Disclaimer of opinion issued by city auditor
NATCHEZ — The City of Natchez’s poor financial records led an independent auditor to perform the accounting equivalent of shrugged shoulders after completing the city’s much-delayed 2012-13 fiscal year audit.
Deanne Tanksley with Natchez’s The Gillon Group accounting firm presented Tuesday the city’s 93-page audit to the Natchez Board of Aldermen.
Tanksley told the board the number of transactions that were not properly recorded and the inability to locate adequate supporting documentation for testing led to her issuing a disclaimer of opinion, which is one of four options available regarding such public audit reports.
The other options include an unmodified opinion, modified opinion or adverse opinion.
Tanksley said the disclaimer of opinion — or no opinion — simply means there was not enough evidence to support whether or not the material was correct or incorrect.
“We are unable to render an opinion on the financial statements,” Tanksley said. “We cannot say they are materially misstated or not materially misstated — they are what they are.
“There’s not enough audit evidence for me to give an opinion one way or the other.”
Tanksley said she’s not aware of any consequences the city would face based on the audit report issued, including any grant money the city is slated to receive.
“If this was the 16th time this had happened, there might be a little more to it,” Tanksley said. “But everyone involved in the process, including any grantors, understands this was sort of a blip on the radar and that the city is getting back on track for 2014.”
The majority of the audit’s findings related to the city’s accounting processes, including bank reconciliations, records and financial statement preparation and payroll reports not being filed in a timely manner, among other things.
Tanksley said the compliance portions of the city’s bookkeeping are fine, meaning no questioned costs came up during the review, but that proper documentation processes were not followed with the city’s accounting processes.
“We couldn’t tie everything back,” Tanksley said. “We would literally have to go back to every single transaction, check the coding and that’s no longer auditing.”
With bank reconciliations, for example, the audit stated the city has no formal process to monitor and review the reconciliation procedures, which means some transactions were going unrecorded and undetected. That caused the city to make operational decisions without all the pertinent information, according to the audit report.
Mayor Butch Brown said inadequate staffing and turnover in the city clerk’s office contributed to the issues listed on the report, including one clerk position that has not been filled since it was vacated last year.
To correct the issue, the city hired another Natchez accounting firm, Silas Simmons, to complete all 2014 bank reconciliations and provide assistance as needed going forward.
Tanksley said she’s spoken to members of the Silas Simmons group, who are on track to have updated and correct information to her for the 2013-14 fiscal year audit.
The other step Brown said the city is taking to correcting its accounting issues is the search for a deputy clerk, who would come in initially to fill the role of one of the city’s openings in the city clerk’s office, but also serve as a possible stepping stone to taking over the office.
City Clerk Donnie Holloway does not have plans to run for the office again in 2016, and the city completed the process last year of changing the position from an elected to an appointed one.
Brown said he has members of several state accounting and municipal government offices on the lookout for possible candidates throughout the state.
“They’re working to find someone who has proven governmental accounting capabilities,” Brown said. “This is a person to come in to fill the vacant slot we have in the clerk’s office and, at the same time, learn what is going on in city government in Natchez.
“When (the city clerk) is appointed in the future, this city will be up and going and have a knowledgeable staff to keep the bookkeeping going.”
On a general bookkeeping level, Tanksley said the majority of the city’s funds are in good shape, especially those that receive grant funding from state or federal sources.
Tanksley made the association that if the city were a business, its net operations would have been up $2.8 million from the previous year.
But what the city takes in and what it can spend on general operations, Tanskely said, are different.
“As we’ve noted in the past, a lot of these net assets are restricted funds,” she said. “Not everything in the increase was something the city could use.
“Most everything that came in positive was restricted for another purpose.”
The city’s general fund, which is used for daily operations, payroll and other expenses, reported a nearly $600,000 deficit.
That deficit occurred from the city overestimating what it would receive from tax dollars and spending more than it had in the fund.
Figuring out how to balance that fund is an issue Alderwoman Sarah Carter Smith said needs to be figured out quickly.
“In the most basic of summaries I can say … we’re spending more than we’re bringing in for unrestricted funds,” Smith said. “It’s going to take some digging to figure out how to balance that.”
Brown said the solution was to figure out a way to get more money in the general fund.
Smith countered Brown’s proposal saying another option is to spend less money from the fund.
Alderman Dan Dillard asked Tanksley if the corrective actions the city was taking now would help for the upcoming audit process.
Tanksley said she’s confident in the work Silas Simmons is doing to correct banking reconciliations and felt if the progress continued, the city would receive a successful audit on time for its 2013-14 fiscal year.
State law requires the city have the audit for a given fiscal year completed within nine months of the close of the year.
The audit report Tanskley presented Tuesday was due June 30.
The board voted unanimously to adopt the audit report.