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City Continues Deficit Spending

In the Hazlehurst City Council’s August meeting, Mayor Bayne Stone gave the council a brief update on the audit for the fiscal year ending June 30, 2020 — completed almost a year after the end of the fiscal year.
While it was announced that there were no findings in the audit, in fact there was one finding — Expenditures in Excess of Appropriations.
A Ledger review of the audit, which was prepared by Kendall L. Davis, P.C., found that the city was in violation of a state law that “requires governments to operate under an approved annual budget of the General Fund, special revenue funds and debt service funds.”
Davis found that the city expended its expenditures over appropriations in the General Fund because budgetary controls were not in place. Davis found that the budget to actual expenditures were not compared on a monthly basis.
Not mentioned at the City’s August meeting was a Management Letter issued by Davis to the Mayor and Council, in which the accountant pointed out five issues to which he felt the council should give adequate consideration:
1. Fund Balance Deficit-General Fund — The general fund continued to operate with a fund balance deficit. The FY19 deficit was $132,073 and FY20 deficit increased to $302,027. Davis recommended that the city make every effort to increase revenues and decrease expenditures. The audit revealed that in addition to the General Fund deficit, the improvements to the airport showed a deficit of $170,059.
2. Actual Expenditures Exceeded Budgeted Expenditures in the General Fund. Audit fieldwork disclosed that expenditures were over budget in Public Safety, Public Works, and Streets and Sanitation with $368,000 of unappropriated costs spent. Public Safety spent $171,779 over budget, Public works was $20,524 over budget, and Streets and Sanitation was $177,163 over. Davis said the city should establish controls to monitor the budget on a periodic basis. Budget amendments should be prepared and approved by the Council to prevent any budget overruns.
3. Insurance for Cybersecurity Not Adequate. The City had $25,000 coverage for cyber security and Davis felt it was evident that the City needed no less that $1,000,000 in coverage to cover loss of data, business interruption and other conditions that could be very costly to the City. He recommended the City contact its insurance agent as soon as possible to secure additional coverage.
4. Internal Controls at Golf Course Nonexistent. Davis said his fieldwork disclosed a drastic decrease in golf course revenues form FY2019 to FY2020. The golf course had a loss of $97,000 for FY2020. Davis added that, during the course of the audit, he was told that no membership dues are ever taken to the City for bank deposits. He recommended the City immediately establish internal controls to ensure that all golf course income is taken to the City for deposit and it should be constantly monitored by a responsible individual not associated with the golf course.
5. Procurement Process. Davis said the City’s internal controls over purchasing need to be improved. There was no evidence that prenumbered purchase orders and prenumbered requisition documents were attached to invoices that were paid. Davis said purchase orders should be initiated by department heads and approved by someone one level above them. Requisition should be prepared when items are ordered. Price quotes should be obtained from more than one supplier if the amounts of purchases exceed the amount established by policy. The requisitions should be attached to the purchase orders and paid invoices.

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