The City of Minden has received an unqualified opinion, which means financial statements were presented fairly, following its annual audit of financial statements and operations.
In a council workshop Wednesday, Kristine Cole, with the accounting firm Martin, Wise and Cole CPAs, said while some findings from last year were resolved, another suggests the city may be in violation of the Louisiana Constitution.
“In last year’s report, there were a number of items that were cleared and resolved; those that are partially resolved or not resolved are repeated in the current year,” she said.
She said when the city learned of the issue of under- and overpayments to the police and fire departments, the council voted to settle the errors, making it retroactive by three years instead of their dates of hire. By doing it this way, she said in her report, due to the nature of the settlement, it could be in violation of the state constitution.
“I was not able to determine whether there was a violation of the constitution,” she said. “Municipalities don’t want to be in a position where they are donating or giving away public resources. Essentially, looking at the settlement of the fire and police calculations, there was one instance where we noted the city authorized to collect overpayments from fire employees as well as pay out underpayments. The central issue was the fact that the overpayments were limited to a three-year period, while the underpayments where the city owed, it went back to hire date.”
Because she could not make that determination, she said she had to put it in the report. Auditors recommended the city continue to follow payroll procedures to ensure amounts are appropriately paid for employee services in accordance with the law, civil service rules and city policy.
The city responded by saying they have implemented several layers of controls by different employees to avoid similar errors.
In the second finding, dealing with controls over collections, Cole said collections of fines at the Minden Police Department were reconciled to subsidiary documentation to ensure appropriate amounts are deposited by the same person involved in the collection process. The reconciliation is not performed by someone outside of the collection process.
Auditors also noted separate instances with the city where the same employee who invoices customers also handles collections, or prepares deposits and records transactions.
Without proper segregation of duties over collections, errors or irregularities could occur and not be detected.
In response to auditors, the city said they would approach the city court to handle the collection process to avoid further errors or irregularities. In the second instance, the city said the finding had been resolved when they separated the employee’s duties.
Another finding deals with inventory. There were four exceptions when testing inventory listing was not updated for additions, deletions or errors. Auditors recommended they review its inventory listings and update regularly to ensure the list is complete and disposals are properly documented and approved.
In response, the city said it would correct those errors and implement additional counts for property after the first six months of the fiscal year.
In the last finding of bank reconciliation, Cole said they’d noted some instances where reconciling items were being carried over from year to year and not clearing.
“We suggested those be investigated and followed up timely so that you have a true cash balance each year,” she said.
The city responded by saying, “The assistant city clerk has been instructed, in a timely manner, to reconcile items affecting accurate cash balances and identify and correct errors and adjustments. The city clerk will review, on a monthly basis, the reconciliation process.”
The Numbers
Revenue has decreased since 2015, and sales tax collections decreased by about $300,000. For 2016, the city saw $5.8 million in revenue, but the increase in revenue came from grants for the airport improvements. Expenses also went up, she said.
As for benefits, those expenses have gone up. Cole said while it’s not “gloom and doom,” their net position reflects what
the city owes in retirement and post-retirement benefits, about $5.9 million in liability for future healthcare for employees. The city is paying about $10 million in retirement benefits, and the audit projected $15.6 million in potential payments. It is considered an unfunded liability.
The city has three different retirement systems it pays into for its employees, fire, police and municipal. They pay 25.25 percent for firefighters, 22.75 percent for municipal employees and 31.75 percent, and the employees pay 9.5 percent into retirement.
Councilman Mike Toland said because there isn’t enough money to pay retirement right now, the only way to fix it is to increase what they put into retirement by 10 to 15 percent, “and the city is still falling behind. We need to increase revenue by $10 million to keep up.
“We can’t fix this on the backs of the people,” he continued.
In the sales tax fund, revenue was under what was expected by about $150,000, and in expenditures, they spent about $2,400 more than was budgeted.
“This past year, one of your major revenue sources comes from sales tax,” she said. “There was a decrease in sales tax; in the past you’ve enjoyed increases every year, but the actual sales tax collections were actually less than 2016 by about $360,000. Part of the increase came from grants to fund the airport improvements. There’s also an increase in expenses, which are funded by those grants.”