BAY ST. LOUIS -- Fifteen findings of deficiencies or noncompliance with state or federal laws regarding the city's finances were noted in the final auditor's report released to the public this week.
Certified Public Accountant Jennifer Bell of Wright, Ward, Hatten & Guel performed the audit as part of the annual state requirement for municipalities. The audit examined the city's finances for the prior fiscal year ending Sept. 30, 2014.
The report categorized 14 of the findings as "material weaknesses," which are described as internal control deficiencies posing the most severe risks of errors on the city's financial reports.
Ten of the findings are instances of noncompliance with state or federal laws and regulations, including a U.S. Department of Justice equitable sharing fund that is missing about $300,000. The city council noticed the discrepancy in August and called for probes by state and federal authorities, which are ongoing.
One finding, regarding a "major federal program," was categorized as a "significant deficiency," described as a less severe instance of noncompliance. It had to do with the city's management of a U.S. Department of Housing and Urban Development grant. In two instances, money received on a cash request was not paid out to the vendor within three days of receipt as required by the HUD grant program, the report said.
When the city finance department presented the fiscal year 2014 budget to the city council for approval on Sept. 12, 2013, it "contained miscalculations and footing errors totaling $621,249.62," the report noted.
The final audit report contains all of the same findings contained in the preliminary report issued in September but also includes the city's responses to the findings and any necessary amendments. One change concerns the finding that the city allowed its workers' compensation insurance to lapse for 60 days and its wind insurance to lapse for 24 days during hurricane season.
The wind insurance was a supplemental policy to lower the city's deductible on its general policy. Mayor Les Fillingame said the finance department at the time was considering whether they actually needed the supplemental policy.
Whether there was a lapse in workers' compensation coverage is unclear. During their examination, auditors discovered a letter from the insurance provider that stated, "Please be advised that effective 10/1/13, the Workers' Compensation Coverage for the City of Bay St. Louis is non-renewed for non-payment of the renewal premium. No claims will be processed after September 30, 2013, 12:01 A.M."
In September, shortly after the auditors finished their preliminary report, the administration obtained a letter from the insurance provider that contradicts the letter from 2013. It states, simply, "During the coverage period October 1, 2013 through September 30, 2014, the city had no lapse in coverage."
"That's just a B.S. letter to me," Councilman-At-Large Mike Favre said. "I don't think we had (the insurance)."
The auditors, nonetheless, did not budge from their initial summary finding, stating in the final report, "The City was noncompliant and had no or inadequate surety bond coverage and a lapse in insurance coverage during the course of fiscal year 2014."
"Had it not been such a public thing, I don't think it would have been a finding," the mayor said. "They kept their modified finding with the updated information only because it had been broadcast so widely."
Fillingame said he thinks a lot of people skip over the point that the city overall has made a strong recovery from Hurricane Katrina.
"The cash crunch is starting to ease, and I think we've taken appropriate actions with the council to make it all happen," he said. "By and large, the recovery has been very successful in my opinion."
Other points in the audit:
- Municipal Court "case files were missing documentation detailing payment history, issuance of warrants, proof of jail time served."
- "Judges court orders were not followed," and Municipal Court payment adjustments "were made without proper documentation or approval," which the report said can cause inaccuracies in financial reporting and noncompliance with court orders and state regulations.
- "Bench warrants were inconsistently issued or not issued at all, and court cash bonds and restitution were not reconciled to the general ledger."
- For several years, failure to issue or collect on warrants for non-payment caused "a drastic decrease in revenue within the court department."
- "Cash accounts were improperly reconciled to the monthly bank statements."
- Some "electronic deposits from the State for grant reimbursements were recorded in the bank statements," but the auditors "were not able to locate these deposits within the general ledger."
- Because of cash-flow shortages, the city is "paying some bills in order of priority instead of order of receipt" -- a violation of state law.
- Several checks were "written and posted to the general ledger and months later were voided" -- a violation of state law.
- General ledger accounts and funds contained "inconsistent and incorrect coding and classifying," which the report said could result in violations of various regulations and state laws.
- "Numerous journal entries were made to the general ledger" and "later voided and re-entered again in-part or in-whole."
- Some city employees, residents and businesses were past due "in excess of two months with their utility payments, and cutoffs were not performed as required per the City's ordinance."
- The city building department "incorrectly coded permit types which caused the fees to be improperly calculated and assessed."
- A restaurant obtained a permit without providing "a lease agreement or deed as required."
- Some city employee time cards were inaccurate, and "paid time off was incorrectly calculated or improperly recorded."
- Some city employees worked overtime "without approval by department supervisors" as required by city policy.
- "Utility and harbor sales tax collected from consumers was not paid to the State in a timely manner."
- "The City's rental and facility manager inconsistently charged lessees a deposit fee" and "inconsistently collected or did not retain deposits for cancellations."