Legislative Audit, Counties and Municipalities
December 1, 2022
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Sen Garner: …going to B, adoption of the minutes of the October 13, 2022, meetings. Any questions on that? If not, I’ll entertain a motion. I have a motion. We have a second? I have a second. All those in favor say aye. Any opposed? All right. Minutes approved. Moving on to the discussion of non-compliance with municipal accounting law, the City of Cotton Plant.
Leg Audit Staff: The City of Cotton Plant has been in the process for non-compliance with municipal accounting law since January 7 when the full committee made the motion to do that based on a recommendation from this committee. The city’s been working on it during the year. They were in non-compliance for a period of time. And on June 3, the full committee voted to approve withholding 50% of the city’s turnback. And on August 19, they voted to withhold 100%. And today is the first meeting after the 60 days they had to get their records in order before all their turnback would be distributed to the other cities. Staff made a visit on November 17, and we found that the city records were in compliance, all their journals were current, and the reconciliations were current through October of this year. And so staff would recommend, and they’re notifying this committee, that the city is now in compliance. And so, Arkansas Code 14-59-17 states that the Legislative Joint Audit Committee shall notify the State Treasurer of that fact, and then the city can begin receiving all their turnback. And this would include the amount that is in escrow right now.
Sen Garner: Thank you. So it looks like this is kind of why we passed that law is to hold these cities and make them accountable and looks like that worked. And we appreciate Cotton Plant coming into compliance. So with that, I have a motion. The City Committee on Counties and Municipalities recommends to the full Legislative Joint Audit Committee that the State Treasurer be notified to resume the City of Cotton Plant’s turnback payments and to restore the turnback that has been held in escrow. Do we have a second on that? Second. All those in favor say aye.
Committee members: Aye.
Sen Garner: Any opposed? Thank you. Motion passed. Moving on to agenda item D, discussion of Act 709 of 2021 repayment of highway fund.
Leg Audit Staff: The City of Twin Groves has sent this committee a request to repay amount that’s less than 10% of the amount they owe to the street fund, less than 10% of the general revenues. The code says that if they owe money to the street fund, they have to pay 10% of general revenues after the end of this year to repay that. And so they’re requesting to pay $500 a month, which will be $6,000 a year, which is just less than it would have been. Let me say it this way. In 2021, general revenues were about $63,000 for Twin Groves, and so 10% of that would be $6,300. And Twin Groves is requesting to pay $6,000 per year. And so anyway, it’s up to the committee to grant that request.
Sen Garner: So basically it’s a $300 difference a year, which I don’t think is a significant amount. If they’re willing to pay that amount back, I don’t think it’s a big change from the law. So I’ll make a motion that we reduce their payments to $500 a month, less than the 10%, for $300 less a year. Do we have a second on that? Second. All those in favor? Any discussion?
Rep Hillman: I’ve got a question.
Sen Garner: Okay. Go ahead.
Rep Hillman: How much do they owe? How long is it going to take them to pay it back? Do you know?
Leg Audit Staff: They owe $64,000.
Rep Hillman: So it’s 10 years?
Leg Audit Staff: Yes.
Sen Garner: Sorry about that. Should have asked for it. Any other discussion? Seeing none, all those in favor say aye.
Committee members: Aye.
Sen Garner: Any opposed? This motion has passed. Moving on to agenda item E, review of the reports.
Leg Audit Staff: Okay, we’ll begin with reviewing reports where we have invitees here. The first report we will take a look at today is the town of Cash, and they’ll be on page 8 of the synopsis. So the town of Cash for the year 2021, fines and cost revenues of $84,656 exceeded 30% of the town’s total expenditures in the preceding year by $7,967 in non-compliance with Arkansas code. These revenues were related from traffic offense citations.
Sen Garner: All right, representatives from Cash, please come to the end of the table. And everybody here who has an opportunity to witness today and explain their findings, when we get to your report, you can go ahead and move to the front. You don’t have to wait for me to ask. That way you can be ready for questions from the committee. Gentlemen, if you can say your name and title for the record and any statements you may have about this finding.
Cureton (Cash): Michael Cureton, mayor, City of Cash.
Stagley (Cash): Paul Stagley, Police Chief of Cash.
Sen Garner: ny comments?
Cureton (Cash): Yes, it appears that we did exceed the amount on the speed trap violation. But we’re not a speed trap. We only wrote 349 tickets, which is less than a ticket per day. We average less than a ticket per day. And of all of our tickets, 69% of them, were for 15 miles and over. Hopefully that has a bearing on this. But the revenue, we’ve cut our expenses down from COVID, and then everything has gotten so expensive, we haven’t spent any money. So that makes our expenses lower, which makes us exceed the limit quicker. If we spent more money, then we wouldn’t exceed the limit. So it’s kind of a Catch 22. Have any questions, I’d be glad to answer them.
Sen Garner: Okay. Representative Hillman.
Rep Hillman: What’s the speed limit through town?
Cureton (Cash): It’s 65.
Rep Hillman: Okay, and that’s the same as it is on the highway before you get there and on the way afterwards?
Cureton (Cash): Yes, it’s 65 all the way through. It never changes.
Rep Hillman: All right, thank you.
Sen Garner: Any more questions? So a major highway goes through the town, basically?
Cureton (Cash): Yes, it’s a four-lane highway, and we have a dangerous intersection there. It’s kind of at an angle, kind of odd shaped, and we feel like that we keep the speed down for the people so it will be safer. And we’ve so far hadn’t had any severe accidents. We’ve had two or three that’s been pretty good, but not too bad.
Sen Garner: Okay. Senator Wallace. You are recognized.
Sen Wallace: Mr. Chairman, I can tell you I drive through that intersection of town at least twice a week. I’ve never seen any evidence of a speed trap. I don’t think they’re doing anything wrong.
Sen Garner: I think Representative Hillman hit it on the head, usually when you see a significant drop in the speed limit from 65 to 30 or something, that’s when you have an indicator. But if it’s the same speed limit as the highway, you got 69% over 15 miles per hour, I think that’s just one of those things that happens. So any more questions? Seeing none, without objection, we will file this report. Thank you all, gentlemen, for coming today.
Leg Audit Staff: Your next report will be the City of Sulphur Springs for the year 2020, on page 9 of your synopsis. The city paid an attorney $500 to set up a nonprofit organization, City of Sulphur Springs Foundation. In addition, the city paid $11,671 to this organization without a contract in apparent conflict with the Arkansas Constitution, Article 12, Section 5.
Leg Audit Staff: Although this report shows a balance of $30,000 in the General Fund, the city owed significant amounts to the IRS and had interfund payables and receivables at December 31, 2020. When these outstanding amounts were considered, the general fund had a deficit balance of $260,000. The Water and Sewer Fund, although not included in this report, would have a deficit balance of $24,000 based on information provided by the city. A similar finding was issued in the previous two reports. And just a staff note on this. In 2021, the city received $182,000 from the bond board for a previous fraud, and the city used these funds to repay the funds. They still owe the IRS some money, but they haven’t repaid the funds.
Leg Audit Staff: Okay. Continuing, the city renewed a loan agreement with the Bank of Gravette on July 8, 2020, in the amount of $125,000 for the purpose of paying past due bills and consolidating vehicle loans. The loan appears to be in conflict with Arkansas Constitution Amendment 78, Section 2, which limits short-term financing obligations for the acquiring, constructing, and installing of real property or tangible property having a useful life of more than one year. Similar findings in the prior report. Continuing on the next page, documentation of the approved salary or hourly rate pay was not maintained for two employees for selected testing as required by code. A similar finding was noted in the previous reports. Mayor Shane Weber is here to answer questions.
Sen Garner: Thank you, Mr. Jones. Can you please say your name and title for the record and any statement you may have about these findings?
Weber (Sulphur Springs): Mayor Shane Weber. Mayor Shane Weber. I’ll just kind of address them in order there, if we can. The first one in reference to the paying $500 to the attorney, yes, we did do that. The 501 paid us back promptly. And the bigger question here or finding here of $11,671, it’s not that we paid them. Before they opened up any of their accounts, they were getting money in. We put it into a separate account, which was one of the city accounts, and as soon as they had their account open, we then transferred it to that. So we didn’t just give them money. We gave them back their money. As far as the IRS goes, it’s from way before my time, but I can tell you, yes, we have been making payments. We are on a payment plan with the IRS. We also sold a piece of property which reduced the debt by about a third. So we are working on that, and unfortunately, it’s going to be in every audit until we get it paid off. There’s nothing I can do about that. As far as the loan goes, that money, it was right after the lady took a bunch from us. And we had to do it. We didn’t have a choice or we would have had to shut the doors. We were $32,000 behind in electric. Another $30,000 in phone. Trash was way behind. We didn’t have a choice. And yes, it was brought up prior, obviously for the same reasons. The documentation of salary, so the previous finding is where we made our changes because of that finding. Office staff was supposed to go through and update everybody’s files. There’s notations made on there as far as where or what they got their raise for, date, time, reason, the amount before and then after. So we have made some changes on that as well. Obviously, they missed a couple of files. We only have six employees. I can only do so much. I can’t check everybody’s work. I try to, but we are a work in progress, if you will.
Sen Garner: Thank you. Any questions, Committee? Representative, you are recognized.
Rep Rye: Thank you, Mr. Chairman. Sir, on the situation with the organization?
Weber (Sulphur Springs): Yes, sir.
Rep Rye: Have y’all now had an agreement to go through city council that the contract would be going through in that direction?
Weber (Sulphur Springs): The city does not take any of their money anymore. They have an account that goes directly to the 501. We don’t have anything to do with it. It’s not the city’s. It’s actually the law enforcement and fire department got together and started as a nonprofit mainly for Shop With a Hero. So we don’t even see– the money goes directly to them.
Rep Rye: Thank you, sir. Thank you.
Sen Garner: Mr. Mayor, you said something about you just had to basically have that money because you were so far behind, because you said somebody did something prior. I’m sorry, a woman?
Weber (Sulphur Springs): Correct. The lady that we got the money back through, the insurance money that we got back because she stole a bunch of money. That’s what I’m referring to.
Sen Garner: Okay, I got you. I was just double checking on that. All right, any more questions, Committee? Go ahead. You’re recognized, Senator. Press your button, please, and be on the record.
Sen Stubblefield: Thank you. Mr. Chairman. How does this short-term financing conflict with the Arkansas Constitution? How are you dealing with it?
Leg Audit Staff: The Constitution says short term financing can’t be longer than five years. And so they extended a loan that was shorter than five years and ended up being longer. Now, they could have refinanced that totally, and it would have been okay, according to the Attorney General. But basically, they had a loan that was longer than a short term, something that’s not a bond issue that was longer than five years.
Sen Stubblefield: Okay.
Weber (Sulphur Springs): Sir, if I may on that.
Sen Garner: Yes, sir, you’re recognized.
Weber (Sulphur Springs): It was my understanding that it wasn’t the time, because my understanding is still five years was the total, but because it wasn’t specific for financing a vehicle or something like that.
Sen Garner: Okay, got you. Yeah, sounds like staff’s supporting what you’re saying. Any more questions, Committee? Seeing none, without objection, we’ll file this report. Thank you for coming, sir. Senator Stubblefield. Turn your mic off. No problem. Next.
Leg Audit Staff: Next we have the city of Wiederkehr Village on page 11 of your synopsis. Bank accounts were not properly reconciled and reconciliations were not approved by someone other than the preparer as required by code. A similar finding was in the previous report. The annual financial statements are not published or posted as required by code. A similar finding was in the previous report as well. On page 12, a total of $7,104 was due to the street fund from the general fund at December 31 of 2021. This finding has been in a report in the previous two years. Invoices and supporting documentation were not provided for all tested disbursements in 2021, 2000, and 2019. A similar finding was made in the previous two reports. Mayor Jeff Coley is here to answer questions in place of Recorder/Treasurer Michelle Robbins.
Sen Garner: Thank you, Mr. Mayor. If you will say your name and title for the record and any statement you may have on these findings.
Coley (Wiederkehr): Jeff Coley, Mayor, Wiederkehr Village. Shelley Robbins, our secretary, would have been here today, but she had a doctor’s appointment come up this morning. So we got together yesterday and went over what I needed to bring and all. Yeah, we’ve been working with Kelly Millwood. She was great. She pointed out all our mistakes and all I can say, my first time being a mayor, there’s a learning curve.
Sen Garner: When were you elected?
Coley (Wiederkehr): 2019.
Sen Garner: 2019?
Coley (Wiederkehr): Yes.
Sen Garner: Okay. It appears these are going back over and over again during your term, am I correct about that? 2019, so– And it keeps saying we’ll fix them and then next year happens and it’s still not fixed. So what active steps are you taking to fix and these?
Coley (Wiederkehr): Well, some of it was not knowing that we needed to pass an ordinance for certain things, and so we’ve started doing that. We couldn’t really do an ordinance for something that we’d already done in the past, but we’re working to learn what we need to do in the future and everything to keep it from happening again. Is there any certain one of these that you wanted to discuss?
Sen Garner: Well, I said you all didn’t adopt a budget. I mean, it seems like a step one on one on any kind of running a city. You adopt a budget through ordinances. Are you all doing that now?
Coley (Wiederkehr): Oh, yes, we are now. And let me see. No, that’s a reimbursement and autopay.
Sen Garner: But you all held an organized city council meeting where you’ve presented a budget, had the city council members vote on it, and now it’s approved and it’s out there, is that correct?
Coley (Wiederkehr): Yes. Yes.
Sen Garner: Okay, any questions, Committee? Representative Love, you’re recognized.
Rep Love: Thank you. Mr. Chair. Let’s talk about this finding in regards to your reconciliation and not having someone other than the preparer reconcile. What steps have you taken to cure that finding?
Coley (Wiederkehr): Okay, which one is that?
Rep Love: Okay, it’s the first finding on page 11. It’s in regards to your reconciliation process with the bank accounts. It needs to be–
Coley (Wiederkehr): Where we had to reimburse the street fund?
Rep Love: Well, I’ll get to that one, but this one is talking about someone other than the preparer looking over the work.
Coley (Wiederkehr): All I’ve got on there– I don’t know if these are Kelly Millwood’s reports or what, but on that one, it just says here this is being done properly.
Rep Love: Mr. Jones, can you explain this finance so that I guess he could better understand?
Leg Audit Staff: Sure. The Municipal Accounting Law says that you’re supposed to reconcile your bank accounts to your books and then someone other than the person doing the reconciling will take a look at those reconciliation. So in most cases, in a small town like Wiederkehr Village, the Recorder/Treasurer, in this case Shelley Robins, would do the reconciliation. Then usually it’s the mayor who takes a look at those bank reconciliations. It could be a council member or someone else. But I’m guessing the mayor may look over those reconciliations or at least open the bank account or the bank statement, something like that.
Coley (Wiederkehr): Oh. Okay, well, I didn’t know that. Nobody had told me that I needed to do that, so.
Rep Love: Let me ask this. Mayor, is this your first time being here?
Coley (Wiederkehr): Oh, yes.
Rep Love: Okay. This is your first time being here. Has anyone ever showed up for Whitaker Village?
Coley (Wiederkehr): Yes.
Leg Audit Staff: He’s referenced the auditor, Kelly Millwood. She’s one of our auditors in that area and she did the work. Now, she probably spoke mostly with the recorder treasurer, Ms. Robins, who couldn’t be here today. But that would be good for the mayor to know that he needs to look over those reconciliation.
Coley (Wiederkehr): Okay. Because I did go there when Kelly and Shelley were both there several times. Like you say, she probably talked to Shelley a lot more than she did me. But the times I was there, we went through all of these, and I really don’t remember her saying I needed to look over the bank accounts. Maybe it was that.
Sen Garner: Well, your response says– this is from Ms. Kelly– whoever her name is. Yeah. Ms. Robins– excuse me. I’m going to do better on bank reconciliations and make sure Mayor Jeff Coley approves the bank reconciliations in a timely manner. So apparently she’s done obligated you through the response to do that.
Coley (Wiederkehr): Well, does that count just verbally? Because she’s explained a lot of this to me that she had gotten done, like getting the receipt books. That’s another one in there later on. But this was all to get the bank accounts.
Sen Garner: Mr. Jones.
Leg Audit Staff: Mayor, what we usually look for is there will be a hard physical paper copy of that bank reconciliation. And what we usually look for is the mayor’s initials or signatures, something to signify that he looked at that.
Coley (Wiederkehr): Oh, okay.
Leg Audit Staff: So that would be what we’d like to see from that.
Coley (Wiederkehr): Well, I can do that.
Rep Love: Okay. And then let’s move to the street fund. Let me find this. You transferred $2,470 as a partial payment– repayment of restricted revenue.
Coley (Wiederkehr): No. no. We went ahead and paid the whole thing.
Sen Garner: If I’m reading the right one, it says, at the next city council meeting, the city council will present and hope to adopt an ordinance to transfer money from the General to street for repayment. You concurred with this response. Have you all done that, or are you going to do that?
Coley (Wiederkehr): We’ve got the ordinance here.
Sen Garner: All right. Okay.
Coley (Wiederkehr): Do you need to see this?
Sen Garner: No. I mean, I don’t. Representative Love is the one who asked the question.
Rep Love: How do you want to handle this, Mr. Jones? Do they need to just send you all the information so that you all can cure the finding?
Leg Audit Staff: When we go back to do the 2022, we’ll see that that money’s been transferred. The response indicated that they will do that. It looks like the mayor has a copy of the ordinance that they’ve deemed that that’s what they want to do, but we’ll make sure they actually move the money to the street from the bank account.
Rep Love: All right. Other than that, I’m finished. Mr. Chairman. Thank you.
Sen Garner: Thank you. And we have Senator Stubblefield, then Representative–
Sen Stubblefield: Thank you, Mr. Chairman. I just have a short question for the staff again. I’ve been on this for six to eight years, and we’ve had hundreds of situations just like this where new mayors are elected, they don’t know the rules. They don’t know the protocol. Does City County– does the Municipal League or the Chamber of Commerce, do they offer any kind of courses for mayors to go in and give them, at least the elementary?
Leg Audit Staff: Yes, sir. There are courses Municipal League has, and you can do those in person. You can easily do those online as well. And Legislative Audit staff speaks at most all of those. And we’ll go over the common findings. We review these kinds of things. It’s not required for the mayors to attend those or recorder-treasurers, but the–
Sen Stubblefield: Do you keep a record of how many people attend these?
Leg Audit Staff: We don’t. The Legislative Audit doesn’t. The Municipal League may. I was looking. I don’t see anyone from the Municipal League–
Sen Garner: On the record, I’m seeing a head shake.
Leg Audit Staff: He probably could answer that question about if they keep a record of who attends. He says they do.
Sen Stubblefield: Okay, well, I keep hearing mayors say the same thing. We were not aware. I didn’t know this. And hopefully, we can find a way to better educate these mayors and city council on the rules that have been on the books for decades about how to run a small city and alleviate a lot of these things, because a lot of them are just we didn’t know that.
Leg Audit Staff: We also have a document on our website about how to prepare for Legislative Audits. And so we try to get that information out there as best we can.
Sen Stubblefield: All right, okay. Thank you.
Sen Garner: Any more questions? Representative Rye, you’re recognized.
Rep Rye: Thank you, Mr. Chairman. Sir, down at the bottom of the page, Mayor, it mentions pre-numbered receipts, and receipts were always issued in subsequential order. And all these other receipts, are you starting to have a system?
Coley (Wiederkehr): Yes. We ordered all brand new receipt books, a receipt book for each one of our accounts, and another miscellaneous just to have it. And they are all numbered sequentially, and we’ve started using those now.
Rep Rye: Thank you, sir. And thank you, Mr. Chairman.
Sen Garner: All right. Mr. Mayor, I think you kind of got a trial by fire here to kind of understand what’s done. I mean, understand. We do this a lot, like Senator Stubblefield said. There’s a lot of different regulations and rules you have to follow and understand. But the reason why this exists is to make sure there’s not fraud, something like stealing. We see that all the time. So get with the Municipal League. Get with your local leaders and try to make an active effort to fix this. That’s what keeps you and your citizens safe from having issues in compliance with the law. So without any more questions, we will file this report without objection. Thank you, Mr. Mayor.
Coley (Wiederkehr): Thank you.
Leg Audit Staff: Okay. The next report would be the City of Helena-West Helena beginning on page 14 of the synopsis. The Treasurer’s payroll check posted to the General Ledger on January 1, 2022, but cleared the bank on December 31, 2021. Additionally, this check only contained one authorizing signature, that of the treasurer in noncompliance with code. It appears the treasurer posted journal entries in an attempt to conceal that the check cleared the bank prior to being posted to the general ledger. Continuing on page 15, the city made the following payments totaling $17,011 for related party transactions without authorizing ordinances in a conflict with Arkansas code, $10,011 to a business owned by an employee for heating and cooling services and $7,000 to a business owned by an employee spouse for legal services. Continuing on page 16, the City paid $945 to an organization affiliated with an A&P Commission member’s spouse for supplies and various services without an authorizing ordinance in conflict with code.
Leg Audit Staff: At the bottom of the page, we noted that fire department employees were overpaid due to an error in calculating holiday pay. This error also caused the department’s holiday pay to be $11,274 over budget. A similar finding was issued in the prior two reports. On page 17, the A&P Director was reimbursed for the following questionable expenses totaling $5,546 in apparent conflict with Arkansas Constitution article 12, section 5, $3,759 for lodging, meals, supplies, and utilities without adequate documentation. Therefore, the validity of these disbursements could not be determined. $1,292 for meals without an overnight stay, $357 for alcoholic beverages, and $138 for clothing purchases. City Treasurer Derek Turner and City Clerk Sandra Ramsay are here to answer questions.
Sen Garner: Thank you, Mr. Jones. Can you please say your name and title for the record?
Turner (Helena): Derek Turner, city treasurer.
Ramsey (Helena): Sandra Ramsey, city Clerk.
Sen Garner: You have any comments on these before we get to questions?
Turner (Helena): No.
Ramsey (Helena): No.
Sen Garner: Who’s the treasurer?
Ramsey (Helena): Mr. Turner.
Turner (Helena): I am.
Sen Garner: You’re the treasurer?
Turner (Helena): Yes, sir.
Sen Garner: All right, you have no comments? But the City Clerk said on the second response, this will be answered by the treasurer. And we didn’t get a response on it.
Turner (Helena): I’m not sure what she was referring to. If you could tell me what she was referring to, I could answer the question.
Sen Garner: All right. Any questions, committee? All right, I’ll just say this. It seems, just my initial read of this is, there’s a lot of issues between what appears to be the Mayor, the City Council, and different departments with what’s going on, what’s happening. Is that a fair assessment? Is there some tension right there? Is there some disagreements in what should and should not be passed? Because the mayor multiple times saying, “I sent this to City Council and it wasn’t sent back.” Is that what’s going on with this?
Ramsey (Helena): If I may respond to that, yes, there’s a lot of tension there. There’s been many cases such as on the conflict ordinance that you brought up. We have tried for the last six meetings to get the limit raised on the conflict ordinance to no success. It gets tabled. There have been many times where we have presented minutes of council meetings to the City Council for approval which might not be approved for four or five months. They table them and then they get up and leave. We have tried diligently to get things done, appropriations, approval of overtime, etc., and everything is tabled. For instance, I’ve been trying to get some ordinances passed to pay some bills which exceed the mayor’s spending limit of $5,000 or the bid limit of $7,500. Some have been on the agenda for five months, and they’re not been approved or paid yet. We’re looking forward to this election and, hopefully, we’ll have a council that will work with us to promote the City of Helena. We have a lot of outstanding debt. We have difficulty getting things appropriated. But we are trying to do what we’re supposed to do.
Sen Garner: Okay, let’s go through Representative Berry, then Senator Stubblefield and Representative Hillman. Go ahead, Representative Berry.
Rep M Berry: Thank you, Mr. Chairman. So can either of you provide any clarity to the finding where the A&P Director was reimbursed the $5,546?
Ramsey (Helena): Well, the current acting chairman of the Commission isn’t here, but the City Council– the A&P Commission reviewed his expenses. They authorized payment. They met with the auditors when they were there. I do not know what the results was of the meeting. I don’t know if the gentleman is supposed to pay anything back. He’s no longer with us. But I paid what was approved by the commission to be paid.
Rep M Berry: Thank you, Mr. Chairman.
Sen Garner: Senator Stubblefield, you’re recognized.
Sen Stubblefield: Well, thank you, Mr. Chairman. Representative Berry asked basically what I was going to ask, but this is a good analogy of exactly what I was talking about. The others are actions that could have easily been overlooked or didn’t understand. These are blatant violations. When you buy clothing and alcohol, you don’t need it. You don’t need the Municipal League to tell you not to buy clothing and alcohol because these are blatant as it can be. And these are the things you cannot overlook. I understand this has been turned over to the prosecutor, right? Okay. Thank you, Mr. Chairman.
Sen Garner: Representative Hillman.
Rep Hillman: Ms. Ramsay, you made reference to this election and new council members. How many new council members do you have?
Ramsey (Helena): We currently have six council members. We have one that did not run. He was running for mayor. We have one that’s returning, and the other slots all had more than one person running. So we may have some new council people.
Rep Hillman: Okay, so you haven’t had the election yet?
Ramsey (Helena): No, sir. We are in the early voting right now and run off on the 6th.
Rep Hillman: Okay. All right. So you could have as many as four new council members?
Ramsey (Helena): Yes, sir.
Rep Hillman: Okay, thank you.
Sen Garner: Any more questions? Representative Rye?
Rep Rye: Thank you, Mr. Chairman. Sir, and ma’am, this American Rescue Act fund, which was, I guess a total of about $1,068,000. Did you just not go through the city council and say, Here is the money this month that came in through this particular fund, and then put that in there and then turn around and say how we’re going to spend that in certain kinds of categories?
Turner (Helena): Well, in this case, the city council, as you mentioned earlier, there’s some tension between the mayor and the council. And so the city council decided that the Municipal League recommended that they make an appropriation for the entire amount. The city council was not willing to do that. They wanted to make the appropriations as they were needed. To my knowledge, all the expenditures had appropriations for every expenditure, but they would wait until the mayor requested a certain project or a certain piece of equipment before they would actually make the appropriation.
Rep Rye: Thank you, Mr. Chair.
Sen Garner: Anybody else? I’m going to be honest. I’m a little torn between this one because, you said it and it’s obvious from these findings there’s tension between the mayor, executive branch, and the city council member. Nobody from the city council is here to defend their side of it. There’s always two sides of the story. And ultimately I want the problem fixed, whatever that problem may be. It’s obviously out of compliance. Maybe the city council has a good reason why they’re tabling stuff. Maybe there’s something on the other side. I don’t know. I won’t be back this next term, so I can’t really kick this can down the road, but I don’t know if we need to call the city council and the mayor here. I don’t know. After the election, the results might be completely different. It takes care of itself, I just don’t know. But the only thing I know, if I can shine a light on it, there seems to be something dysfunctional happened and it needs to get fixed one way or the other. And that might just be my part in saying that. And maybe somebody picks up on it, but something’s not right, and it needs to get fixed. I think that’s what I’m saying. Representative.
Rep M Berry: Thank you, Mr. Chairman. I have one last question. Is the City, are you caught up on your taxes and penalties with IRS?
Turner (Helena): Yes, sir. We are currently current on our federal payroll taxes and the state withholdings.
Rep M Berry: Okay, thank you. Thank you, Mr. Chair.
Sen Garner: Any more questions? Seeing none, without objection, we will file this report. Thank you for coming today.
Leg Audit Staff: The next report will cover is the City of Lepanto for the year 2021. It’s on page 20 of the synopsis. The police chief was allowed to take 34 days of sick leave before the leave was earned, resulting in a salary overpayment of $5,210. This arrangement appears to conflict with Arkansas code– excuse me, Arkansas Constitution article 12, section 5, which prohibits city from loaning credit to any individual. A similar finding was noted in the previous report. Mayor Ernie Hill and Police Chief Chad Henderson are here to answer questions.
Sen Garner: Thank you. If you can please say your name and title for the record of any comments you may have about these findings.
Hill (Lepanto): Mayor Ernie Hill.
Henderson (Lepanto): Police Chief Jack Henderson.
Hill (Lepanto): And my comments is we had a miscommunication between myself, the police chief, and the city clerk about the sick time that we thought the chief had banked over the previous years. He was in the hospital with kidney failure at the time, then he got out and was going to kidney dialysis. We were under the impression that he had days banked. However, when I did get the report, there was no days banked. He’d already used all the days. However, since then we have put in place a policy for sick leave donation from other employees. He’s already paid in the process. I think 90% is paid back and the rest have to be paid back by the end of the month, so. But we do. And then now I get a monthly report on sick time, vacation time on all employees.
Sen Garner: Any questions? I know what this says, but I mean I’m going to give you a lot of grace on a guy going through kidney failure and you’re trying to take care of him. I mean, let’s be real about it. I know what this says here, and it’s the law, but I think that’s understandable to have that happen. And it sounds like you got it fixed going forward. Is he doing okay? How’s that?
Hill (Lepanto): Yes, sir. I just like to add, too, his other officers that’s under him, they’ve graciously donated time.
Sen Garner: And is this the guy? Are you him?
Henderson (Lepanto): Yes, sir.
Sen Garner: Yes, sir. We’re happy to see you’re doing good health being up here. Don’t let it happen again when you have kidney failure.
Henderson (Lepanto): Yes, sir. Thank you.
Sen Garner: Any questions? Seeing none, we’ll file this report. Thanks for coming today, guys.
Leg Audit Staff: The next report will be the city of West Memphis for the year 2021, beginning on page 28. Arkansas code requires management to maintain financial records. The city’s financial record contained errors that were considered material. As noted below, the general fund financial record contains misstatements due to receivables and payables recorded in error, classification errors, journal entry errors, and posting errors. The Street Fund financial records contain misstatements due to unrecorded payables and journal entry errors. Other funds in the aggregate financial records contain misstatements due to receivables and payables recorded in error, classification errors, journal entry errors, and posting errors. A similar finding was noted in the previous three reports dating back to 2018. The city recorded interfund receivables and payables consisting of restricted revenues deposited in the wrong funds, deposit errors, and excess transfers of reimbursements to vendor payables and payroll expenditures. These balances were not cleared in a timely manner and may prohibit the governing body from making sound financial decisions with accurate information. A similar finding was noted in the previous three reports dating back to 2018. Finance Director Tory Perry is here to answer questions.
Sen Garner: Thank you. If you can say your name and title for the record.
Perry (West Memphis): Yes. Tory Perry, finance director for the city of West Memphis.
Sen Garner: Any comments you may have on these findings, ma’am?
Perry (West Memphis): If I could just give a background real quick, and then I can answer any questions you may have.
Sen Garner: Yes, ma’am.
Perry (West Memphis): I became part of the city of West Memphis as a staff accountant for the utilities in 2018. And at the time, our finance director was Frank Martin. After a year of being there, he wanted to train me to replace him at some point, and so he asked me to enroll in school to get my Master’s. And so during that time frame, he became ill. And so from December 2019 to May, when he passed away, I was kind of trying my best to just step up and take over for him while he was out. Well, once he passed away, from May until October, when I was appointed to be the finance director, I was on my own. He had no backup of any sort, and so I’ve had to learn and get advice from different cities, got with the Municipal League. And so some of this stuff is back from 2018, but I’ve been trying to implement some internal controls, get a hold of everything that’s going on to try to make some improvements. Since then, we are still improving. We are still trying to get better. And so, yes, I just wanted to give you all a background first.
Sen Garner: Absolutely. Any questions from the committee? Representative Love, you are recognized.
Rep Love: This is a question for staff. So, Mr. Jones, when you all went down to audit West Memphis, did you see any improvement in the processes that they had?
Leg Audit Staff: I’m not on the audit team per se, but I will tell you that the city of West Memphis, this is not the first time some of these things– they didn’t begin with this current administration. They’ve gone back before her. And so it’s my understanding from listening to the people who did the audit that they are trying to go in the right direction, that they’re trying to make a turn here on some things. I don’t know if you could pick this out from one of these findings that there was a little bit of conflict between the previous finance director and the council. And that was why there was some confusion with some of the accounting anyway. But it’s my understanding that she’s trying to correct these issues from the audit team that has spoken with me.
Rep Love: Okay. I just wanted to know if some of these– because I’m looking at this first finding. Did you all report any missing money?
Leg Audit Staff: No, sir. These were financial accounting entry errors. There was no money missing. There were just some large errors. And these errors have to be pretty large before we write this finding. This finding is in a different part of the report. If you pulled out the audit report, it’s in the body of the report on internal control. And so it’s a serious financial accounting issue, but money is not missing.
Rep Love: There’s no money missing. Okay. So now, ma’am, I’m going to turn to you. Give me your name again.
Perry (West Memphis): Tory Perry.
Rep Love: Ms. Perry, so I just listened to what Mr. Jones said. In the future in regards to some of these findings, did you say that you are putting in internal controls?
Perry (West Memphis): Yes. And so another background, we have a very old antiquated accounting system that we use. It was a homegrown system that the current data processing manager that’s been there 50 years implemented. And so I got with the mayor and the council, with also a suggestion from Leg Audit, that we needed an updated system.
Rep Love: So have you gotten an updated system?
Perry (West Memphis): Well, we have put out an RFP to get one, and so they were actually due yesterday, so I haven’t had a chance to review any of them. But we will be having a new system next year.
Sen Garner: And Mr. Jones has a follow up to that if you’re done, Representative Love.
Leg Audit Staff: Representative Love, I received a message from the supervisor of that engagement. And his message is that West Memphis is better, and they do have a new software system, and they’re working on new software systems. So either, I think he was watching online, but he sent us a message that, yes, it is better.
Rep Love: All right, I have no further questions. Thank you, ma’am.
Sen Garner: Any more questions, committee? Yes, ma’am. It looks like taking over for somebody that’s been there forever, I know that can be some challenges. Obviously, if you have these two or three years down the road, you probably have an issue, but it sounds like you’re working through it, and we appreciate it. Any more questions? Without objection, we’ll file this report. Thank you, ma’am.
Perry (West Memphis): All right. Thank you.
Leg Audit Staff: The next report is the town of Allport beginning on page 29. Although this report shows a balance of $52 in the general fund, the town owed significant amounts to the street fund and the HACT Regional Waste Treatment District. When these outstanding amounts were considered, the general fund had a deficit balance of $20,000. A similar finding was issued in a previous report. The town was in noncompliance with Arkansas code as follows: Minutes did not indicate the budget was passed by ordinance or resolution. However, resolution 2021 to 2022 signed on May 24, 2001, indicated it was passed on March 1, 2021. A budget was not adopted by February 1. A similar finding was noted in the previous five reports. Continuing on page 30, at December 31, 2021, the town owed HACT Regional Wastewater Treatment District $6,600 for sewer collection and wastewater treatment. The town paid nothing during 2021 in non-compliance with an agreement stating the town would pay $200 per month until the debt is satisfied. A similar finding was noted in the previous five reports. Monthly bank reconciliations were prepared but were not accurate in non-compliance with Arkansas code. A similar finding was noted in the previous report. Mayor Kenneth Raynor and Recorder-Treasurer Jeremy Allen are here to answer questions.
Sen Garner: Thank you. Can you please have your name and title for the record?
Raynor (Allport): Kenneth Raynor, Mayor.
Allen (Allport): Jeremy Allen, Recorder-Treasurer.
Sen Garner: All right. Any comments about these findings? Can we go to questions?
Allen (Allport): For the bank reconciliation statements, I did hear back from the auditors, and I did learn that there was one month that had one mistake in it. So that was the inaccuracy as far as the numbers go. And secondly, there was–
Sen Garner: Is your mic on, sir? I’m sorry to interrupt you. No, I think you did have it on. I’m sorry. Thank you. Sorry about that.
Allen (Allport): Is that better?
Sen Garner: Yes, sir.
Allen (Allport): Okay. For the monthly bank reconciliation statements, there was one month in one account that had a check that had cleared, but that was part of the numbers, so that caused an inaccuracy in regards to the numbers. All the other months were correct for all the accounts. Also, there was a term that was misused. It should have said ending monthly bank statements instead of beginning. So those were the inaccuracies for the monthly bank reconciliation statements. For the payments to HACT, we had a verbal communication agreement, and then later on a letter, that we were going to resume payments at a later time, in early January, late December 2020. They did give us a letter in April 2021 stating that the payments were okay to be suspended. Then later on, we did reach a new agreement and payments did resume in January of this year, and they have been made every month since then.
Sen Garner: All right, any questions? Representative Love, you’re recognized.
Rep Love: Okay, let’s go back to the question that you just had in regards to HACT, I guess. Are you saying that you are making payments?
Allen (Allport): Yes, sir.
Rep Love: Okay. Have you provided this information to staff?
Allen (Allport): Yes, sir, they are aware.
Rep Love: Okay. And then talk to me about this not passing the budget in these resolutions, not passing the budget for your town.
Raynor (Allport): During that time, we were under pandemic protocol, and we weren’t having meetings. A couple of months, we didn’t have a meeting because of the pandemic protocol. We were under pandemic and late on that. A couple of months later, we did eventually have a meeting in March and passed that and did a resolution on it in 2021.
Rep Love: Okay. All right. Thank you. Thank you Mr. Chair.
Sen Garner: Representative, you are recognized.
Unknown Representative: Thank you Mr. Chair. Looking here, it shows that you have a deficit over 20 million– I mean, $20,000 in general revenue. What is your anticipated revenue for this year, this coming year?
Raynor (Allport): I don’t have a hard number, but our revenue comes from state tax turnback each month. That’s approximately right at about $1,200 per month. Then we get a franchise tax refund from Entergy quarterly at about $700, and that $20,000 sends back to old street fund issues from 2006 and 2010. We continue to pay that monthly, and we just passed a resolution to pay 10% of our general revenue fund each year until that’s paid.
Unknown Representative: Okay, you do do an anticipated revenue, then do your budget, correct?
Raynor (Allport): Yes, sir.
Unknown Representative: Is there a deficit in that between your anticipated revenue and your budget?
Raynor (Allport): No, sir.
Unknown Representative: Okay. Looking by the records here, you lost about 25% population in the last census. So you’ll be losing turnback money from the state, correct?
Raynor (Allport): That’s right. But we should still not have a deficit, because before we were paying the IRS. That debt has been paid. We were paying them $542 per month.
Unknown Representative: All right. Thank you, Mr. Chair.
Sen Garner: Thank you. Yeah. If I understand correctly, you all don’t get turnback funds right now, do y’all? Because it’s been recommended not to have turnback funds, and that’s the case that’s in front of the AG, from what staff told me. Let me ask you this. So you said that you have an agreement to pay the $200 back. You say that you’re going to do it, but it says that nothing was paid back on the second to last finding to the HACT Regional Waste Plant. It says in 2021, $0 were paid. And you said you had an agreement to do it. And you said now there’s a continuance to do it, now there’s not doing it. I mean, a similar finding was noted in the previous five reports. Sounds like you all hadn’t paid that bill yet. Am I incorrect about that?
Raynor (Allport): Yes, sir.
Sen Garner: Are you all going to pay it?
Allen (Allport): No, we’re paying it. Are you saying no payment for May 2021?
Sen Garner: How much has been paid towards it as of today?
Allen (Allport): The $6,600?
Sen Garner: $6,600. Yes, sir.
Raynor (Allport): We’ve paid this year $200 per month all this year.
Sen Garner: You have paid it?
Raynor (Allport): Yes.
Sen Garner: Okay, good. Just making sure because it was saying it never got paid, and just making sure there’s payments being made.
Raynor (Allport): Yes. We resumed payments, I think, January of last year?
Allen (Allport): This year.
Raynor (Allport): No, we paid some last year. We paid them in July. We paid a few months, then we stopped. I think. Did we?
Allen (Allport): Not that I recall.
Raynor (Allport): Okay, well, we resumed payments in January of this year, and we’ve been paying every month since.
Sen Garner: Okay, just making sure. Any more questions, Committee? Representative Rye?
Rep Rye: Yes, sir. Thank you, Mr. Chairman. Fellas, looks like on the first paragraph, it speaks about the general fund owing money to the street fund. Did you guys spend money from the street fund?
Raynor (Allport): Yes. That goes back to years between 2006 and 2010, and that’s where we passed the resolution to commit to pay 10% of our revenue each year until that’s paid off.
Rep Rye: Yes, sir. So, actually, y’all are paying that back, aren’t you?
Raynor (Allport): Yes, sir.
Rep Rye: Thank you.
Sen Garner: Thank you. Any more questions, Committee? Seeing none, and without objection, we’ll file this report. Thank you for coming. Next report.
Leg Audit Staff: Next report is the City of Leslie on page 33. For the years 2021 and 2020, an annual audit, agreed-upon procedures, and compilation report was not obtained for the Water Department in non-compliance with code. A similar finding was issued in the previous two reports dating back 2015. The minutes of the governing body did not document the review of the previous report and the findings and actions taken by the governing body as required by code. A similar finding was in the prior report as well. Mayor Talitha Harden is here to answer questions.
Sen Garner: Thank you, Mayor. If you can say your name and title for the record, and any comments you may have.
Harden (Leslie): Talitha Harden, Mayor of Leslie. We have satisfied the notation about the minutes. And as far as our water sewer audit, we had a good faith effort agreement with a gentleman who kept telling us that he was going to complete that. He had our records, he had a surgery. Based on feedback that he gave us, he had a surgery, then he had an illness, had COVID, kept pushing it back. Thankfully, we had not paid him anything, even though he had come and picked up our records and stuff. He did not follow through with that. But we have since entered into an agreement with a new auditing group, so we will get that taken care of. We very definitely want to be in compliance. The city of Leslie has been blessed for 42 years with the same Recorder/Treasurer, a retired math teacher, so he’s amazing. We’re very thankful for that. But we very definitely do understand the seriousness of getting our audit complete and want to make sure that we’re in compliance.
Sen Garner: Thank you, ma’am. It sounds like from the response, it sounds like y’all have found somebody that will audit and do the report.
Harden (Leslie): Yes, sir. It’s Barry and Associates.
Sen Garner: Okay. Any questions, Committee? Seeing none and without objection, we’ll file this report. Thank you for coming today, ma’am.
Harden (Leslie): Thank you.
Leg Audit Staff: Okay, the next report is on page 34. It’s the town of Twin Groves for the year 2021. This report shows a general fund balance of $12,694. As of December 31, 2021, the amount owed to the street fund for State Aid totals $64,529. When this outstanding amount was considered, the general fund had a deficit balance of $51,835. A similar findings was issued in the prior report. Mayor Wesley Tyus and Recorder/Treasurer Mae Lyon are here to answer questions.
Sen Garner: Thank you. Can you say your name and title for the record, please.
Tyus (Twin Groves): Wesley Tyus, Mayor of Twin Groves.
Lyon (Twin Groves): Mae Lyon, City Clerk Recorder/Treasurer.
Sen Garner: Okay. Any comments you have about these findings?
Tyus (Twin Groves): Yes, as far as the $64,000, of course, that goes back several years. And for the last couple of years, we’ve addressed it a lot more aggressive than it was in the past. And this past year, the year 2022, the council approved paying $250 a month rather than the $50 a month, but we saw where we could pay the $500 a month. So for the entire year this year, we paid $500 a month, which this year will total $6,000. So that’s going to bring that total down, the amount that we owe, somewhere around $59,000. And of course, we did earlier hear that we received permission to continue to pay that. And there is a commitment to get this done so we can put that behind us. And we’ve tried to do our business to where we could concentrate on this debt, and we’ve done that. And so if that’s maintained in the future, we can put this to bed after a few years.
Sen Garner: Yes, sir. Yeah. We appreciate y’all coming seeking approval. We appreciate the payments being made. That’s what we look for. It’s moving toward trying to resolve it. It looks like everything I’m seeing looks like doing it. So I just want to commend you all on that. It hates when bad things happen, but it’s good to get it fixed. So, any questions, Committee? Representative Hillman.
Rep Hillman: Thank you, sir. It says in here that the money had not been transferred from the general fund to the street fund for the past– where did I see that– anyway, a number of years. Is that correct?
Tyus (Twin Groves): No. Okay, let me say it like this. In the year 2019, the transfers weren’t made. And that totaled about a little, $4,200, almost $4,300. We paid that amount back last year. We cleaned that up. This entire $60,000-some odd goes back probably 15 years.
Rep Hillman: Okay. That’s what I was asking.
Tyus (Twin Groves): Yes. But that practice is no more, but we still have the debt. But yes, it’s been transferred properly, and we are addressing it seriously to pay it back.
Rep Hillman: Okay. And so you paid back $6,000 roughly this past year on that $64,000?
Tyus (Twin Groves): For the year 2022 and for the year 2021, we paid $4,200 to a different segment, but of the same debt. But we were still making payments to this bigger debt, but we paid a smaller one off and now we’re concentrating on the larger one.
Rep Hillman: Okay. Do you have any idea what’s your anticipated general revenue is for 2023 or fiscal 2023?
Tyus (Twin Groves): We’re looking at somewhere around $85-90,000 if I’m not mistaken. And we have requested because it’s doable and we can maintain up to $500 a month. And we can see some light at the end of the tunnel. We can see getting this paid off.
Rep Hillman: I agree. Okay. All right. Well, thank you. Thank you, Mr. Chairman.
Sen Garner: Any more questions, committee? Senator Irvin, you’re recognized.
Sen Irvin: Just really a point of personal privilege, if I may. This is one of the coolest communities in the State of Arkansas. I have the blessing of inheriting them in my new district, and if you ever get a chance, when you’re driving up 60 or down, Highway 60, 66, 65– I live on 66, 65. Anyway, you should stop in. It’s pretty cool what they’ve done there. And it’s just an amazing little community with an incredible, incredible history. And so thank you all for being here. Thank you for what you’re doing to address that. But you’re doing really great stuff in your community, too, and I appreciate that.
Sen Garner: Thank you, Senator Irvin. Any more questions, committee? Seeing none, without objection, we’ll file this report. Thank you all for coming today.
Tyus (Twin Groves): Thank you.
Lyon (Twin Groves): Thank you.
Leg Audit Staff: Okay. That concludes the reports. We have visitors as far as I know. If we have a visitor from any other county or municipality today, let me know at this point. If not, we’ll begin back at the start of the synopsis. All right, we’ll take a look at Jefferson County for the year 2021. And this was deferred because of the finding at the top of page 3. In the District Court there in Jefferson County and in Pine Bluff, they had a probation officer that began collecting money before his new position was approved. And some of the amounts charged for fees were higher than they were supposed to be. And the funds collected were deposited into the probation officer’s personal bank account. When the court personnel discussed these discrepancies with the officer, he indicated that he was not told what to do with the funds collected. And he returned the receipts of $4,300 that have been issued. He returned that money to the court, and the committee had some questions surrounding that. And we’ve received a letter from the court from both Jefferson County and Pine Bluff from the judge and the court clerk. And Joe Archer is sitting over there, and he actually supervised this engagement. So he’s going to summarize what that letter had to say.
Sen Garner: You’re recognized.
Leg Audit Staff: Joe Archer, staff. After the meeting in November, me and co-chair Garner discussed this, and whether to bring them here. We’re going to give them an opportunity to submit this explanation letter. And they did so very quickly. They did want me to let you all know they would be glad to appear. This is my idea, not theirs, to answer any questions you have, but they did submit the letter. A little background, during COVID, both districts, divisions of the court lost their outside probation services. And they couldn’t hire anybody. I mean, they couldn’t find a service, so they advertised a new position and they had an applicant. But due to both the city and the county needing to agree on funding and accounting issues, there was some delays. And the probation officer that was hired took it upon himself to start collecting fees without the proper accounting system set up or the proper authority. On October 4, 2021, the court’s personnel contacted auditors, said they had a problem. I personally went over the next day, on the 5, and verified that, yes, they had collected this $4,300. They had already obtained the receipt books, and the funds were already obtained back that afternoon from the gentleman. These funds were currently being held by the county treasurer’s office and have been deposited. And as soon as this report is approved, they will reimburse based on the receipts, any funds due to the individuals to pay the old payments. Questions?
Sen Garner: No. So if I can– last time we saw this, raised a bunch of red flags to me. I talked to staff afterwards. From what they said, from the letter, from everything, it looked like this was a guy got hired, had money coming in, was trying to do the right thing, he wasn’t trying to steal it, wasn’t trying to do anything. He just got overzealous, opened the account to put the money in, trying to be at his new job, trying to help out. Obviously, it’s wrong that he did it. And when they found out about it, they immediately corrected it. The money was $100 difference, I think. And I think he’s going to pay that back.
Leg Audit Staff: He already has.
Sen Garner: He already has. Everything looks like, from discussing with staff, that there was nothing illegal done here, nothing done. It was wrong to do it, but nothing was done, in my opinion, that would require them to come here and explain it. So I told staff that this letter would suffice for me. Obviously, the committee can make a different decision, but I would recommend that we file this, and that this matter be resolved unless anybody has a major issue, and we’re more than happy to call them in there. Any questions, comments? Seeing none, without objection, we’ll file this report. Thank you all.
Leg Audit Staff: All right. We’ll continue moving through the synopsis. The next two reports are the Town of Allport for 2020 and 2019. The committee has deferred these because Allport, they lost their turnback funding, if you remember, and this committee recommended that they would lose their charter. Today, you filed the 2021 report. So I was just checking on the will of the committee if they’d like to still defer these two reports, or if they’d like to file them. Seeing as how the 2021 has been filed.
Sen Garner: Well, what do you all think? I think that there’ll be another audit on them and they’re likely to have results again, and you all will have to deal with this again. Personally, I’d like to resolve this and get out of here, but it’s up to you all. Well, in that case, without objection, we’ll file this report. Anybody object? No objection. Move forward. How about that?
Leg Audit Staff: Okay. The next report will be the Town of Horseshoe Lake on page 8. And a review of the town’s payroll reveal wages and taxes withheld did not reconcile between the IRS reports and the Arkansas AR3 report was not prepared and submitted. Due to these discrepancies, it appears taxes withheld may not have been remitted to the appropriate taxing agencies. A similar findings issued in the prior report. And this report has– this is the third time it’s been deferred. And Recorder/Treasurer Carol Adams couldn’t be here today. She had health issues. It sounded like she had some surgery and there’s some recovery going on. This is December of 2022, so we’ll be doing a 2021 audit soon. This is the only finding they had, and we’ll definitely follow up on this. Staff would recommend filing this report for these reasons.
Sen Garner: Without objection, we’ll file this report. Seeing none, report’s filed.
Leg Audit Staff: Okay. The next report is the City of Parkin, right below it, for the year 2020. Payroll taxes for 2020 were not remitted timely. As of the report date, we cannot determine that taxes owed to the IRS from previous years of $21,000 had been remitted. A similar finding was noted in the previous four reports dating back to 2016. And staff spoke with the mayor on Tuesday, and the Recorder/Treasurer is having some health issues, like she’s been in the hospital is my understanding. This is the fourth time this report has been deferred. This is the fourth meeting. And again, this is the 2020 report. We will definitely follow up on this because it’s an issue with the IRS. Staff would recommend filing the report.
Sen Garner: Without objection, we’ll file the report.
Leg Audit Staff: Okay. The next report is Monroe County on page 13. We have one finding. This is Monroe County of the year 2020. The balance remaining in the commissary account of $4,786 was not identified. A similar finding was issued in a previous report. Again, this is 2020 report. Staff is one-third of the way finished with the 2021 report. We should have the 2021 report in the next meeting in April or May. And this is an issue we will follow upon as well. Staff would recommend filing the report.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: Continuing at the bottom of page 13. This report is certified at the Bond Board, City of Centerton for the year 2021. Unauthorized withdrawals of $34,841 were made from the city’s bank account. City personnel discovered the unauthorized withdrawals upon reconciliation of the affected account. And the funds were recovered from the bank. In late 2021, city personnel were made aware of questionable expenditures made by their former Public Works Director, and the Centerton Police Department investigated this matter. Subsequently, the Director was charged on December 16, 2021, with felony theft of property and fraudulent use of a credit card and debit card in the amount of $62,190. Our review of selected transactions revealed an additional $1,850 in expenditures that the department identified as questionable. Continuing on page 14, the city disbursed $2,500 to Ozark Regional Transit without a contract for services in apparent conflict with Arkansas Constitution Article 12, Section 5. This report is being certified with the Bond Board and will be referred to the prosecuting attorney. No one was requested to be here because there were no repeat findings in this report.
Sen Garner: No objection, we’ll file this report.
Avoca Fire Department
Leg Audit Staff: All right. The next we have on page 19 through 20. We have an investigative report on the Avoca Fire and Rescue Department. And Ms. Kim Williams is here to give that report.
Sen Garner: Ms. Williams, you’re recognized. Give your report.
Leg Audit Staff: Thank you, Mr. Chair. Kim Williams with staff. At the request of the 19th West Judicial District prosecuting attorney, staff was requested to assist the Benton County Sheriff’s Office involving allegations concerning this fire department in Avoca. We reviewed transactions from January 16 through January 20, 2021. That’s about the time the Recorder/Treasurer or the district’s Treasurer resigned. And what we were able to find, there were 66 transactions that were made by the former department secretary totaling over $24,000 that were unauthorized and improper. We had a state tax lien that was filed against the department that was satisfied. And there were numerous internal control deficiencies, and most of the disbursements did not have any supporting documentation. We noticed that there were no internal controls at all during COVID. They got lax on having two signatures on the checks. No one else was looking at the bank statements. The former Treasurer Adam Kinney has repaid almost $20,000 to the department. He was charged with theft of property in January of this year. And this case is pending as date of this letter. I just wanted to inform the committee, no one’s here from the department, but they’ve hired the city treasurer to keep their books. They’ve also added a control where there’s two signatures on all the checks. And they were having someone independent of the bookkeeper reconcile the bank statements and requiring documentation for this.
Sen Garner: Thank you, Ms. Williams. Any questions? Excellent work. I appreciate it. Looks like you uncovered what should have been uncovered.
Leg Audit Staff: Well, actually to give the department credit, they noticed the discrepancies.
Sen Garner: Yeah. It sounds like they knew it. They wanted to get on it. And they wanted to help build a case against the guy.
Leg Audit Staff: Yes.
Sen Garner: Good, good. Good work. All right. Moving on.
Leg Audit Staff: I guess you want to file it.
Sen Garner: Oh, excuse me. Yeah. We’ll file the report without objections, unless you want to keep it going.
Leg Audit Staff: All right. The next report is on page 21. It’s Carroll County for the year 2021. On December 22, 2021, the county discovered an employee’s payroll direct deposit had been fraudulently diverted to another bank account after the employee contacted the county about not receiving payment. It was determined that on December 17, the county made a direct deposit change after receiving an email from what appeared to be the employee’s email account. This transaction resulted in a $1,278 loss to the county. This report is being referred to prosecuting attorney and no one was invited.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: Okay. Nevada County for the year 2020. County officials could not locate a lease agreement related to a $400 payment, and the monthly payments for 2020 total $4,800. Because county officials weren’t unable to determine the purpose of these expenditures, the county ceased payments in July of 2022. The lessor was unaware of any lease agreements and ceased billing the county. We recommended the county seek legal counsel regarding the resolution of these matters. The county judge issued two court orders relating to the sale of a building. We could not determine whether the county complied with the requirements of Arkansas Code for advertising the sale of the building at a public auction. Additionally, the county did not require the purchaser to submit payment in full on the day of the auction as stipulated by the court order. On December 30, 2019, the county received insurance proceeds as $7,600, remitted these proceeds to the purchaser on January 27 without documentation to substantiate the cost of any repairs made by the county or the purchaser.
Leg Audit Staff: The quorum court minutes didn’t document the review of the prior report. Competitive bids were not solicited or waived for the purchase of a sanitation truck costing $155,000. The county court did not approve two short-term financing obligations executed for the purchase of equipment. Additionally, the county court did not approve amendments to extend the terms of these three existing short-term financing obligations. One of the extensions caused the term of indebtedness to exceed five years, in conflict with the Arkansas Constitution. Road fund expenditures exceeded appropriations by $236,000. We’re continuing on page 23. The quorum court adopted an ordinance to establish a service fee for solid waste collection. And the ordinance exempted commercial business, churches, and deer camps from the fee. However, county resources were used to provide solid waste collection services to these entities in conflict with Arkansas Constitution Article 12, which states, in part, no county shall appropriate money for or loan its credit to any corporation, association, institution, or individual.
Leg Audit Staff: And continuing on page 24, the county paid the coroner $4,469 for miscellaneous jobs performed without a contract or authorizing ordinance in conflict with code. The county paid $915 to non employees for Christmas bonuses without quorum court authorization in conflict with Arkansas Constitution Article 12, Section 5. Additionally, bonuses were not paid to all employees, and payments were not in accordance with the amounts prescribed by the quorum court. The county Judge Mark Glass and County Clerk Julie Stockton Oliver, neither one are here. The judge called and said he would be unable to attend. Neither of these officials will be in office in 2023. This report has been referred to the prosecuting attorney. Staff would recommend filing the report.
Sen Garner: If they were going to be reelected, I’d say bring it back because this is extensive. And I don’t like people not coming for us, but they’re not going to come anyway, so we might as well file the report without objection.
Leg Audit Staff: All right. Beginning on page 25, Newton County. The county paid an employee a $6,000 bonus after nine years of service in noncompliance with the county ordinance which states county employees who have completed 25 years of service will have the option to state their intention to retire in three years and receive a $2,000 yearly income for the last three years of employment. The employee retired 10 months after receiving the bonus, and then was rehired by the county six months later. Subsequent to our questioning of the payment, the employee repaid $6,000 to the county on August 17, 2022. Continuing on the next page, the sheriff’s office employee resigned from county employment on February 19, 2021, and started working for another municipality on February 22, 2021. Subsequently, the county paid the former employee for 40 hours every week for eight months using sick vacation and compensatory time with payments totaling $15,324. Documentation supporting leave balances was not provided. Therefore, we were unable to determine the validity of these payments. In addition, it appears this individual was paid for more leave than he was eligible to accrue during his tenure. This report is going to the prosecuting attorney, and no officials were invited.
Sen Garner: Without objection, this report is filed.
Leg Audit Staff: All right. Sharp county is next on page 26. On page 26, the quorum court voted to deed 0.54 acres of land valued at $2,160 to an individual who has maintained this land and had an easement through it to the joining property which this individual owns. However, this arrangement conflicts with Arkansas Constitution Article 12, Section 5, and the public purpose doctrine.
Sen Garner: Without objection, we’ll file this report. Somebody got a half-acre land free.
Leg Audit Staff: All right. Continue to top of page 27. Woodruff County for the year 2021. The county paid $1,000 to an employee for lease of his personal tools to be used for county business without an authorizing ordinance as required by Arkansas code.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: Okay, the next report, town of Shirley just below, for the year 2021. The town executed a $23,000 promissory note to sell town-owned residential property to the current tenants on a lease-owned basis. This arrangement appears to conflict with Arkansas Constitution Article 12, Section 5, which states in part, “No town shall loan its credit to any corporation, association, institution or individual.” Additionally, the town council did not adopt a resolution authorizing the conveyance of the town property as required by code.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: All right. Next report is on page 23. The town of Beedeville.
Sen Garner: 33?
Leg Audit Staff: 31. 31, I’m sorry.
Sen Garner: Beedeville. I never heard of that.
Leg Audit Staff: Beedeville. All right, Beedeville. Year 2021 and 2020. The fixed asset listing was not properly maintained as required by code. Similar findings was issued in the previous two reports dating back to 2014. Recorder treasurer Polly Adams called, and she was ill and not able to be here today.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: All right. The city of Grubbs for the year 2021. An audit or agreed-upon procedures report was not completed for the Water and Sewer Fund as required by code. The similar finding was noted in previous reports back to 2017. Cash receipts and disbursements journals were not properly classified in total for each fund in noncompliance with code. The a similar finding was noted in previous filed reports back 2010. IRS quarterly reports and Arkansas Department of Finance and Administration form AR3 were not provided. We could not determine if federal withholdings were properly withheld and remitted. Similar finding was noted back to 2017. The mayor, Jackie Ivey, had health issues, she’s not going to be able to attend. My understanding, they’re going to have a whole new slew of officials in 2023. And this engagement is– the 2022 engagement is scheduled for early 2023. Staff would recommend we file because this report will likely be presented in the next.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: Town of Jacksonport on page 32. Pre-numbered receipts were not issued for all funds received in noncompliance with code. Cash receipts and disbursements journals are not properly classified, and they don’t have totals for each fund, and bank accounts are not properly reconciled. And all these findings went back several years. Recorder treasurer Deanna Dotson, we did not hear from her today. She was invited to be here.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: Okay. The next report is town of St. Joe on page 33. For the years 2021, 2020, the town was not in compliance with the municipal accounting law as indicated below. Bank reconciliations are not performed. Pre-numbered receipts are not issued for all funds. Cash receipts and disbursements journals were not established. Annual financial statements are not prepared and posted. Invoices were not retained for all expenditures. Electronic disbursements were made from the general fund without proper approval by the council and without establishing internal accounting controls and documentation for the audit and accounting purposes. A similar finding was issued in the previous report. And on page 34, IRS forms W-2, W-3, and 1099 were not filed, and a similar report was issued in previous reports dating back to 2011. Mayor Ben Taylor was invited, but he is not here today.
Sen Garner: Without objection, we’ll file this report.
Leg Audit Staff: Okay. All right. Town of Mount Vernon on page 34 at the bottom. The court treasurer did not submit to the council monthly financial reports as required by code. And this is a report where we didn’t get a response, and we’ve contacted the town, and we just haven’t heard back from them.
Sen Garner: Without objection, we’ll file this report until they get back to you all.
Leg Audit Staff: Okay. All right. Beginning on page 35 through page 38, there are nine reports with resolved findings. Staff would be happy to answer questions as best we could. If there are no questions, staff would recommend filing these reports.
Sen Garner: Any questions? Without objection, we will file page 35 through page 38, you said. There are multiple reports filed.
Leg Audit Staff: All right. On pages 39 through 40, there are 45 reports with no findings. Staff would recommend following these reports.
Sen Garner: Without objection, we’ll file the reports.
Leg Audit Staff: That concludes the review of reports.
Sen Garner: Thank you. Excellent job by the staff. Item F, next meeting of Legislative Joint Audit Committee will be held at the call the chairs. Representative, you got something? Representative Berry.
Rep M Berry: Thank you. I was just going to ask if you can make sure that all of our auditors are healthy when they go out because it seems like they’re spreading a lot of illness throughout all the communities that they audit. So any precautions that they might need to take–
Sen Garner: I’m telling you, maybe we need to give them something that end-of-the-year sickness that’s going around when I know that the new legislature is coming. Representative, you’re recognized.
Rep Hillman: I’d like to say something before we adjourn. I’ve been on this committee now for 10 years, and I just want to commend the staff of the Audit for the job that they do and the professional way that they do it and the integrity that they use. And I know they catch a lot of flak. And I’ve had several phone calls about they didn’t do this right. And I have never found them to take any direction other than what was prescribed by law, and I just want to commend them for it. And to you, committee members, the care that you take with these counties and municipalities and the way that you have looked at them, I want to commend you for that also and just let you know that it’s been good serving with you all. And also with the co-chair, he and I have ya-ya-ed back and forth up here, as you all might know, and I have certainly enjoyed serving with him. Thank you all.
Sen Garner: Seconded. All right. Anything else? With that, we’re adjourned.