Auditor: Town’s books were a mess

Council Advised To Hire Competent Accountant

BLYTHEWOOD – Before presenting the audit for the town government during Monday night’s town council meeting, Gary Bailey, with Love, Bailey Auditors of Laurens, S.C., spoke plainly about the condition in which he found the town’s books when he was called to audit them last November.

“The books were really in a mess,” Bailey said.

During the May town council meeting, Mayor J. Michael Ross announced that the town’s books were not in order and hadn’t been for some time. He said the town “has not even commenced the annual audit process for the 2016-17 audit.”

To that end, the town hired the CPA firm of Sheheen, Hancock and Godwin of Camden to bring the town’s books up to the level that they could be audited. That audit was presented just seven days before the July 30 deadline when, by state law, the state could begin to withhold state funds from the town.

“It appears this situation has resulted from management’s failure to properly transition to the new accounting software system which was recommended to this council by professional public administrators who then failed to attain implementation,” Ross stated during the May council meeting.

Ross credited the town’s newly hired administrator, Brian Cook, for detecting the deficiency very early in his service to Blythewood. Cook was hired last February to replace Gary Parker who retired. Assistant administrator Chris Keefer left her position in June.

By Monday night, however, all appeared to be well.

“[Sheheen] did an excellent job,” Bailey told council. “After they took hold of your books, we didn’t find any major issues. The town is in a very strong position.”

Bailey gave the town a stern warning, however, going forward.

“You can see the alternative of not having a qualified person in place [to do the town’s accounting.] Hiring someone without expertise cost you way more than just outsourcing for a fraction of the time that was needed [to get the books in order],” Bailey said.

Hitting the highlights of the audit, Bailey said the town’s total general fund increased by $173,000 to $1.562 million and, of that, only $359,000 was restricted to debt service. The other $1.2 million was unassigned.

“The general fund cash balances increased to $1.2 million in fy 2016, but dropped a bit to around $800,000 in fy 2017 because you have a lot of projects going on and transferred a good bit over to capital projects,” Bailey said.

The unassigned fund balance of $1.2 million represented about 87 percent of the fy 2017 expenditures which, Bailey said, was very strong.

“Most town’s push to have a 25 percent minimum fund balance. Yours is 87 percent, so that’s really strong,” Bailey said.

Bailey reported that the town’s general fund expenses were $1.38 million for fy 2017 based on operating cash, not restricted cash, which gave the town almost 10-1/2 months of cash flow.

“If you didn’t bring in a single dollar for 10-1/2 months, you’d have enough to continue funding the town. That’s very strong even at June 30, 2018,” Bailey told council.

Bailey reported that while the overall general fund revenue did decrease by about $65,000 from fy 2016 to fy 2017, it was mostly isolated to building fees and permits.

Expenditures, Bailey said, also went down about $10,000 in fy 2017 due primarily to payroll being up about $9,000.

“You had about $14,000 in capital outlays within the general fund, but all other expenses decreased $33,000 from the previous year,” Bailey said.

The good news, Bailey said, is that the town’s revenue was $64,000 more than was budgeted and expenses were $168,000 below what was budgeted.

“You spent a lot of money in fy 2017 and wrapped it up in fy 2018,” Bailey said. “Overall capital outlay in fy 2017 was $865,000, mostly for two projects: the amphitheater for $416,000 and the Doko building for $408,000.

The audit showed that Doko Meadows is becoming a bright spot instead of a blight on the town’s financial picture. Revenue increased from $135,000 in fy 2016 to $175,000 in fy 2017 The unadjusted fy 2018 numbers have the revenue at $212,000. Bailey also pointed out that the Doko Meadows losses decreased from $77,000 in fy 2017 to $35,000 in fy 2018.

The outstanding balance on the bond that was used to construct Doko Meadows is $4.4 million.

Going forward, Cook said the town is evaluating how it wants to reconfigure staffing to handle the town’s accounting. He said the 2016 transition from outsourcing the town’s accounting to an in-house system bogged down.

“We’re thinking about hiring a qualified accountant and doing it ourselves, now, but with oversight from Sheheen. We have some controls in place and we’ll continue to have a CPA check up on us, maybe monthly at first and less frequently over time,” Cook said. “It’s going to take a little time to get set up.”

Cook said he expects the town’s books to be ready for the fy 2018 audit to begin in October and Bailey said that audit is on track to be presented before Christmas.