State cites issues in Baldwin audit

Baldwin’s audit findings by the Louisiana Legislative Auditor cited several issues in the town’s finances to which Mayor Wayne Breaux has replied.
The issues arose from the legislative auditor’s review of the 2012 audit report. A response was requested by March 31, which Breaux provided.
The following are the state’s cited issues:
—Town management did not have a formal plan to address and eliminate a negative fund balance in the general fund. The audit reported deficit spending and a negative fund balance totaling $256,926 at June 30, 2012. By Oct. 31, 2013, the town’s financial records for the general fund indicated a negative fund balance of approximately $240,000.
—The town was not paying all vendors on a timely basis. In November 2013, accounts payable records indicated that the town owed vendors approximately $340,000, of which $172,000 (51 percent) was over 120 days past due.
—Town management was not complying with revenue bond requirements and an ordinance related to cutting off utility services on delinquent customer accounts.
—The Town was not making the required monthly transfers from the utility revenue fund into the revenue bond sinking fund, utility revenue bond reserve fund, and the utility system depreciation and contingency fund. When questioned, management was uncertain as to the amounts that were required to be transferred into these three accounts each month.
—Town management was not ensuring that utility services for past due customers were being cutoff in accordance with its utility revenue bond ordinance. The town ordinance allows utility customers a 25-day grace period to make payment; however, language on the utility bills indicated a 45-day grace period and noted that management was allowing an even longer grace period. For example, as of Oct. 30, 2013, the town had more than 200 active customers with delinquent utility account balances totaling $96,111, of which $66,794 (69 percent) was over 60 days past due. Management was cautioned that providing free services (without payment) could be a violation of Article VII, Section 14 of the 1974 Louisiana Constitution and La. R.S. 42:1461.
—Management had not implemented internal controls to ensure that all customers receiving garbage services were being charged the $3 monthly dump fee.
Response: It appears that a computer glitch was not automatically establishing the garbage fee in some instances. The software has been upgraded to correct the problem. The town clerk will also review billings before being mailed to ensure accuracy.
—Management had not implemented processes/controls to ensure that dedicated sales tax revenue was spent only on intended purposes. The legislative auditor’s office was informed that these restricted monies have been used for other purposes.
—The Chief of Police was reducing citations even though he has no judicial and prosecutorial powers under law which may constitute malfeasance for a public official who disposes of traffic citations in an unlawful manner.
—Police Department personnel were allowed to make changes/edits to time sheets without documenting the reasons for such edits.
—The town’s 2014 budget did not include all elements required by state law (e.g., ordinance did not define authority of the mayor and board to make changes to the budget).
—The town did not have written policies and procedures in place to guide all major fiscal operations (e.g., no policies and procedures to ensure that funds for debt service payments are available and that payments/transfers are made as required).
—The town did not have adequate checks and balances in place to ensure that all accounting transactions were accurately entered in the general ledger and that errors in financial statements were prevented, detected, and corrected (e.g., no secondary review of general ledger entries).
—The town did not have adequate controls over receipts/collections. Management allows employees to share and work out of the same cash drawer.
Breaux addressed the findings in his official reply to the state auditor:
1. General Fund Deficit
“The town will address this deficit by a number of immediate cost saving measures and a review of all revenue producing options,” Breaux wrote. “The town has received a COPS grant for one police officer salary and benefits. An officer qualified for the grant will replace an existing officer which will be a $40,000 reduction in salaries. Insurance costs for this calendar year have been reduced by $60,000. Additionally, debt service has been reduced $15,000 the past calendar year and will be reduced by an additional $85,000 this calendar year. The council has also committed to no new debt obligations until the deficit is eliminated. As previously mentioned, we will also review all revenue producing options, including utility rate schedules. We plan to eliminate the negative balance by June 30, 2015.”
2. Vendors Paid Timely
The mayor said, “November is our worst time as far as vendor outstanding payments due to the fact that much of our debt obligation is due on Nov. 1 and tax revenues have been depleted. We are very fortunate to have good relationships with our suppliers and they realize the situation and continue to work with us. In December we begin receiving property taxes and in January we begin receiving occupational licenses and franchise fees. At that time the outstanding invoices are reduced considerably. By Jan. 31, 2015 we plan to have all vendors payables current (with a) 90 days maximum.
3. Revenue Bond Requirements
“The town treasurer has been directed to make the necessary transfers to the bond obligated funds. This process will begin in April 2014,” Breaux said. “I find the 25-day grace period somewhat unreasonable and would cause much hardship. I have contacted the bonding attorney for his view on amending this criteria and am awaiting his response. Meanwhile, all utility customers should be in accordance with present policy of a 45-day grace period or be on a viable payment plan. The town clerk has been designated to address this compliance. If for some reason the restriction cannot be amended, I will propose an ordinance to comply.”
4. Customer Garbage Fees
Breaux wrote, “It appears that a computer glitch was not automatically establishing the garbage fee in some instances. The software has been upgraded to correct the problem. The town clerk will also review billings before being mailed to ensure accuracy.”
5. Sales Tax Revenue Restrictions
“Most of the sales tax revenues are transfer accounts,” Breaux said “The town treasurer has been advised to monitor those transfers to make sure that they are within the dedicated area of the sales tax. All of the taxes are very general in nature and encompass a wide variety of uses.”
(Items 6 and 7 were addressed by Police Chief Gerald Minor at the end of this article.)
8. Budget
“Language will be included in an upcoming budget ordinance that will define the authority of the mayor and board to make changes to the budget,” Breaux said. “This will be accomplished by June 15, 2014.”
9. Procedures for All Major Fiscal Operations
“We are in the process of establishing procedures as recommended,” the mayor said. “We have reviewed the Legislative Auditor’s site and (are) seeking outside assistance. This should be completed by April 30.”
10. Secondary Review of General Ledger Entry
“The mayor will review general ledger entries monthly and a periodic review will be made by (an) outside consultant,” the mayor reported.
11. Receipts/Collections
“Ninety-five percent of collections are received by one person,” Breaux said. “An additional drawer will be established for occasional collection by other personnel.”
Respectfully Submitted
Police Chief Gerald Minor also submitted responses to the legislative auditor’s findings, including:
—All citations current and delinquent have been transferred to Town Hall.
—As officers turn in citations they will be transferred to Town Hall.
—All payments will be accepted at Town Hall. This office will no longer accept payments for citations.
—All requests for assistance on citations will be referred to the mayor’s office.
—The Chief of Police will no longer participate in Mayor’s Court
—If an officer is needed for court, then one will be assigned.
—All paid citations will be kept on record at Town Hall.
—A log book will be kept by the Baldwin Police Department showing citations received, before transferring to Town Hall.
—A journal showing citations that are being transferred to Town Hall will be kept by the police department, with signatures of the person delivering and the person receiving said citations.
—All changes on payroll time sheets will be documented with a reason for any change, addition, and/or deletion.
—As is the usual protocol, all time sheets are reviewed and approved by the Chief of Police.