Auditor cites compliance issuesPublished 12:00am Tuesday, January 8, 2013
Florala Utilities Board members were shocked Monday when a new audit revealed nearly 20 findings of internal weaknesses and legal compliance issues – including instances of employee pay loans, insufficient payroll and employee work time accountability and misuse of company property.conservative
The findings could also mean a future consolidation between the city and the utility board, members agreed.
Auditor Ben Vance of Vance and Associates was hired following the board’s firing of its longtime general manager, Lynn Hughes, and her subsequent arrest on theft charges.
Hughes was charged with two counts of theft and an ethics violation after she allegedly issued extra paychecks and paid family insurance premiums totaling more than $40,000. She is currently free on a $120,000 bond.
Vance said the audit also found other major issues, which included:
• Poor payroll accountability: Vance said as “salaried employees” work a variety of schedules and that workers are not required to work a 40 hour workweek nor are they required to use a time clock. There are also no records of leave time accrued or used by employees, he said.
• Inadequate employee supervision: He said field workers are in the office for extended periods of time, while there is a lack of a dedicated supervisor for field employees.
• Lack of needed governmental accounting skills and accountability measures for office staff.
• Personal use of city/utility board property. Vance cited one instance where an employee used board property to dump trash on city property. Chairman Marvin Willford said that the issue was addressed and corrected.
• Inadequate establishment of communication of any ethics policy and standards of conduct and expectations for employees.
• Water loss. Vance said the board is reporting a 40 percent monthly loss of water – which is costing the board money.
“You as the board – not the staff – is responsible to move and correct these items,” Vance said. “We knew you had issues, but if these things had been corrected, it wouldn’t have gone on for such an extended period of time.
“What we found was that you have $25,000 in unrestricted cash in the bank; $124,000 in restricted funds and $5 million in assets,” he said. “That is not acceptable. You’re in trouble with your cash flow and you need to ask yourselves what you’re spending money on.”
Vance said the board reported losses of $132,000 in 2012, and $120,000 in 2011.
“You’re not bankrupt and it’s not anything that you can’t fix, but the board needs to come up with a plan and get it in place – quickly.
“Ethics start at the top,” he said. “The board must establish a standards of conduct and to make (its) expectations known to employees. I don’t feel like the board has done that. You have a lot to correct. You’ve got problems with ethics and day-to-day accountability.”
Vance said the board is “in a precarious position” and urged the board to cut expenses before raising rates.
He recommended the board implement the following changes:
• Place the supervision of office staff as a responsibility of the city clerk;
• Move the board’s accounting under the direction of the city accountant;
• Implement segregation of duties for office staff, i.e., one person takes payments; one person counts the day’s payments and another makes the daily deposit.
• Purchase a biometric time clock, which requires employee fingerprints to record time.
• Move from salaried positions to hourly wages for employees.
• Hire an operations supervisor over field employees.
• Require board approval on all contracts and vendors.
• Remove employee signatures from checks and require signatures from two board members for checks.
• Give weekly financial updates to board members.
“Sure, you’re going to have to pay the city clerk a little more, but you’re saving the cost of a general manager and in other areas,” Vance said.
Board members asked Vance to put his recommendations in writing and tasked Williford and board member Robert Williamson to work out the logistics of implementing those recommendations. Those findings will be presented on Jan. 16 at 11 a.m.