City audit shows $924k deficit in funds

The city’s 2013 audit report released on the state legislative auditor’s website this morning showed a total of $924,699 in deficits across several funds including $712,948 in emergency management funds, for which FEMA is supposed to reimburse the city, according to city officials.
Other deficits cited in the budget included $117,196 in Louisiana Community Block Development Grant money; $40,817 in Louisiana Capital Outlay funds; $34,305 in state prisoner funds; $19,320 in central garage funds; and $113 for Lake End Park construction, the report stated.
In an email, Morgan City Finance Director Deborah Garber said the fund deficits in emergency management, Louisiana Community Block Development Grant funds, and Louisiana Capital Outlay funds are due to money owed to the city by federal grants and state capital outlay.
“The revenue is considered deferred revenue and will not be recognized as revenue until 60 days prior to the actual receipt of funds,” Garber said. “These deficits will be funded and revenue recognized in subsequent years.”
That audit report stated that the city anticipates that the deficits will be funded by excess revenues in subsequent periods or by appropriations from the utility funds.
The audit covered the year ended Dec. 31, 2013.
The audit report also expressed an adverse opinion on the aggregate discretely presented component units because the financial statements do not include financial data for the city’s legally separate component units. The audit was performed by Kolder, Champagne, Slaven, and Company LLC.
Assistant State Legislative Auditor Joy Irwin said an adverse opinion means that the financial statements do not include everything that they are supposed to include. “The primary government and the component units are all supposed to be reported together, but Morgan City chooses not to do that. And that’s OK. It’s OK to do that. It’s just that the auditor has to disclose that that was done,” Irwin said.
Irwin said the legislative auditor sees this finding often in audits especially at the parish level. “That’s not anything to be concerned with,” Irwin said.
The auditor issued unmodified opinions on the financial statements of the city’s governmental activities, business-type activities, each major fund including the general fund, pollution abatement fund, and emergency management fund, and the aggregate remaining fund information. An unmodified opinion is a positive one, Irwin said.
The opinion on the aggregate discretely presented component units was adverse because the city issues primary government only financial statements, the audit stated.
No deficiencies in internal control were disclosed by the audit of the basic financial statements, which were considered to be a material weakness, the report stated.
A management letter was not issued, and no instances related to internal control findings were noted, the auditor stated.
The audit issued a compliance finding where the city incurred budget variances in excess of 5 percent in the pollution abatement fund and in the emergency management fund. “We do see that quite often,” Irwin said.
Under state law, the chief executive or administrative officer is supposed to advise the governing authority or independently elected official in writing when revenue collection plus projected revenue collections for the remainder of the year, within a fund fail to meet estimated annual revenues by 5 percent or more; when actual expenditures plus projected expenditures for the remainder of the year, within a fund are exceeding estimated budgeted expenditures by five percent or more; or when the actual beginning fund balance, within a fund, fails to meet estimate beginning fund balance by five percent or more, and the beginning fund balance is being used to fund current expenditures, the report stated.
City management responded by stating that the city will more closely monitor budget to actual comparisons, and adopt the necessary amendments to insure compliance with state statute, according to the audit.
The condition results from a failure to properly monitor the revenues and expenditures of the special revenue funds, the auditor stated.
The city may not prevent and/or detect compliance violations due to over expenditure of the appropriated budget, and/or errors or irregularities on a timely basis. Also, the mayor may be subject to the penalty provisions, the audit stated.
The auditor recommended that the administrative authority prepare and review budget to actual comparisons and amend the budget in effect upon determination of significant variances.