BLYTHEWOOD – The Town’s 2024-25 audit, performed by Love Bailey CPA firm, was presented by Foster Hemond during the Dec. 15 Town Council meeting. Hemond said the audit was unmodified.
“There are three options: adverse, modified, and unmodified,” Hemond said. “You’ve got the best of the three.
“[Unmodified] just basically means that the numbers on the trial balance are presented in a material and reasonable way,” Hemond said. “Our responsibility as auditors is to provide, basically, an opinion.”
Hemond reviewed the positives of the Town’s audit before council members questioned him about the financial issues at the Manor.
“Your operating income year-to-year has grown,” Hemond said. “And you can see that you have plenty of cash on hand. You have your unrestricted cash balances of around $8.5 million and your restricted balances of $3.7 million.”
He said the Town’s restricted cash is made up of $2.4 million of capital projects, $600,000 of accommodation tax revenue, and $600,000 of hospitality tax revenue. The Town has 31 months of cash on hand.
“Even if you include your debt service payments and your capital expenditures on a year-to-year basis, you would still have 14 months of cash on hand. Obviously, you have had positive operating income for the last five years,” Hemond said.
Without mentioning the Manor, Hemond noted that, “one responsibility of the audit is to kind of design and test controls to pick up on fraud, of which we have no findings. Then the Town’s responsibility is to maintain effective internal controls and ultimately financial statements.”
“You mentioned misappropriation of funds,” said Councilman Donald Brock. “What attestation methods do you use to look for those types of transactions?”
“We test all the controls,” Hemond said. “We submit a form to the Town. We have a questionnaire that basically says, hey, can you please fill this out for us and list all of your controls that you have in place for anything such as spending, receiving, large expenditures for capital assets, and anything like that, budgetary,” he explained. “We test those controls.
“But it’s not foolproof,” Hemond said. “We can’t provide a hundred percent assurance. However, we do state that we provide reasonable assurance.”
“What about misuse of public assets?” Brock asked.
“Such as?” Hemond asked.
“If unofficial misuse of the public asset gives discounts or allows facilities to be used with no fees,” Brock said, “do you test for any of those?”
“We do,” Hemond answered. “Obviously, like I said before, we send out those memos, and they list the controls [the Town has] in place.”
Councilwoman Trish Hovis asked Hemond if he tested his findings based on the list of the Town’s internal controls.
“That’s right,” Hemond answered.
“So, if we don’t have an internal control for, say … for a fee waiver policy, you can’t test it. Is that accurate?” Hovis asked.
Hemond said he wasn’t sure what the question was.
“In other words, if we don’t have a particular control in place, you’re not able to determine whether or not we’re deficient in that particular area,” Hovis clarified.
“Right,” Hemond said.
“So, do we have a fee waiver policy?” Hovis asked.
“I’m unaware of a fee waiver policy,” Hemond said. “I’d have to look through the internal controls.”
The next day Hemond sent a clarification on the issue to town hall.
“After reviewing our audit documentation and the financial results, I can confirm that our testing did not identify any missing or unaccounted-for revenues,” he wrote.
He did not, however, answer Hovis’s question asking if the Town had controls in place in the Manor to accommodate testing.
“The matter discussed relates strictly to internal control and governance, not financial integrity,” Hemond wrote. “Establishing a formal fee waiver policy would simply help clarify the process and ensure consistency; it would strengthen transparency without implying fault or wrongdoing by anyone involved.
“The audit remains in good standing and accurately reflects the financial position of the Town,” Hamond concluded.
The next Town Council meeting will be a strategic planning session on Jan. 12, from 1 – 7 p.m. at the Manor.
