Sullivan Yeah. So we have to pass an ordinance to hire her?
T Garner Generally, there’s a process that you have to follow in order to do bids and all this. The Municipal League and our own auditors can probably tell you generally how that works. I do not know because I don’t run a city. But there’s a process you have to follow to do that, to make sure you can use the revenue, whether general budget or otherwise to seek the outside help. We’ve had other cities come in here and say they’ve hired CPAs or accounting firms to help them through. I would suggest looking into that, seriously.
Sullivan Okay. We can get her to help us.
T Garner Okay. Any questions from committee? Seeing none, without objection, we’ll file this report. Thank you all.
Sullivan Thank you.
Audit staff Okay. The next report we will look at is the City of Tuckerman on page 29. Actually, is that right– 28. I’m sorry page 28. In 2021, General fund disbursements exceeded appropriations by $245,000 in noncompliance with Arkansas Code. A similar finding was noted in the previous two reports. Mayor Rick Womack is here to answer questions.
T Garner Mayor, if you can, please state your name and title for the record and any comments you may have on these findings.
Womack My name’s Rick Womack. I’m the mayor of Tuckerman. All I can say is we’ve probably just overlooked some things. We was trying to get everything straightened out. And we thought we had it all straightened out until this auditor we had come in. And I don’t guess we did. And I’ve got my city clerk with me, too.
Adams I’m Vicki Adams, the city clerk. We paid off a few loans and failed to include that in. Since, the budget has been amended and it’s all been taken care of.
T Garner Okay. Did the– was it excess money that you had that was outside the budget because of Covid, I imagine.
Adams It was Covid. It was money that we received and I failed to include it in. And then we paid off some loans and that’s where it come in at.
T Garner Okay. Representative Rye, do you have a question? Representative Rye, you’re recognized.
Rye Yes, ma’am. The money that you’re speaking of, where did that come from?
Adams That was that first round of money– Covid money that we received.
Adams It was like $174,000, and I didn’t amend the budget to include it.
Rye I see. I just– Senator Trent, I just wonder if that’s lawful, to use that kind of money to–
Adams That, that first round, we could do that with it.
T Garner Yeah, we kind of– we’ve kind of had this discussion before. There’s– the state of Arkansas has very little control over how that money is spent. There’s guidance from the federal government they send to you all directly. I didn’t mean to smile, but that’s a significant amount of money for a town of 1,700 people. Happy– you sound like you paid it, used it and–
Adams The first one was $75,000.
T Garner $75,000? Okay.
Adams And the council approved for us to use it to pay loans off and that– and then we got– borrowed money to buy two vehicles and that wasn’t added in. I didn’t amend it at that point.
T Garner Yes, ma’am. So the money– it was just a matter of changing the budget. You approved and everything.
Adams And since then, it has been amended and added in.
T Garner And the next time we have a world ending pandemic and you get tens of thousands of dollars, you’ll know to change your budget before.
Adams Yes, I know to do that now.
T Garner All right. No, no– any questions from Committee? All right. Seeing none, without objection, this report is filed. Thank you.
Adams Thank you.
Audit staff Okay. At this point, I would like to ask if there’s any more people from cities that have been invited to answer questions. This is– so far this is all we’ve had that signed in. I just want to make sure there’s no one else here.
T Garner In a note here staff said that some cities we asked to be here because we were supposed to have this last week and obviously the special session moved it. Some of them couldn’t be here I think because of the quick turnaround. That makes sense why some people couldn’t be here.
Audit staff Okay, we’ll make our way to the beginning of the synopsis, and we will work our way through now. So on page one, through, actually, page four, we have the two reports for the town of Allport. The committee has been deferring these reports until this matter with Allport has been settled in the courts. And so we would like to know the will committee on Allport.
T Garner Without objection, I say we defer these reports to the next committee meeting.
Audit staff Okay. All right. Moving on. Town of Gum Springs on pages five through six, the recorder treasurer was responsible for the repeat findings and she has since resigned since the last committee. So staff would recommend that we file this report.
T Garner Was there– this isn’t referred to the prosecutor? Was there any–
Audit staff No.
T Garner –illegal activity or just–
Audit staff The fixed asset listing wasn’t proper, and they had some state aid funds for highway that were deposited into the street.
T Garner Okay. Okay. Any objection for filing this report? Seeing none, this report is filed.
Audit staff Okay. The next is the town of Umphrey on page seven. This is a very similar situation. Recorder Treasurer Kimberly Burgess has resigned since the last meeting. And she had a couple of findings with some IRS issues and city council minutes not being maintained. Staff would recommend we file.
T Garner Without objection, this report is filed.
Audit staff Okay. Town of Jericho on the page, page 18. The Recorder Treasurer Elaine Dupree, she contacted us letting us know she couldn’t be here, and she requested a deferral until the September meeting.
T Garner Without objection, we will defer this report until the next meeting.
Audit staff Town of Parkin on page nine. Recorder treasurer Pernita White also contacted us and she couldn’t be here today either. And she requested a deferral until September.
T Garner Defer the report to the next meeting without objection.
Audit staff All right. The next report is Monroe County on page ten. We didn’t hear from the sheriff, so staff would recommend that we defer the report.
T Garner Defer the report to next meeting without objection.
Audit staff The next report is Phillips County on pages ten through 13. We heard from the county judge. He couldn’t be here today because of the change of dates and he had some things previously scheduled. And the sheriff and tax collector couldn’t be here because he is speaking at a funeral today. Staff would recommend we defer the report.
T Garner Without objection, we’ll defer report until next meeting.
Audit staff Okay. On page 14, we have an investigative report for the Lake Village Water and Sewer Department. And staff member Jimmy Locke is here today to give a report.
T Garner Jimmy, whenever you’re ready.
Locke Thank you, Mr. Chair. The prosecuting attorney for the 10th Judicial District received some allegations concerning the Lake Village Water Department, and there was the possibility that some money was missing so he asked us to look at it. I looked at the period February 1, 2019, through January 31 of 2021. During that time, Tashonda Freeman was the accounting clerk and she was responsible for collecting, receiving, depositing the funds, as well as posting customer water bill payments in the computer system. So I compared the receipts that Ms. Freeman issued with the deposits she made in the bank and found $9,363 in unaccounted for funds that consisted primarily of cash receipts that she had failed to deposit. I also found where a lot of these receipts were subsequently reversed in the computer system. And undocumented, undocumented adjustments were posted to customer accounts in an apparent attempt to conceal the unaccounted for funds. So we found $9,363 missing. Also checked to see if they were getting financial audits each year as required by state law. They had audits for 2016, 2017 and 2018 with no problems noted. But according to the CPA firm that does their audits, they had trouble getting records for the 2019 audit. So the audit was completed, but it wasn’t completed timely. Also, during the 2019 audit, they found the same problems that I found, the receipt reversals and the undeposited funds. We identified several internal control deficiencies. The main one is that the person that collects money and issues receipts shouldn’t have the ability to reverse receipts and post adjustments to customer accounts. And in this case, that was happening. So basically the accounting clerk had too much control. So we made some recommendations, and according to the city, they’ve made some changes and those deficiencies have been corrected. And one last thing. Our review focused strictly on the water department. That’s what the prosecutor asked us to look at, and that’s what we did. But while I was going through the records, I noticed that there were some other city receipts that had been reversed by Ms. Freeman. There were some general fund receipts and park fund receipts that she had reversed. So I notified the city’s finance director and the city conducted a review and they found $6,115 in other city receipts that were not deposited. And we didn’t confirm or verify their findings, but we included it in our report so that the prosecutor would be aware of it. Ms. Freeman resigned in March of 2021, and of course, our report was referred to the prosecutor. And on March 15, 2022, theft of property and computer fraud charges were filed against Ms. Freeman. And it took a while– it’s my understanding she doesn’t live in Lake Village anymore, and it I think it took a while to find her. But they eventually located her and served the warrant. And I checked the status earlier this week and a plea and arraignment hearing is scheduled for this coming Monday, August 22. So the legal process has started on that. And that concludes my report.
T Garner Any questions, committee? Excellent work. [00:42:18]It’s always great whenever we’re able to step in and find somebody stealing money like that and, more importantly, restoring that trust. Great work by the auditors. Just want to give them a great shout out on that one. Moving on to the next report. [12.3s]
Audit staff Okay. This is another report I referred to the bond board just like Lake Village Water and sewer was. City of Wynn, the year 2021, on page 15. We noted $25,968 in district court cash receipts not deposited. $24,168 in receipts could not be traced to deposits for the period January 1, 2021, through July 30, 2021. Deposits on June 29 and July 29, 2021, contained $500 in unreceipted credit card payments and $1,300 in unreceipted checks, respectively, in place of cash receipts. Of 12 deposits made on July 29 and 30 of 2021, six were missing all or some cash that should have been deposited. During July 2021, cash collections for three daily deposits were not deposited and several deposits were apparently altered prior to the deposits being made. Receipts were not always deposited intact daily in noncompliance with Arkansas code and several deposits were held in excess of 30 days. This is– there’s no one here. This report’s being– it’ll go to the bond board and to the prosecuting attorney.
T Garner Thank you. Any questions? [00:44:00]And it looks like there may be something there. So we’ll see what happens with that legally. [3.4s] Without objection, we will file this report.
Audit staff Okay. Moving on to page 16. To the city of Bull Shoals. This is a report that’s being referred to the prosecutor as well. This is for the year 2020. The city paid a total of $10,001 to operate a shop with a cop program: $2,000 in 2021, $5,543 in 2020, $2,358 in 2019, and $100 in 2018. These payments conflict with the Public Purpose Doctrine in Arkansas Constitution, Article 12, Section 5, as interpreted by Attorney General Opinion 91-410. Although the city received private donations to fund these purchases, we were unable to determine which donations were for the shop with a cop program because documentation was not available for all donations, and expenditures were recorded in multiple accounts. It should be noted that all funds were spent in 2021 and the program is now being administered by the Fire Department Auxiliary.
T Garner That all?
Audit staff Yes, that’s it. Sorry.
T Garner Can, can you tell me which, which exact finding was given to the prosecuting attorney– was was kind of the–
Audit staff It’s at the top of the page on–
T Garner The shop a cop program?
Audit staff Right. And it’s because the money was used for basically nonpublic purposes.
T Garner Okay. Any questions, committee? Seeing none, without objection, we will file this report.
Audit staff All right. [00:45:44]Continuing on page 19, we have the city of Atkins for the year 2021. In 2020, the city paid expenses of $994, $1,491 and $497 in 2021, 2020 and 2019, respectively, for an employee’s family health insurance benefits and failed to collect the premiums from the employee in conflict with Arkansas Constitution, article 12, Section 5, which states in part, no county, city, town or other municipal corporation shall loan its credit to any corporation, association, institution or individual. When this matter was brought to the attention of the employee on May 9, 2022, the employee reimbursed the city the full amount. This is a finding that by law we have to send to the prosecuting attorney, and the, the employee reimbursed the city for these amounts. [62.2s]
T Garner [00:46:48]Okay. Any questions, committee? Seeing none, without objection, we will file this report. [4.5s]
Audit staff All right. Continue at the bottom of the page, the city of Evening Shade. For years 2020 and 2019, the city paid $420 and $840 in excess of appropriated salary to the Recorder Treasurer. In 2020 and 2019 respectively in noncompliance with Arkansas Code 14-42-120. Additionally, salary of $1,130 and $1,645 paid to the recorder treasurer was not reported on IRS form W-2 in 2020 and 2019 respectively. Continuing on page 20, the city paid $4,800 to the recorder treasurer’s husband, who also serves as a part-time police department employee for the purchase of a 2003 Tahoe patrol vehicle without an authorizing ordinance in noncompliance the Arkansas Code 14-42-107. And at the bottom of the page, the city has not obtained an annual agreed upon procedures and compilation report for the city’s water system in noncompliance with Arkansas Code. A similar finding was noted in the previous report. Mayor Lonnie Haley was invited to be here, and as far as we know, he didn’t make it today. So staff would recommend we defer the report.
T Garner Without objection, we will defer this report to the next meeting.
Audit staff Okay. Continuing on page 21 with the city of Higginson. This is– these reports are continuing the reports referred to the prosecuting attorney. [00:48:34]The city paid a total of $2,028 to the mayor and a council member for their role as sewer operators for the city. Based on Arkansas Code 14-42-107 and Attorney General Opinion 2003-164 we can question the propriety of the dual roles filled by these individuals. That’s the only finding we have for Higginson that’s going to the prosecutor. [24.1s]
T Garner [00:48:59]And they’re pushing back on that?[1.1s]
Audit staff [00:49:02]They said they gave us an ordinance, but the ordinance is a– it’s a broad ordinance. It says, basically– I have a copy with it if you’d like to see it. It said the city, they authorize doing business with any of the council members. The code in 14-42-107 talks about being specific. And also there’s an attorney general’s opinion, and I have a copy of that as well, that speaks to this situation almost exactly, a council member serving as a sewer operator. It’s basically a conflict of interest. [32.2s]
T Garner [00:49:37]Do y’all want to have them here or what’s y’alls opinion about that? It’s been referred to the prosecutor. Decisiveness of this body is amazing. Bring them in. All right. There we go. We got an opinion. Without objection, we’ll defer this report until the next meeting and request they come and explain this plan. Okay. [26.5s]
Audit staff Okay. Page 22, City of Mulberry for the years 2021 and 2020. In 2021 and 2020, the city disbursed $3,000 to the Mulberry Senior Citizen Center without a contract for services in apparent conflict with Article 12, Section five of the Arkansas Constitution as interpreted by Attorney General opinions 91-410 and 92-099. The situation here, basically, is they just didn’t have a contract with the Senior Citizen Center to do a service that the city would provide otherwise.
T Garner Okay. Any questions about this one? Without objection, this will be filed.
Audit staff Okay. Continue with the town of Perry for the year 2021 and 2020. The recorder treasurer was paid an additional $700 in 2020 upon council approval for serving as interim mayor for one month. This appears to conflict with Arkansas Code 14-43-409 as interpreted by Attorney General Opinion 92-244. This particular attorney general opinion handles this situation exactly. [00:51:21]Basically, the recorder treasurer took over as mayor and the city paid her for a little more for doing that. And that’s against– that attorney general’s opinion says you can’t do that. [10.6s]
T Garner [00:51:33]It looks like the response is they’re going to pay it back though. So, anybody got any issues with this, filing it? Without objection, we will file this report. [7.3s]
Audit staff All right. Continue with the city of Pottsville for the years 2021 and 2020. The city paid $23,000 to a council member for equipment in 2021 without an authorizing ordinance in noncompliance with Arkansas Code 14-42-107. Just a basic ethics finding because they didn’t have the ordinance.
T Garner Without objection, we will file this report.
Audit staff Okay. Continue with the City of Willisville on page 23 for the years 2021, 2020 and 2019. The town paid $750, $910 and $700 to the Mayor for mowing services in 2021, 2020 and 2019, respectively, without an authorizing ordinance in apparent conflict with Arkansas Code 14-42-107. Again, another basic ethics finding for not having an ordinance for the Mayor.
T Garner Without objection, we will file this report.
Audit staff Okay. Continue on page 24, the city of Ward. These are reports for the repeat findings and the recorder– actually, the district court clerk, Beth Glover, she emailed us and she couldn’t be here today and she requested a deferral until September.
T Garner Without objection, we will defer to the next meeting.
Audit staff Okay. Continuing on page 25, the town of Horseshoe Lake, we received a phone call from Recorder Treasurer Carol Adams and she requested a deferral until September because she had a conflict. Staff would recommend we defer.
T Garner Without objection, we will defer to the next meeting.
Audit staff Okay. City of Summit, Page 28. Actually, sorry. Yes, page 28. We received a phone call from Mayor Toby Norberg. He had a conflict and we would– and he requested deferral until September.
T Garner Without objection, we will defer to the next meeting.
Audit staff Okay. Page 29, the town of Valley Springs. There was one finding regarding the fixed assets and we have received documentation of corrections. Staff would recommend the report be filed.
T Garner Without objection, we will file this report.
Audit staff Town of Western Grove, same thing. There was one finding for they didn’t have, they didn’t get a AUP for a water system. We received a copy of the engagement letter for that water system. Staff would recommend filing the report.
T Garner Without objection, we will file this report.
Audit staff Okay. On page 30, we have four reports under the heading reports with findings. But if you’ll notice, there’s a staff note under all three– under all four of those where we’ve received a response in the last few days. We’ll be glad to answer any questions. If not, staff would recommend filing the reports.
T Garner Any questions? Without objection, we will file the four reports.
Audit staff Okay. On pages 31 through 43, there are 39 reports with resolved findings. We would be happy to answer questions if we could. Staff would recommend we file.
T Garner Without objections, we will file the multiple reports.
Audit staff On pages 44 through 47 there are 131 reports with no findings. Staff would recommend filing.
T Garner Without objection, we will file the 131 reports with no findings.
Audit staff Mr. Chair, that concludes the review of the reports.
T Garner Thank you. Moving on to agenda item E, the next meeting will be September 8, 2022. Without any business– further business from this committee, this meeting is adjourned.