Clean audit shows ‘material weakness’ in cityPublished 12:07am Friday, June 29, 2012
NATCHEZ — An independent auditor presented a clean audit to the Natchez Board of Aldermen Thursday, but that news was somewhat overshadowed by the “material weakness” the auditor found during her work.
Deanne Tanksley with the Gillon Group said she encountered significant obstacles in getting financial information from the city clerk’s office to conduct the audit for the 2010-2011 fiscal year.
“We are repeating the finding for internal controls over financial reporting as far as trying to pull the information (for the audit),” Tanksley said.
Tanksley said it is not unusual for a material weakness to be cited in an audit.
“We report this on half the audits we work on,” she said.
Tanksley said in January when she was having trouble getting the documents she needed, she had several options, including issuing a disclaimer on the audit.
A disclaimer is issued when an auditor cannot form an opinion and therefore refuses to present an opinion on the financial statements.
Tanksley said a disclaimer would have jeopardized the city’s federal funding, so she chose to think of Natchez first.
“I’m not just an auditor; I am a citizen, too,” she said. “The City of Natchez is very important to me. My husband and I chose to live here, we didn’t have to, so I take all of this very seriously.”
Tanksley advised the board that the city needs to find a strong accountant in the city clerk’s office who will be hands-on with operations.
Tanksley said the biggest problem with the accounting in the clerk’s office is a problem that faces most governmental entities. She said the government auditing model changed seven or eight years ago to combine cash basis and accrual accounting.
The problem with the city’s accounting, she said, is matching up expenditures with the actual time they were made.
For example, Tanksley said if a contractor does work on city streets in September, but the contractor’s bill doesn’t get to the city until November, a journal entry in the city’s books should note that the expenditure is for September, not November.
“It’s the non-routine timing that throws things off,” Tanksley said after the meeting. “Other governmental entities miss the same kinds of things. It’s just not what normal governmental accounting workers are used to.”
Ward 6 Alderman Dan Dillard said the implementation of the new accounting software in the city clerk’s office has been a “monumental disappointment.” Dillard asked Tanksley what the city needed to do beyond the software to stop the recurring accounting problems.
Tanksley told Dillard that getting the new accounting software in place was a great leap toward that.
“But the software is only as good as the people running it,” she said.
Tanksley said the city clerk’s office staff does a very good job of cash-basis accounting, which she said is historically how governments have reported and is allowed under state statute.
She said, however, if an office is not keyed into the governmental auditing standards, some things get overlooked.
Tanksley notes that the Natchez Transit System keeps “impeccable” records, as well as the city’s engineering department, which she said uses a color coding filing system to locate files that made her job much easier.
The board voted to adopt the audit so it could be submitted today, which is the deadline for the audit.
Tanksley said aside from the obstacles to getting the city’s financial information, the audit showed the city had a “break-even” year.
“The city has been very well-managed from that standpoint, and the board has done a good job on being willing to cut expenses and watching expenditures,” Tanksley said. “Each year, I have seen improvements, and this year was not too bad.”