October 23, 2010 Rockwood, TN and Morristown, TN: Illegal Loans From Utility Funds

Morristown City government is not alone in violating state law in making illegal loans from one fund to another.   

Recently, the Utility Board of the City of Rockwood--in Roane County--got busted by the State Comptroller's Office for making illegal loans from its gas department to its sewer and water departments. Click here for the news article.

Rockwood city officials have now abolished their misbehaving Utility Board and City officials will oversee these departments and pay back the illegal loans of $1.3 Million--or officials could face ouster proceedings.

Morristown City officials have done the same thing for years! Illegal loans from the sewer fund to the general fund and from the sewer fund to the stormwater fund. The difference in Morristown is that it was the CITY ITSELF that was violating the law instead of some board that City officials could ceremoniously abolish to "solve" the problem.

The Comptroller's Office found out about Morristown's shenanigans in the last year.  Morristown's violations had gone on for several years before that, however, but were NOT reported as audit "findings" until the 2009 Audit was issued by the local auditors Craine, Thompson, & Jones in early 2010.  

With citizens' reviewing audits and asking questions, the gig was up in 2009, and an audit finding appeared.  As people became aware of the illegal loans, an auditor's e-mail was sent admitting that an auditor (Tom Jones) had been in a meeting with former City Administrator Jim Crumley and Finance Director Dynise Robertson during which Crumley directed that the illegal loans/transfers be made to cover up the poor financial situation of the City.

See Auditor's e-mail here. "Mr. Crumley suggested the entry due to the general fund's cash situation looking poor. He authorized the entry in a meeting with Dynise Robertson and Tom Jones." Both Terry Winstead, who wrote the e-mail, and Tom Jones, to whom Winstead refers, are auditors with Craine, Thompson & Jones, the city's longtime auditors. Winstead's take is that Jones was in the meeting and knew that Crumley ordered the loan/transfer, but, since Jones didn't actually pick up a pencil and make the entry for the illegal loan, there is no auditing independence issue.

But what about 2007 and 2008? Craine, Thompson & Jones were aware of and reported multiple fund loans/ transfers/switcheroos in the audits for those years.  Why did CTJ fail to issue audit "findings" on illegal loans/transfers/switcheroos in the 2007 and 2008 audits?  Click here for a fuller discussion of the illegal loans and other problems with the 2009 Audit.

Of course,  members of CTJ are not only the city's auditors but they are also members of Millennium Square Partners, a lucky group that recently received an $890,000+ grant from the City of Morristown to help Millennium Square Partners build stores on Main Street where the old Gazette-Mail used to be.

But I digress. The Millennium Square deal is enough fodder for several separate posts...as the public waits to hear that two of the Millennium Square partners (David and Tim Wild/Wild Contractors) have managed to submit the low bid and win the contract to build Millennium Square Partners' new stores on Main Street and the City will pay $890,000 of the costs through a grant.  Sweet!