Fiscal year 2017 report lists numerous ‘material weaknesses’

City of White audit reveals missing credit card receipts

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Tammy Galvis, a representative of the Cobb County firm Nichols, Cauley and Associates, read findings from a 2017 fiscal year audit to members of the White City Council Monday evening.

“We are unable to issue a clean opinion on these financial statements,” she said. “What we have issued is a ‘disclaimer of opinion,’ which basically means that we are not issuing an opinion.”

Galvis said the audit began late last year. 

“If you recall, at that time, there was no longer anyone working at the City that had been involved in the financial process during 2017,” she said. 

Councilman Dennis Huskins put it a different way. “So basically, the previous administration just dumped it all,” he stated at the public meeting. 

Galvis said the audit revealed several “material weaknesses” in the City’s internal controls for FY 2017.

“Because we were unable to obtain documentation supporting the City’s fines and forfeitures revenue and certain vendor and payroll expenditures, nor were we able to satisfy ourselves as to the amounts by other auditing procedures,” she said. “Because of the significance of the matters described in that basis for the disclaimer of opinion paragraph, we did not move to obtain sufficient [audit] evidence to provide a basis for an audit opinion.”

Among other significant audit findings, she said the City’s equity did not reconcile to the previous year’s audit, in addition to several receivables, payables and fixed assets that were not adjusted.

On Dec. 31, 2017, she said the City’s general fund operating account had an “unreconciled difference” of more than $33,000.

“Basically, what that means is that there was a bankrupt reconciliation that had been done, but the bankrupt reconciliation didn’t agree to the general ledger,” she said. “By the time we got out to do the audit, it still had not been resolved. Ultimately, what we did find was that was just a posting error with the ledger, so money had gotten into the correct bank account, it was just the general ledger was not correct and it had not been corrected, so it just continued to show the difference each month.”

Nor was City staff able to provide supporting documentation regarding fines and forfeitures assessed for the fiscal year. 

“Therefore, we could not perform any testing of the fines and forfeiture revenue that had been recorded in the general ledger,” Galvis said.

She also said there was insufficient reporting of several credit card transactions. 

“The City was unable to provide supporting receipts for credit card transactions totaling $35,204 or supporting documentation relating to the use of gift cards received from converted credit card points totaling $475,” she said. “The credit card statements were available, but there was no supporting receipt documentation for the statements.”

Nor was there proper documentation for approved employee pay rates. 

“Payroll reports were available, however, there was no documentation relating to what the approved pay rate was for different employees in 2017,” she said. 

Elsewhere, Galvis said the auditors had difficulties locating a listing of property and equipment and shared several concerns about “segregation of duties” within the municipality.

“During our process, it appeared that there were a limited number of people working in the office, which is not uncommon in a small city,” she said. “But it did look like many critical duties were combined  and given to available employees … it looked like the same individual was preparing and signing checks, reconciling bank accounts, preparing utility bills, receiving payments — both on the payroll duties as well as maintaining the ledger.”

With that in mind, she told the city council that there are “compensating controls” that can be put in place to “remediate those internal control weaknesses.” 

Galvis said the audit also revealed that the City of White was noncompliant with two United States Department of Agriculture loan agreement financial covenants. 

“Funding of those required reserves had not been done, so there was a shortfall in both of those,” she said, adding that one of the deficits totaled $4,589.