Deficiencies found in Milltown audit
April 14, 2010
Three Crawford County towns recently received results of routine state audits, and one, Milltown, revealed several deficiencies.
The audits, conducted by the State Board of Accounts, were for Jan. 1, 2007, through Dec. 31, 2008. Leavenworth's report noted several wastewater utility accounts were more than 90 days in arrears, and Marengo's report found issues with the town's customer deposit register, transaction recording and lack of credit card policy.
However, it was Milltown that was found to be deficient in several areas, including:
•Internal controls over financial transactions and reporting. The audit noted problems in regard to a lack of segregation of duties, preparing financial statements and monitoring of controls.
•Condition of records, including record balances not being reconciled to the depository balances from June 2008 to June 2009, disbursements for the town and receipts and disbursements for the wastewater utility for June 2008 to June 2009 not being posted until September 2009, receipts not being issued for collections made, and considerable posting errors, including receipts being posted to the wrong fund.
•The 2008 annual report not being presented for audit within 60 days of the end of the calendar year.
•Overdrawn cash balances for the payroll fund in 2007 and 2008 and the trash and cemetery funds in 2008.
•Improper investment of cemetery perpetual care funds in corporate stock and in mutual funds with a portfolio of corporate stock.
•Receipts were deposited later than the next business day. For 2007, there were 11 instances where receipts were not deposited until seven to 49 days after collection; whereas, in 2008, there were 23 instances where receipts were deposited three to 153 days after collection.
•The town's police department did not remit fees collected for handgun applications within the required one-week time frame on three occasions. A letter from the police department attached to the audit report states the situation has been remedied.
•Prescribed forms were not always used.
•Expenditures in excess of budgeted appropriations for 2008 totaling $10,176 for the following funds: general, $1,044; local road and street, $4,587; cemetery, $2,500; and economic development income tax, $2,045.
•Errors on claims, including not always containing the signature of the clerk-treasurer certifying the invoice or bill is true or correct; not always adequately itemized; and not always having evidence to support receipt of goods or services.
•A late loan payment resulting in a late charge of $1,456.77.
•Councilman Jerry (Monty) Garrett, who took office in January 2008, did not properly file a Uniform Conflict of Interest Disclosure Statement, as Garrett, during 2008, received compensation in the amount of $1,450 for backhoe and repair services he performed for the town and wastewater utility.
•No contract with Garrett for backhoe and repair services in 2007 and 2008, totaling payments of $435 and $1,450, respectively.
•The failure to file a Form 1099-MISC with the Internal Revenue Service for a professional service provider who received more than $600 in compensation during 2008.
•Sales tax was paid on some purchases. (Governmental funds generally are exempt from paying sales tax on qualifying purchases.)
•Actual canceled checks were not returned to the town with monthly bank statements. Only optical images of the front of the checks were returned.
•Clerk-treasurer Evanelle Goss made advance salary payments to herself on 24 occasions in 2008. The advanced payments ranged from one to 49 days prior to the time she should have received the salary payments. (The clerk-treasurer's position is paid about $24,000 per year.)
•Employee time and attendance reports were not properly approved.
•A list of town employees was not certified with the county treasurer during 2007 and 2008.
•A certified report of compensation of officers and employees for 2008 was not filed with the State Board of Accounts.
•Official bonds for the clerk-treasurer, town marshal and town manager for 2007 were not filed in the county recorder's office.
•Problems with the distribution of gross revenues from the wastewater operating fund to the bond and interest fund, as well as the debt reserve fund, in 2008.
•Improper increase of sanitation charges in 2005 and 2007. The town authorized the fee to be increased without any changes to the ordinance.
•No sufficient detailed records of capital assets owned by the town and the wastewater utility.
Several of the deficiencies involve the clerk-treasurer's position, which has been held by Goss since January 2008 and, before that, Linda Pevlor.
Goss, who sat in on the exit conference with the auditor on Dec. 14, 2009, admitted error, but said the audit was helpful.
"I made mistakes. I admit it," she said, calling the audit process a "learning experience."
"Everything in the audit has been taken care of," Goss said.
Town Council President Curt Hudson, the only member to have been on the board in 2007, still is concerned, however. He said Dennie Stroud, who for years worked with the state, and Tom Doddridge, a former school superintendent and resident of the town, worked with Goss to get the financial reports in order. He also noted that the 2009 annual report, which was due at the beginning of March, hasn't been submitted.
Goss said the annual report is in the process of being completed and the regular financial reports are being kept up.
"She has never, to my knowledge, provided the council with reports she created herself," Hudson said.
He said the town spent thousands of dollars to keep Pevlor on as a deputy clerk through May 2008 to assist Goss and has rehired her for periods since, including to help Goss after she became ill.
Although the excess expenditures for 2008 that were cited in the audit totaled just $10,176, Hudson believes better reporting could have prevented the overture.
"Had we received the financial reports, the cash balance reports, it would have been more of a red flag to take action," he said.
Goss said even if the financial reports weren't presented at the council meetings, the financial books were kept up and available for the council's review.
Hudson said he believes the town is OK financially and, while the council has the cash balances for the accounts, it doesn't have the needed appropriations statements. He said the town manager pulls the books and provides estimates of remaining appropriations.
"That has been done for the last couple of years," Hudson said. "He has done a very good job."
Regarding the late loan payment resulting in a charge of $1,456.77, Goss said she has begun repaying the town. Hudson, however, said, to his knowledge, that wasn't the case as of Thursday.
Hudson said the council has offered to send Goss to classes offered for clerk-treasurers by the Indiana Association of Cities and Towns.
Even if the record keeping for the town's finances improves, Hudson said he is fearful the audit results will hurt the town's chances of getting future grants and loans for improvement projects.
Hudson admitted the council itself needs to correct things found in the audit, including doing a better job of segregating duties.
To read the full audit reports for Milltown, Leavenworth and Marengo, as well as past reports, visit www.in.gov/sboa/.