(NOTE: This story was corrected 7-23-18 (9:00 a.m.) to reflect correct dates for General Fund bank balances.)
Brownsville’s General Fund Balance is richer than earlier thought, but at a meeting Friday, accountants made it clear that it’s not what it once was—precisely how much is not clear. The city’s audit firm told the Board of Mayor and Aldermen that their work on accounting for the year ended 2017 is not complete, but information developed so far supports signs that there’s much less cash in the operating account.
Incomplete information is a part of the problem Mike Hewitt, of accounting firm Alexander Thompson and Arnold (ATA) agreed, but he confirmed that available cash has been on the decline and overspending may also be an issue.
The cash worries started about three weeks ago when City Clerk Lisa Brooks alerted aldermen and the mayor to a shrinking balance in the General Fund. All five members of the City Board expressed surprise.
“I take responsibility for everything that happens in the city,” Mayor Bill Rawls told the standing-room only crowd. “We’re not dragging our feet…this is a priority.”
“I apologize for this partial information that’s created panic and fear.”
General Fund was once $4m…now $1.3m
No one confirmed that a spreadsheet circulated at a June 29 budget workshop noting declines in the General Fund account is accurate, but Hewitt said the report did not include General Fund reserves, held in a separate account.
“When you (city officials) report in a public meeting you have to be careful,” Hewitt commented. He was referring to news brought from the workshop that the General Fund had dwindled from about $4 million to just over $300,000. Hewitt says there are other General Fund accounts that raise the balance to “roughly $1.3 million.” The additional money has been held in interest bearing checking accounts and certificates of deposits outside of the operating account. The mayor has called those “reserves.” Hewitt notes, however, that the General Fund has historically held much more cash, and that it has been in decline since 2016. Balances were approximately $4 million in 2016; $2.4 million at the end of 2017; and he estimates $1.3 million at the end of 2018.
Tuesday, July 17, Mayor Bill Rawls reported that all of government’s accounts —and there are many beyond just the General Fund—held $3.6 million. Hewitt confirmed he believes that to be correct. The accounting apparently further confirms Brownsville’s decline in cash because the 2016 audit, the last year certified accounting is available, reports the same city’s bank accounts held $6.9 million on June 30.
What happened?
City Hall workers, aldermen and the mayor and a number of accountants are still sorting through the books. Some things have been confirmed by auditors but other key issues are still being investigated. The research is far from complete, according to officials commenting Friday.
Out-go more than the in-go
Hewitt says the 2016/2017 audit, expected to be completed in “a couple of weeks”, will show the city “…spent $707,000 more than it took in…” a year when aldermen and the mayor approved a deficit budget. Last summer Mayor Rawls said, despite the earlier forecast, the year ended in a surplus. Absent the completed audit, that’s remains unclear.
Payroll suspect
At the end of June workshop board members reviewed a report stating that the city’s payroll included as many as 133 workers in 2014/2015. The sheet reported 157 workers in fiscal 2017/2018, an increase of 24 employees. Friday, Mayor Rawls said he had not confirmed the accuracy of the report. In a news release Mayor Rawls says was unauthorized, City Clerk Lisa Brooks said she believed the growing payroll should be considered. Brooks also claimed she’d been warning the mayor for months that the city’s cash balances were troubled.
Accounting errors
The accounting is flawed—that’s one thing on which everyone agrees. During Mayor Rawls four years in office two audits have been completed, both of which noted numerous accounting problems. Hewitt indicated problems persist saying, “we will have some recommendations for you…” in their 2016/2017 report. Mayor Rawls recently commented that he believes the city’s accounting is defective.
It was Hewitt’s firm that helped City Hall repair faulty accounting discovered in the 2014/2015 audit after Rawls’ first year in office. Accounting firm Cowart, Reese and Sargent could not complete the audit because of missing information. They recommended a separate accounting firm fix the problems, and that’s when Rawls hired Hewitt’s firm, ATA. The work cost taxpayers $35,000 according to aldermen. Cowart, Reese and Sargent then completed the 2015/2016 audit but Rawls hired ATA to perform the 2016/2017 work.
“We helped you get caught up,” Hewitt said about the early-on repair work. “When we stopped —it got behind again.” Hewitt says aldermen and the mayor have not been receiving current accounting because “bank accounts weren’t reconciled…It’s going to be one of our findings.”
“I thought we taught staff how to do that (reconcile) but I wonder now…”
“You guys have been getting limited financial information…you are charged with overseeing (the city’s money) and you can’t do it without information.” Hewitt said aldermen and the mayor should review the city’s finances at every meeting and “approve or disapprove” the reports.
Lisa Brooks
Mayor Rawls appointed Lisa Brooks City Clerk just a few weeks after he was elected when the former clerk, Jessica Frye, resigned. “We couldn’t even write a check for a couple of weeks,” Rawls said because of the accounting disarray caused by Frye’s departure.
Brooks lacked credentials required for City Clerks but earned them within a few months.
Brooks still remains in charge of the town’s bookkeeping, despite problems auditors described in the 2015 and 2016 reports. In its response, also found in the audits, the city said the problems accountants identified had been addressed.
Last week, Mayor Rawls placed Brooks on a ten-day paid Administrative Leave. He said statements she released to the news media were in violation of the town’s media policy. At Friday’s meeting, Rawls extended the Leave as he and aldermen ponder her future.
What’s next?
Cash to pay the town’s bills remains an issue, though it is not the emergency earlier feared. Friday afternoon Mayor Rawls posted noticed of another called City Board Meeting for Monday morning at 9am. The agenda includes consideration of a $2 million loan. The Tax Anticipation Note would help the city out of a crunch the shortfall in cash could cause. At a meeting held July 10, board members failed to act on the mayor’s proposal, but they say they fear the General Fund could run dry and workers could go without paychecks.
And the new budget?
During a question, answer and comment period the mayor allowed after Friday’s meeting adjourned, upset members of the community complained loudly about the town’s troubles and leader’s discussion that property taxes could be raised 80-cents, a little over 44%. Mayor Rawls said the budget plan is not presently being negotiated and until more is known about current accounting, the work has been suspended.
It can’t be put off too long though. A deadline for printing and distribution of tax notices looms. The bills are mailed October 1.
