Christopher McGuire, a representative from Nichols Cauley, gave a presentation to mayor and council concerning the financial review of the City.

The did four procedures for cash disbursements and cash receipts. “The first procedure was we selected a sample of deposits, and then we reviewed the support behind the deposits to ensure the date, amount, the customer and the classification was reasonable.”

The second procedure was a sampling of disbursements provided by the General Ledger. “We reviewed the date, the amount, the classification, which is tricky, and then the approval.” The third procedure was a test of a sample of 43 bank account reconciliations, looking for accuracy, timeliness, and proper review. The fourth procedure was a sample of credit card payments. “We look for proper classification, approval, reasonableness.”

However, the work was complicated by the departure of the finance director, leaving them with less support.

McGuire addressed the journal entries. “Unfortunately, a lot of that is manual.” He stated that led to mistakes. “So of the different disbursements we selected, 12 were missing an approval. There was just an expense that went out the door.”

McGuire also found seven without the proper support documentation to back up the expense. He gave the hypothetical of an employee using a credit card, the statement being there, but without a receipt.

McGuire gave the one of the biggest issues. “We did notice where the General Ledger in the bank account wouldn’t match.” He gave a hypothetical. “You write a check to Benny for groceries. Benny holds onto it for two weeks. You still are out that check you wrote, but it’s still in your bank statement. It’s a timing difference between the two, but on a reconciliation, you’re kind of reconciling the two.”

McGuire also checking three credit cards across nine months, saying credit cards were the most common source of fraud. “We’ve got the statements and requested the support to back up the statements.” He stated there were nine support packets missing. “There was a credit card statement where we could see what the charges are, but there was no receipt backing them up.”

McGuire recommended that they either the new finance director help, or have someone come in and review the policy and make sure it was being followed.
City Council member Daryl Dowdell asked McGuire about the controls on spending. Department heads can issue credit cards to people in their department, but they usually have to require a receipt. The council had previously discussed raising the spending limit for department heads due to inflation.

Dowdell questioned the City Manager Diadra Powell about the issues McGuire brought up.
She stated she believed the concerns were the same as those found by Mauldin and Jenkins, the firm that audited the City. “We have individuals who probably need some training on how, what, the processes are. It may not necessarily be that the processes are not there. They may not understand what the processes are.”

She also addressed the lack of a sign off. “In the absence of a finance director, something that needs to have two signatures is only gonna have one.” McGuire concurred.

Powell also stated turnover was an issue in insuring policy compliance. The City currently has a vacancy for an accounting manager. “I’m not in that department, I can’t tell you specifically whether or not they are following the documented processes.” Powell also stated that while processes might not be fully followed, “They didn’t see where there was any monies missing.”

Powell stressed that her card and that of the City Clerk Sierra Harvey were reconciled. “From the finance department’s perspective, you don’t make payment on the card until every single transaction has a backup document.”

Dowdell commented. “If a employee [needs] training on bringing a receipt back, they need to be fired.” He also asked if McGuire’s work was complete.

McGuire stated it was not finalized. “In case you guys wanted to go and look for the stuff that we’re missing.”

Dowdell asked if they were receiving everything they had asked for.

McGuire responded they had asked for it. “I guess it could be somewhere.”

Dowdell stated he was not comfortable. “We’re not keeping a good check and balance.”

City Council member Nicole Smith questioned the City Manager. “I’m kind of a little baffled because of your background in finance, no red flags came up?”

Powell stated that the department heads managed their departments, and if they had cards, they would turn in their receipts to the finance department. If the statement and receipt did not match, the finance director was the person who typically asked why. “The only time that the manager sees an invoice is if it’s above a specific dollar amount.”

Smith stated that if City employees could not do what was requested, that they needed to fire them. “These are tax payer dollars that we are not being able to account for.”
Kinnamon asked McGuire if he found any fraud.

McGuire replied that it was hard to give a definite answer to. “I saw nothing that I felt like I needed to alert you of.” McGuire stated that in what they tested, nothing looked out of the ordinary, but that the City was a complex organism. “We only tested a sample of disbursements.”

Council member Kelvin Pless brought up the vacancy of the accounting manager. Powell expressed concerns over filling it. The accounting manager that resigned had a CPA. Powell stated that few people with CPA would be willing to work for the City based on what they were willing to pay. “What we can do is hire an individual that can learn the job.” She has also offered the finance department help with training.

Human Resources director Ola Terrell stated that out of 10 cities they looked at for a salary comparison, nine were trying to hire a finance director and an assistant finance director. “We do not have the money to pay for the caliber that we need. If we bring someone in here to train them up, who is training them? We do not have that in house.”

Powell responded to McGuire’s statement that the systems being manual. “They should be done automatically.”

McGuire responded. “That’s interesting, because that’s been an audit finding you guys have had for a couple years.”

Brown stated that Powell, Taylor, and McGuire should get together and be on the same page. “Nothing could be wrong, but it makes it look like something could be wrong.”

Finance director Robert Taylor stated the policies were in place, but that equipment, training, and enforcement were crucial. He also stated he was going to school to get his CPA in four to five years, and would have the ability to train others. “I’m here for the long haul.”

Council member Charles Christmas questioned McGuire on the unsubstantiated credit cards payments. McGuire responded that it could have been substantiated, but that it was not given to them. “In the accounting world, if it isn’t documented, it did not happen.”

Council member Terrence Clemmons expressed hope that the staff could give McGuire the needed support to find the documentation.

McGuire recommended a consulting deep dive.

Taylor presented an ordinance to raise the purchase authorization limit for department heads to $5,000 and the City Manager to $20,000, the first reading of the ordinance. Christmas said that he didn’t believe limits for department heads should be raised the issue was corrected. Kinnamon stated that he did not feel they had unanimous consent for a vote that meeting, leading to a decision delayed till June.

In addition to discussing finances, the City Council approved the renewal of Powell’s contract as City manager.