August 10, 2012 Pikeville (TN) Mayor Charged with Public Misconduct

Was everybody asleep at the wheel while the "third-term Mayor and sitting County Commissioner" was using city funds for his personal benefit and wasting tax dollars and submitting claims to the City for reimbursement of $130,000 in insurance premiums that he never paid?

http://www.knoxnews.com/news/2012/aug/09/pikeville-mayor-accused-of-stealing-wasting-in/

Here is the Comptroller's brief summary of the findings:

http://www.comptroller.tn.gov/repository/NR/20120809PikevilleMayorCostsTown.pdf
Comptroller Justin Wilson states:

"Elected officials are put in positions of public trust and they should act accordingly at all times," said Comptroller Justin P. Wilson. "Unrestrained abuses of power undermine public confidence in local leaders and create an atmosphere of distrust of government that can take years to erase."

Here is the Comptroller's Investigative Report:

http://www.comptroller.tn.gov/repository/ia/20120809PikevilleReport.pdf

July 2, 2012 City Finance Committee Meeting on June 21

The Finance Committee of the City of Morristown met on June 21 for 10 minutes to get three handouts from longtime City Auditor Tom Jones of Craine, Thompson & Jones.

Just after the halfway point, Jones asks for the Council/Finance Committee to explain how it exercises financial "oversight." Bob Garrett says he has already answered: "Tony (Cox) takes care of it."

September 6, 2010 The State Comptroller Requests Explanations from the City and the City Auditors about Violations of State Law and Problems with 2009 Audit

The above letter to the Mayor and City Council from the State Comptroller's Office was one item briefly discussed at the Council's August 2010 "retreat" in Johnson City. Audits and cozy auditors and conflicts of interest.

I have maintained for a long time that the City of Morristown should get a fresh set of auditing eyes to perform its annual audits. This 5-page letter (click each page to enlarge, read, or print out) from the State Comptroller's Office provides more proof that new eyes are needed. In addition, the GFOA reommends that auditors be changed periodically as a "best practice."

In the 2009 City audit, the Comptroller points out that certain figures don't match up. Lowland Wastewater debt was taken on for 25 years without approval from the Comptroller's Division of State and Local Finance. MUS loans to the telecom fibernet system were also apparently not approved in advance by the Division of State and Local Finance.

Lots of problems with reporting requirements and reported amounts that don't agree. Improper categories. Grant reporting is questioned.

Notes to the financial statements did not include or had incomplete disclosures. And on and on.

There may be explanations for some of the questioned items and some may be the result of mistakes. But there is no doubt that the auditors knew or should have known that "loans" from one fund to another required city council AND state approval. There is no doubt that the auditors knew in recent years that the City was in poor financial shape but failed to call specific attention to this.

Apparently, the auditors thought that if the City could figure it out, OK.  And if the City didn't bother to look at the audits (which is what happened) or couldn't figure it out, then the auditors could say "No, I didn't point out that you were broke or making illegal loans/transfers, but it was in the audit." Sort of like your doctor giving you a blood test and handing you the results to figure out for yourself--even though he knows that you have a specific disease that needs immediate treatment.

Besides the quality and accuracy of the 2009 audit and the failure of the local auditors to disclose the illegal loans and transfers and switching of money, one has to consider the coziness of the auditors (Craine, Thompson & Jones) with the entity (City of Morristown) that they are auditing.

The auditors are local businessmen who have failed repeatedly in recent audits to report that the City was violating state law in swapping/loaning money from fund to fund without a vote from City Council and without obtaining the required approval of the Comptroller's Division of State and Local Finance. The state is pointing out numerous problems by just looking at the 2009 audit. There is no telling what a true detailed examination of the city's books for the year 2009 (Former City Adm. Jim Crumley's last full year) would show or what a thorough look at prior audits would show.

The current auditors (Craine, Thompson & Jones) have been the city's sole auditing firm for about three decades. The local auditors claim that they perform an "independent" audit of the City. However, the fact that the auditors are local business people who have very strong social and economic ties to the same organizations, clubs, churches, sports groups, business groups (Chamber and Industrial Board), and schools as do the individuals (City Administrator, Mayor, City  Council) who represent the City of Morristown creates an  obvious "independence" problem. It may be an "independent" audit from the auditors' technical  perspective, but ethically and in a world of common sense, it's not "independent."  The auditors are aware of "independence" questions, and but they have atempted to explain away their involvement and knowledge of illegal loans/transfers between funds, putting all blame on Crumley AFTER Crumley was fired. Click here to see a copy of the auditor's e-mail message sent to Interim Administrator Lynn Wampler many months AFTER Crumley was fired.

It's not bad that the auditors belong to the same groups and organizations as do Morristown city officials. However, true auditing "independence" is questionable when strong social and economic ties exist between auditor and auditee and when the auditors have already been shown to have failed to call attention to violations of state law by the City and dire financial problems in City government.

Another new "independence" problem has arisen recently because members of the auditing firm apparently have about a 1/3 interest in an entity (Millennium Square Partners) that is receiving $890,000 from the City through a grant. Who/what auditor is going to bite the hand that is feeding it $890,000? Who/what auditor is going to point out the poor financial status of the City or violations of state law by the very people (City officials) who have just given you $890,000? In next year's City audit (FY 2011), the auditors will be auditing their own $890,000 grant!

This potential conflict of the auditors as recipient of an $890,000 grant was discussed briefly when the City was voting on whether to hire new auditors or renew its audit contract with Craine, Thompson & Jones. One of the local auditors who was present at that meeting, Tom Jones, told the City Council that there was no conflict and that the auditors only had a very small interest in Millennium Square Partnership.  Apparently, however, members of the auditing firm have as large an interest as anyone else (David and Tim Wild) in the Millennium Partnership and have a larger interest than the other two remaining members of the Millennium Partnership--Dr. Sidney Boyd and William (Bill) Young).

I guess it all depends on what the meaning of a "small interest" is and it all depends on the meaning/ interpretation of true auditor "independence."

The City needs fresh eyes looking at its financial reports. The current auditors have contributed directly or indirectly to continual violations of state law by their failure to report violations and by their willingness to let these violations slide by.  The City needs to follow accounting best practices, hire outside auditors, and then rotate auditors at least every five years.

February 26, 2010 City: Requests for Audit Proposals Will Likely Go Out

At yesterday's City Finance Committee meeting, there was more discussion about the 2009 audit. Gene Brooks expressed concern that the city's longtime local auditors Craine, Thompson & Jones did NOT tell the Council in any of the last three years that the City was in poor financial shape or that Sewer Fund money was being used or moved to the General Fund to shore up and cover up the city's pathetic finances. Of course, former City Administrator Jim Crumley, current Budget Director Brian Janish, and current Assistant City Administrator Buddy Fielder didn't tell the council anything either.

New City Administrator Tony Cox didn't say it directly yesterday, but he strongly hinted that the City should advertise for new auditors and try to get a new set of eyes reviewing the city's finances and performing the city's audit.

I have said this same thing many times in previous years. It's common sense to periodically change auditors in order to get a fresh set of eyes going over the government books. And, as Tony Cox added, it just happens to be a "best practice" in government auditing.


Yes, seeking new city auditors isn't just a Noe thing, it is a BEST PRACTICE recommendation from the Government Finance Officers Association (GFOA).  Click on image at left to enlarge. This GFOA document, recommending that solicitations for new auditors should go out at least every five years, was included with the 2009 city audit that was provided to all councilmembers. 

It was mentioned at yesterday's meeting that the Jones firm (Hiram Jones, Tom Jones, and James Craine) has been the city's sole auditing firm for about 30 years. The Jones firm and personnel merged a few years back with Glenn Thompson, CPA, and  are now performing the city's audit under the new firm name  Craine, Thompson & Jones (CTJ).

Performance of an audit is a professional service. RFP's (Request for Proposals) are advertised asking for proposals for auditing services from governmental auditors. As a professional service, Bob Garrett pointed out that there is no requirement that the low bid/low proposal be accepted. Instead, each proposal is evaluated on a number of factors including cost, services provided, and how the proposal meets the city's needs and purposes. 

CTJ may end up again as the low-cost proposal. If CTJ is the "low cost audit" proposal, the council will have to decide whether yet another "low cost audit"-- from the firm that failed to note the repeated violation of state law by Crumley and company in switching sewer fund money to the general fund in 2007 and 2008 and that failed to inform the council of the city's negative cash position and depletion of the city's rainy-day fund, trumps a "best practices audit" by another firm.

February 12, 2010 Administrator Cox: City Cash Runs Out in May 2010. $2 Million Bank Loan Needed To Pay City Bills

The Mayor and City Council got a picture of just how well Jim Crumley managed the city's finances yesterday. They took it all to heart. The Mayor and Council also found out why they need to ask questions and act as a "check and balance" in the handling of city finances to protect the voters and taxpayers. Time will tell if they got that part of the message.

New City Administrator Tony Cox presented the sad tale in a power-point presentation in the Mayor's little conference room. [The Mayor and Council and Administrator and the local "news"paper reporter sit around a conference table and city staff and citizens and a representative from McGill and Associates stand around the wall or in the hallway and try to see and hear what's going on.] 

Nutshell: The City had negative cash balances at the end of FY 07, 08, and 09. Jim Crumley--and perhaps others--covered it up by creating unauthorized "loans" or "payables" and "receivables" to hide his use of sewer fund monies to pay general fund payroll, debt, and other basic expenses in each of those years.

Today, the City is again going to be out of cash before the end of the budget year. There will be a negative cash balance in May 2010 ---and that's with the cuts that were made during the summer 2009 budget process and with the additional cuts that were made a few months ago.

To take care of its lack of cash and lack of a fund balance or rainy-day fund to get the city through to the end of the budget year, Cox recommends that the City get a short-term bank loan of about $2 Million Dollars to pay debt, payroll, and other operating costs in May and June 2010.

The City is not going the illegal route that was taken in 2007, 2008, and 2009 when Crumley, et al, hid the cash problems/lack of rainy day funds and instead used took sewer rate-payer monies to pay general government expenses without getting council or state approval as required by state law.

Cox said that the long-time city auditors (Craine, Thompson, & Jones) did not point out or alert the council to the negative cash flow in past years. Cox added that the information about the negative cash situation was "in" the past audits IF you looked for it. 

If you are a CEO (Mayor and Council), wouldn't you expect your auditor--to whom you have paid big bucks-- to let you know that you have a serious cash flow problem?  Wouldn't you expect your auditor to inform you that your Administrator has been illegally using sewer fund money to pay general fund expenses without informing council of this action and without getting inter-fund loan approval from council and from the state as is required by state law? If you reviewed the audit or even if you didn't, wouldn't you at least ask a few simple general questions, like How are we doing? How does our rainy-day fund balance look? How much of our fund balance is available for an emergency?

Instead of an honest audit presentation or questions being asked, it looks like the auditors provided the audit (late), cashed their check (quickly), and then pretty much told the Mayor and Council to go and figure out for yourself if you are in good shape or bad shape.  Don't ask and we won't tell.

There are several groups or individuals who are responsible for the mess the city is in.

1. The Mayor and Councilmembers for failing to ask even basic questions of the auditors and of the former City Administrator Jim Crumley and for failing to monitor and provide some kind of check on the city's finances.
2. The auditors for failing to point out to the Mayor and Council basic and important post-audit financial information --such as, you have a serious cash-flow problem! The auditors for failing year after year to note that unauthorized switching of money from the sewer fund to the general fund was taking place to cover up the cash-flow problem.
3. Jim Crumley and all his confidantes who knew what was going, who helped him cover up the unauthorized money switching, and who failed to inform council of the financial problems.

To help "fix" what has been created by a total financial failure at the city, Cox gave council a number of  choices for next year's budget. Raise revenue by increasing property taxes. Raise revenue by charging a garbage fee.  Cut expenses.  Who pays for years and years of mismanagement? Taxpayers and Ratepayers.

[During the meeting, Cox only briefly mentioned the upcoming 2010 sewer rate study (another cost of $18,000 or so) to tell the City how much more needs to be added to sewer rates---over and above the increases that were tacked on last year after the summer 2009 sewer rate study. How many sewer rate studies can the city afford? When is the city going to "study" the different costs for sewer customers who live outside the city v. inside sewer customers?]

Just for old times sake, take a brief stroll down memory lane to see who sat by praising Jim Crumley and fiddling while the city finances burned.

Click Here. Here. Here. Here. Here.  Those who didn't have a clue and thought Jim Crumley was "railroaded."  Those who didn't have a clue and didn't look at audits for years and years. Those who didn't have a clue and who fiddled and spent and are still spending today because it sounds like such a "nice" project.

February 9, 2010 City Audit for 2009 Is Not in Bound Form Yet, But It May Be Ready for Finance Committee Meeting on February 11

After the Planning Commission meeting today, I asked new City Administrator Anthony Cox about the 2009 city audit.

He said it is "almost" ready.  According to Mr. Cox, the 2009 audit is not in official bound form yet, but he is hopeful that this audit--for the period 7/1/08-6/30/09--will be in final form in time for this Thursday's Finance Committee meeting.

If it's ready on Thursday, the 2009 city audit will be about six weeks late--while that's nothing to brag about, it's a definite improvement over the five to six-month delay in providing the 2008 audit! For background, click here, here, and here.

I was pleased that Mr. Cox offered to make the 2009 draft audit available upon request. The draft audit was passed out to the council on January 19th.  This was a refreshing attitude that is in marked contrast to interim-Administrator Lynn Wampler's refusal to provide a copy of the draft audit under the mistaken claim that it was not a public record.

Mr. Wampler was helpful to the council and appeared to have solid financial credentials. However, he was wrong in saying that the draft 2009 audit was not a public document and in refusing to provide it upon request.

Fortunately, the new City Administrator appears to be aware of what constitutes a public document.

February 3, 2010 City Administrator Anthony Cox: 2009 Audit Is Still Not Ready

During the City Administrator's report yesterday, Anthony Cox told the Mayor and Councilmembers that the 2009 final audit is still not ready.

At the January 19th meeting, a preliminary/draft audit was given to council. The final audit was supposed to be ready no later than yesterday. Cox gave no explanation for the delay, and neither the Mayor nor any councilmember asked for an explanation.

The current auditors (Craine, Thompson & Jones) have been late with the audit for many years. The 2008 audit (for the period 7/1/07-6/30/08) was due by December 31, 2008. It was provided some five months later, prompting ex-City Administrator Jim Crumley to recommend in May 2009 that the city solicit bids for new auditors. Click here. Jim Crumley and I disagreed on many things, but that was one time when he was right.

After Jim made that proposal, the auditors blamed the lateness of the 2008 audit on being unable to get timely reports from MUS.  Craine, Thompson & Jones then promised that the 2009 audit (for the period 7/1/08-6/30/09) would be provided in a timely manner, assuring the council that the 2009 audit would be ready no later than December 31, 2009.

That self-imposed December 31, 2009, deadline wasn't met. January 2010 has passed by. And now we're into February 2010 and no final audit.

While a timely audit AND a new set of auditing eyes are still needed, my guess is that there will again be someone else to blame, all will be forgiven, and the Mayor and Council will carry on as before.

January 31, 2010 David Purkey, Still Wanting To Be Tennessee Safety Commissioner, Latches onto Gubernatorial Candidate Haslam's Coattails

The local "news"paper had an interesting picture on its front page on Friday, January 29. Gubernatorial candidate Bill Haslam and his wife knocked on the door of Lynn Purkey in the Alpha Community, and a Tribune cameraman just happened to be there to record the event. 

The article then mentioned that Haslam was "flanked" in his door-knocking campaign by long time friend and supporter Hamblen County Mayor David Purkey.

[I'm not sure why, but the "news"paper forgot to mention that the Lynn Purkey who just happened to answer the door is Otto Purkey's wife and that Otto is David Purkey's big brother and that Otto is the former Sheriff of Hamblen County who lost his re-election bid in 2006 to current Sheriff Esco Jarnagin. Lynn Purkey's door was not randomly picked so an explanation of who Lynn Purkey is and her connections might be in order] 

I haven't decided whom I will support in the governor's race in Tennessee. This post is not about the governor's candidates but about the fact that David Purkey has grabbed onto Haslam's coattails with all his might in the hope that if Haslam is elected, David will finally get the dream job that he has always wanted---Tennessee Commissioner of Safety with power over the Tennessee Highway Patrol. 

To understand Purkey's dream, you have to go back to June 2006 when David was in the middle of what he had declared was his "last" run for County Mayor.  Although David had said that he wanted to serve one "last" term as mayor, ironically David ran off to Nashville and applied for Safety Commissioner right in the middle of that "last" campaign for County Mayor.

What was even funnier was that the local "news"paper either didn't know that David had applied for the Safety Commissioner job while in the middle of running for County Mayor OR the "news"paper knew and decided not to report this significant bit of news to its local readers.  Nope, the "news"paper never said a word about any of this until after I had a blog post based on a story in the Nashville Tennessean about David's application.

Click here for my June 26, 2006, post that was based on a June 22, 2006, Tennessean article. Then click here for the "news" story that the local "news"paper ran on June 27, 2006 (5 days after the Tennessean article and one day after my blog post).  Noe4accountability is a personal blog--not a newspaper with full-time reporters. There is something ironic about a local "news"paper that didn't know what the local Mayor was doing OR that chose not to report what the local Mayor was doing until five days after it had been reported across the state in the Tennessean. In fact, the local "news"paper only reported that the Mayor had applied for Safety Commissioner and had withdrawn one day after I finally went ahead and mentioned it on this blog.  How "news"y is that?

Of course, there is plenty of other "news" that the local "news"paper chooses not to report. The "news"paper decides what is "news" and how that "news" will be reported.   Bob Moore will cover up anything that Jack Fishman says to cover up.  Bob will slant anything as directed by his boss.  Bob will print just about anything that a government office or official tells him to ---without checking the accuracy of the information. Click here for one example of how Bob just publishes what government officials hand him and refuses to check on the accuracy of what he is provided. Some--but not all--front-page articles by Bob are little more than front-page press releases with a little flowery language added for that personal touch. Whether it's appropriate or not in a "news"paper article, I will admit that Bob's style of writing and word-choice are entertaining.

Frankly, I doubt that Haslam really knows much about David Purkey, the man who has always wanted-- and still wants--to have control of law enforcement in Tennessee.  I don't know the whole story about David.  I do know that he hates me because he couldn't control me while I served on county commission (2002-2006).  I know he hates that I brought in the state auditors to perform the county audit in 2003 when Hamblen County had more findings (29) than any other county in the state. Click here.  I know that he hates me because I pushed for openness and accountability throughout county government and for better control of spending.

This is a man who became upset and red-faced when I simply asked that a county decal be placed on all county taxpayer-provided vehicles (other than undercover vehicles or exempt law-enforcement vehicles). David wanted that county car, but he definitely didn't want a decal on it to let people know that it was a Hamblen County taxpayer-provided vehicle. The rest of the commissioners blinked.

And when I decided not to run again in 2006, one of David's first requests to the new commission was to ask for a car allowance of $7200/year---paid as a salary increase.  David had two goals in this. He would get the county to pay for a car that he could keep (no decal, of course) after he left office AND, by having his car paid for through a salary increase, his future government retirement pay would skyrocket since his retirement pay is partly-based on the highest five years of compensation.  With the car allowance/salary increase deal, Purkey upped his highest compensation from around the $83,000 he had been drawing as County Mayor to $90,000+ and upped his retirement for the next 20-30 years as well.

With David's continuing desire to be Tennessee Safety Commissioner, it's time to let the public know at least some of what the local "news"paper covers up about David Purkey, the lifelong politician and master of the cover-up, with help from friends in high places.

January 22, 2010 How Morristown Can Start To Get Its Financial Affairs in Order

A prior noe4accountability post notes Morristown Mayor Sami Barile's admission on Tuesday, January 19, that the City had no reserves and nothing in its rainy day fund as of 6/30/07 and that the City has just recently discovered this fact. There are many other financial facts that the Mayor and Council do not know about --in 2007, 2008, and 2009.

The major reason for this financial debacle was and is a total lack of checks and balances and a lack of accountability on the part of the Mayor and City Council. The Mayor once stated that the Mayor and Council shouldn't micromanage the affairs of the City. Well, how about just some kind of management?  How about paying attention?  How can you be accountable if you don't even know what's going on and don't try to find out?

After the Mayor's January 19th statement, I presented some commonsense suggestions to the City about how it might begin the process of gaining budgetary control and establishing some accountability for taxpayer funds.

1) Establish separate bank accounts for the city's main funds (general fund and sewer fund) as well as for minor funds (especially grant funds).  Presently, the city has one big bank account and all checks are written off that account.  The City should abolish the one big bank account system that has contributed to the current situation with repeated violations of state law as the City simply keeps writing checks and dipping into or borrowing sewer funds without local and state authorization when the general fund runs out of money or needs to be shored up.  Here is another suggestion that I did not mention in my comments to council: the City also needs to review its Charter and determine if the commingling of sewer monies and general fund monies in one big bank account is prohibited by the Charter. The Charter is on the city website, but one never knows if the online form is an updated and accurate version.

2)  Have timely presentation of budget amendments by the Budget and Finance Directors and department heads. You shouldn't be making one big budget amendment in late 2009 or early 2010 to figure out what happened on 6/30/09 which is the end of FY 2009.

3) Enact an ordinance that provides clear whistleblower protection to those employees or others who are willing to come forward with information about fraud, waste, abuse, suspected illegal money transfers, misuse of grant funds, etc.

4) Do a complete and detailed audit for 2009.  The current audit is a typical governmental audit that is just a cursory sampling of a small number of revenue and expenditure items that are provided to the auditor. If the small number of samples looks OK, the auditors give an opinion that the financial statements fairly represent the financial situation of the city.  While a cursory sampling is all that is required by the state for a regular  annual audit, at this time Morristown desperately needs a full and detailed outside audit of virtually all transactions and financial procedures and internal controls. A new administrator, Anthony Cox, has arrived just in time to hear the revelations of past (2007 and 2008) and current (2009) financial switcheroos and violations of state law. The Mayor, councilmembers, and Mr. Cox should insist on a full and detailed audit and get this financial ship righted and then keep it right!

The City's situation reminds me of the county's situation right before I was elected to county commission in 2002. As a citizen I had been watching and gathering information as my concerns about rising taxes and new taxes (remember the "temporary" wheel tax) and school board construction program bid-rigging (multi-millions of dollar in one-bid contracts) grew. I knew there were violations of state law and financial shenanigans. I went to the Comptroller's Office in August 2001 and in mid-2002 state law was changed to stop the school board's version of construction management with its one-bid contracts.

Then I ran for county commission on a platform of open government, change, and accountability. Once elected, I made the motion to have auditors from the State Comptroller's Office perform the county's audit. The first audit by the Comptroller's personnel saved the county $18,000 AND resulted in a huge number of findings of violations of state law and financial irrregularities. In fact, Hamblen County had more findings that any other county in the state. While the initial audit by the state auditors reflected badly on Hamblen County financial operations, the end result was better controls and fewer violations in future years. Click here for a short post on the first audit by the State Comptroller's auditors.

Morristown needs to take its medicine and get a new set of auditing eyes NOW and for the future. Getting a new set of auditing eyes is not a direct reflection on the current city auditors [who, incidentally, were the county's auditors in 2002 before the Comptroller's personnel came in].  Auditors need to be changed routinely every 3-5 years.  It is hard for a local auditor to be truly independent when he or she lives in the same community and goes to church with and belongs to the same clubs as the elected officials and governmental employees being audited.  That's human nature, but it can be eliminated by getting outside auditors and rotating auditors periodically.

What I did from 2000-2002 in prompting a change in state law to address the local school board's bid-rigging scheme and its construction management system of paying people to manage themselves made me no friends on the school board.

What I did in county government from 2002-2006 in exposing waste and abuse and demanding accountability for county taxpayer dollars made me no friends in high places.

And those enemies among the politically, socially, and financially high and mighty continue to attack and attack.

Well, so be it. I'm not going away. There are large numbers of Americans across this beautiful country who are just now waking up to the waste, corruption, lies, and conflicts of interest in government at every level. I had my awakening years ago.

January 20, 2010 Mayor Barile: The City Was Broke in 2007 But We Just Became Aware of This in Recent Weeks

At yesterday's City Council meeting, Mayor Barile was asked to answer a question that she had been asked some time ago: What reserves (fund balance) did the City of Morristown have at the end of FY 2007 (6/30/07)

Mayor Barile: The city had NO reserves in 2007 but we just became aware of this in recent weeks.

Mayor Barile and councilmembers, that information was in the 2007 audit that you were given in 2008! If you just became aware of this "in recent weeks," it must be because YOU didn't look at the 2007 audit,  YOUR auditor failed to discuss this audit factoid with you, and YOUR esteemed former City Administrator Jim Crumley didn't tell you that he had driven the city to bankruptcy and was covering it up by illegally switching money around. 

Hint to Mayor Barile and council: Now you need to look at and READ the 2008 audit. Check on available fund balance as of 6/30/08. You might "become aware" of more disturbing news. Click here for more on Bankruptcygate.

And if you pay attention and ask questions and end the feel-good spending, you might be able to stop the bleeding that has been going on right under your nose.


.

January 7, 2010 Mayor and City Council Caught in Web of Unauthorized Money Shifting in Violation of State Law

[Updated 1/8/10: See my note at the end of this post]

At the end of the January 4th City Finance Committee meeting, Councilmember Kay Senter said, “It is what it is.” Her comment came at the conclusion of a remarkable meeting that showed how little the Mayor and Councilmembers know about the city’s finances and what little effort they put forth to find out what's going on. The meeting also provided a glimpse of how much money shifting (plenty!!) has gone at the City Center to cover up mismanagement and financial problems.

I will try to summarize the major item of discussion but lots more will be said later.

Short and sweet version: The City’s General Government Fund had a deficit of over $1.2 Million dollars as of 6/30/09! Unlike the federal government, local governments in Tennessee can not end their fiscal year in a deficit situation. To remedy this “cash flow” problem, the City was planning to let the Sewer Fund loan $1 Million + to the City’s General Fund. After all, that’s what the City did in 2007 and 2008–illegally and without authorization –when the General Fund had a deficit.

This time, though, it was third strike and you’re out. Citizens and others have caught on to the city’s old scheme of “robbing Peter to pay Paul.”  Citizens for Accountability.

See my earlier post discussing the illegal transfer/loan of $2.5 Million from the Sewer to the General Fund to cover up the 2008 General Fund deficit and the auditors November 2009 e-mail to Interim Administrator Lynn Wampler "explaining" the auditors involvement/non-involvement. That illegal transfer/loan was not reported as an audit finding in the 2008 audit by the "independent" auditors. [Interim Administrator Wampler has a copy of my e-mail to the State Comptroller’s Office and Mr. Dycus' reply e-mail stating that David Bowling, State Comptroller's Office, must approve inter-fund loans and that they must first be passed by the city council.]

Faced with another General Fund money shortage in 2009, Mr. Wampler and Budget Director Brian Janish  talked to Mr. David Bowling and to MTAS Consultants to see if the City could pass a local ordinance in January 2010 for a Sewer Fund to General Fund loan that would be “retroactive” to 6/30/09 and would erase the current deficit in the 6/30/09 audit.

According to Janish and Wampler, MTAS consultants and the Comptroller’s Office have thus far said “no” to the 6/30/09 retroactive loan--just as they probably would have said "no" to the 2007 and 2008 retroactive loans IF the City hadn’t just slipped the earlier loans through without a word. 

[The 2009 audit has been delayed AGAIN. There are rumors that the City and its auditors are still trying to figure out a way to handle the 2009 General Fund deficit without an audit finding. Apparently, the city and the auditors are talking to everyone to try and come up with a "solution" to the violation of state law. Surely, the auditors can't ignore or gloss over these illegal, unauthorized transfers a THIRD TIME.  Since cities and counties often get "help" from higher up to cover up violations of law, it remains to be seen what the city and its auditors will be allowed to do to cover up what is actually a third  violation in a row of state law. One idea that has been floated around--see below--is to simply call the loan a "payable" and a "receivable."

For two years (2007 and 2008), the city just illegally shifted money from the Sewer Fund to the General Fund without even making an effort to get required local and state approval. I have little doubt that a third illegal money shift would have taken place quietly in 2009 had former City Administrator Jim Crumley still been around. Jim pulled the wool over the Mayor and Council ’s eyes in a lot of ways. Because the Mayor and Council did not pay attention and have not taken care of taxpayers’ and ratepayers’ sewer money, citizens are stepping up to do what they can. [Click on the Citizens for Accountability link for the website of the new citizens group that will be providing information to the public and holding local city and county officials accountable for the actions. Citizens for Accountability.]

Bottom line. The City illegally shifted money (Sewer Fund to General Fund) to cover up or lessen the General’s Fund’s poor financial situation in 07 and 08. Jim Crumley (former City Administrator) and Brian Janish (Budget Director) and Buddy Fielder (Assistant Administrator) and Dynise Robertson (Finance Director) did not report this situation to the Mayor and Council. The local auditors (Craine, Thompson & Jones) did not report this situation to the Mayor and Council nor did they report these unauthorized loans as an audit finding in 2008. The Mayor and Councilmembers obviously did not examine the 2007 and 2008 audits or one of them surely would have spotted these unapproved transfers and would have seen that the money shown as general fund balance or surplus was not really general fund money at all but was largely a temporary loan of money to the General Fund.

The gig is up.

This year the City is “caught” with a 6/30/09 deficit that it can’t erase with another illegal, unauthorized loan. Aas mentioned above, one idea to "get around" the violation is to have the auditors report that “$1.2 Million is due from the General Fund to the Sewer Fund” and “$1.2 Million is due to the Sewer Fund from the General Fund.” That's a loan but it just doesn’t use the word loan.  After all, it all depends on what the meaning of "loan" is! If your auditor will report a loan as a "receivable" and a "payable" and if the State will accept this new way of reporting loans, then maybe Morristown will have once again broken ground with a way to "legally" violate state statutes. And then other cities and counties who find themselves with a deficit can also cover it up with this new auditing angle.

Regardless, this three-year fiasco highlights a number of serious problems at the City Center:

1. Auditors that have allowed illegal, unauthorized loans (Sewer Fund to General Fund) for 2007 and 2008 without reporting them to the Mayor and Council.

2. Budget and Finance Personnel who have been a party to these illegal, unauthorized loans without reporting or seeking approval of the Mayor and Council.

3. A former City Administrator who was the major player in these illegal, unauthorized loans without reporting or seeking the approval of the Mayor and Council.

4. A Mayor and Councilmembers who did not take the time to examine the yearly audits, ask questions, and get answers. [The cash poor condition of the General Fund was evident in the audits--but you had to actually open the audit and look at a few key pages to see that unauthorized loans were being recorded in the audits to "cover up" the dire financial condition of the City].

Elected office is not just a fancy title with a nameplate and special parking place. It is a high calling when you are entrusted with other people’s money. Elected officials ask to be put into office. If given the opportunity to serve, they have an obligation to give whatever time it takes and to do whatever is necessary to see that taxpayer dollars are spent wisely and legally.

[Update 1/8/10. I have deleted my 1/5/10 post which was almost identical to this post. My e-mail (left) requesting info on procedures for inter-fund loans was to Mr. Dennis Dycus in the Comptroller's Office. I sent the e-mail to ensure that my understanding of the procedures for such loans does require local and then state approval.  In his reply, Mr. Dycus confirmed that a local resolution or ordinance must be passed first and then Mr. David Bowling, Division of Local Finance in the Comptroller's office, must give approval to any inter-fund loans between the sewer fund and the general fund. In 2007 and 2008, the City violated state law and just made these transfers without council approval AND without state approval in order to give a quick "fix" to the general fund deficit.  The "independent" auditors reported this "fix" (a/k/a unauthorized and illegal transfer) in the 08 audit as a "loan" even though there was apparently no documentation of a loan in either year. 6/30/09: the city AGAIN has a general fund deficit and the audit is delayed while the city and the "independent" auditors  AGAIN try to find a way to "fix" the mismanagement once more.]

December 3, 2009 City Council Meeting: Sewergate To Cover-up Bankruptcygate?

In a previous post (click here), I mentioned the City of Morristown's illegal transfer/loan of $2.5 MILLION dollars from the city's sewer fund to the city's general fund in the fiscal year ending 6/30/08. Former City Administrator Jim Crumley apparently authorized the transfer to cover up the "poor" cash situation of the general fund.

The city's auditor is Craine, Thompson & Jones. Terry Winstead of CTJ (click on e-mail below) states that Tom Jones of CTJ was present in a meeting when Crumley authorized the transfer but that CTJ's auditing "independence" and objectivity were not lost because while Jones knew about the entry, he (Jones) didn't physically  make the entry himself.   So Jones was in the meeting where the entry was authorized. Jones then completed his audit of the city's books and recorded the $2.5 MILLION switcheroo as an inter-fund loan.  BUT Jones did not report that this $2.5 Million "inter-fund loan" had not been approved by council (as is required). AND Jones did not report that this $2.5 Million "loan" had not been approved by the State Comptroller's Director of Local Finance (as is required).

At left is Winstead's e-mail to Wampler describing how the $2.5 Million "entry" for fiscal year 2008 came about and then disavowing any direct involvement by auditor Tom Jones-- Jones just happened to be there when the entry was authorized.  On the November 2009 e-mail, there is also a written notation by Wampler stating that Dynise (Robertson), the city's finance director, informed Wampler that the $2.5 Million 2008 sewer to general fund transfer was "transferred back last week."  No mention of who authorized the transfer-back or why the transfer-back, like the initial transfer, did not go through council.

The scariest part of the note is Wampler's second statement: "We will have to transfer most of that money back to the General Fund before the end of the fisical (sic) year."   Why? To cover up a poor financial situation again?  After the whopping property tax increase of 2007, after the sales tax increase of 2008, and after red light cameras were installed for even more revenue, is Wampler's comment a warning that the city may still not have enough funds for general government operations at the end of FY 2010 (6/30/10) and will somehow need another sewer loan as a cushion?

At city council yesterday, Charles Cook asked Mayor Barile if she knew about this $2.5 Million sewer fund to general fund transfer in 2008. She said she didn't recall being told at the time.

Cook then passed out an e-mail that I had received from the Director of Municipal Audit (Dennis Dycus) in the State Comptroller's office in response to questions about (1) whether a temporary transfer of money from the sewer fund to the general fund could be made (no) and (2) how an inter-fund loan from sewer to general fund should be handled (carefully).  [Cook had blacked out my name on the e-mail so the city officials could concentrate on the contents of the e-mail itself.  By now, the Mayor and/or some members of the council or others have probably called up the state to find out who was asking questions when in reality it is the Mayor and the councilmembers who should have been asking this and many more questions all along.]

Mr. Dycus, Director of Municipal Audit, simply confirmed the obvious. There has to be local approval of an inter-fund loan by the city council. Then the loan is sent to the Division of Local Finance in the State Comptroller's Office for approval.  Dycus twice notes that any loan of this type has to be an arms-length business transaction and that the going rate of interest has to be paid by the fund that is borrowing the money. In the city's case, the general fund (largely funded by taxes) borrowed the money and should have paid interest to the sewer fund (largely paid by ratepayers) that made the $2.5 Million loan. Click on the e-mail below to enlarge.

Because of the illegalities of the handling of the funds transfer/loan and because the whole thing was cleverly orchestrated to cover-up the dire (essentially bankrupt) financial situation of the city's general government fund, Cook referred to this matter as "sewergate."  Maybe it was "sewergate" to cover up Morristown's "bankruptcygate."

Now click again and read Wampler's last statement in his hand-written note on Winstead's e-mail. "I will develop a fund transfer policy as soon as I can."  Transfers are not allowed.  No need for a transfer policy.

An inter-fund loan from sewer to general fund can be made, BUT it must be an arms-length transaction that is first passed by the council and then approved by the state. The Dycus e-mail pretty much outlines the procedures for such an inter-fund loan. Maybe the city should consider following state law as its inter-fund loan policy!

Of course, maybe the city would not have to borrow money from its sewer fund at all if the Mayor and councilmembers managed the taxpayers' money responsibly and didn't pass every nice-sounding spending proposal that comes around plus borrow and spend every penny that they can get their hands on.

Mr. Cook pointed out to the Mayor and Council that they could and should have known about the $2.5 million switcheroo (my word) if they had ever actually looked at the 2008 audit.  He also pointed out that they could and should have known that the city's 2008 general fund balance of $3,431.536.00 was all smoke and mirrors (my words) if they had actually looked at the audit. 

The $3,431,536.00 fund balance was largely a charade, but you had to ask questions or you had to be paying attention to see the charade.  Every penny of the 2008 "fund balance/rainy day fund" of $3,431,536.00 was  reserved or set aside (1) to pay back the sewer loan ($2,500,000.00), (2) to pay existing contracts ($995,419.00), and (3) to pay other bills owed by the city ($135,617.00). 

Real available general fund balance/rainy day fund as of 6/30/08. Zero!

Now how many times do you reach the end of the year (December 31) and your debts and bills are EXACTLY, down to the penny, what is in your checking account (fund balance) at that point in time?

Yet, that's what the city's 2008 audit would have the taxpayers believe. The audit suggests that the city's checking account (fund balance) had EXACTLY $3,431,536.00 in it as of 6/30/08 and that the city's current debts and bills just happened to total EXACTLY $3,431,536.00 as of 6/30/08.  An unbelievable coincidence? Smoke and mirrors? Or plain old local hoodoo economics?

November 19, 2009 City of Morristown and the FY 2008 Audit: Stay Tuned

City leaders are offended when financial responsibility--or their lack thereof--is mentioned.  They blame "the economy." Certainly, the overall economic outlook today is not good. However, the city's mismanagement and wasteful spending sprees that have driven it into virtual crisis-mode go back to pre-bailout times.

Some readers may recall a headline in the local paper a few years back about the city's $100 Million dollar "wish list"?

In the upcoming days, there will posts on the city's 2008 audit and discussion of why the word "bankrupt" has been mentioned.

November 17, 2009 Crumley's Legacy Begins to Unfold. Where Was Council's System of Checks and Balances?

Morristown City Council meets today at 4:00 pm. [At their last meeting, they refused to move the meeting time to a taxpayer-friendly 5:00.]   Most councilmembers are happy with 4:00 and especially with the fact that 4:00 makes it inconvenient or impossible for working taxpayers to attend and actually watch what is being done with THEIR money.

I predict that some of Crumley's legacy of mismanagement along with council's failure to act as a check and balance on the administrator's power may begin to officially unfold today. The word is out. It may take a long time for the full extent of mismanagement by Crumley and cohorts to make it out into the public domain.  In fact, some of the mismanagement and/or illegalities may never be uncovered. In government circles, one level of power protects the other.

One of the most egregious acts of Crumley was the illegal transfer of $2.5 million dollars from the City sewer fund to the general fund in FY 2008 in order to conceal or prop up the "poor" cash situation of the general fund.

According to the city auditors, Crumley suggested the entry and authorized the entry in a meeting with the city's "independent" and "objective" auditor Tom Jones and Finance Director Dynise Robertson.

The transfer was then recorded by Jones in the 2008 audit as a "loan." 

After the illegality of this transfer was discovered, all those involved went into protection mode. The auditors said, yes, we were in the meeting where the journal entry was authorized but we didn't actually make the entry ourselves (we just knew about it). Just a couple of weeks ago, the $2.5 million was set to be transferred back from the general fund to the sewer fund---again no passage by the council, no mention in the paper. I guess two wrongs in the city make a right--especially if it's all conveniently handled in-house with no public acknowledgment or explanation.

[I expect some response and a brief explanation by the city pretty soon. It will probably one of those "spin" statements saying that it was just Crumley who did this. No one else had a part in it. No one knew it was illegal. No one asked any questions. Move on! And for Pete's sake don't expect us to hold anyone accountable. Well, spindoctors, consider this. If the auditors had pointed out this illegality when they prepared the 2008 audit or when they presented the 2008 audit to the council in May 2009, it could have saved the city taxpayers over $145,000.

Did the auditors really not know that a  loan from the sewer fund to the general fund requires local approval and state approval? Was auditor objectivity lost because of their presence in the meeting with Crumley where this transfer/loan was authorized? Was auditor independence compromised by being part of the financial process? With $2.5 Million being shifted around, wouldn't an independent auditor ask or check to see that proper documentation and legal procedures were followed? After all is said and done, auditors have the last call. If only they had blown the whistle on this illegality, if only someone on council had actually looked at the audit and asked about this, Crumley could have been fired without the fancy retirement party and the huge severance package PAID FOR BY CITY TAXPAYERS.]

And while most of that money (the $2.5 million that was illegally transferred) has now or will soon be transferred back to the sewer fund,  it will have to be transferred back again to the general fund pretty soon because, you guessed it, the general government fund is still in "poor" condition. Robbing Peter (sewer fund) to pay Paul (operate general government)?

Crumley is gone, but certainly not forgotten. His fiscal mismanagement and illegal actions are just starting to unravel. The council needs to do a complete and thorough audit of all city funds and departments before a new administrator comes in. The council also needs to set up a system of financial reporting along with a set of checks and balances before a new administrator comes in.

The city taxpayers should not be left holding the bag.  Higher property taxes, higher sales taxes, red light cameras, debt and more debt, and on and on. Lack of accountability put the City in the position it is today. Now, the procedures, regulations, and reporting need to change. And then the council and department heads and others must ensure that the new procedures, regulations, and reporting are monitored and enforced.  No more sleight of hand. Transparency and accountability are needed. Not cover-ups.

If things don't change in a big way, Morristown will simply have a new set of names but the same old waste, fraud, and abuse.

May 12, 2009 Crumley Repeats My Words and Recommendation Almost Verbatim

Yesterday's Morristown City Council Budget Meeting was held at 5:00 pm in a small conference room near the Mayor's office.

Other than the Mayor, Councilmembers, City Administrator Jim Crumley, and a few members of city staff, only Tribune reporter Bob Moore, Gwen Holden, and I were present.

Revenue projections and expenditures were discussed, and I will go into both in more depth in future posts.

A significant and strongly worded recommendation to Council came from City Administrator Jim Crumley regarding the city's 2008 audit or lack thereof. Crumley's recommendation: You need a new auditor.

As reported previously, the city audit for the fiscal year that ended on June 30, 2008, is still not available. That audit was due December 31, 2008. It is so late now that Dennis Dycus of the State Comptroller's Office, Division of Municipal Audit, has called the city to find out what's going on.

The "lateness" of the city audit is nothing new, but it was underscored this year when the city found itself having to provide financial information to Moody's Investor's Services in order for Moody's to assign a debt "issuer" rating for the city.

Because 2008 audit figures were not available, Crumley and city staff had to provide "unaudited" figures for Moody's to use in its evaluation of city debt.

Jim Crumley stated to the Mayor and Council almost exactly what I stated in my April 29 post. You need to get a new city auditor. Click here for my April 29 post and scroll to the last paragraphs to see my comments on changing the city auditor.

Crumley repeated those same sentiments, noting that to be without an audit now (10-1/2 months after the end of the audit year and 4-1/2 months after the audit due date) is not "acceptable" and adding that another problem that has been discovered is that the current auditor incorrectly accounted for accrual of property taxes.

Crumley and other councilmembers briefly discussed sending out a Request for Proposals to audit/accounting firms to let those firms present information on costs and services to be provided. Crumley said that it may end up costing more to have a new auditor come in, but the intention would be to obtain a timely audit and to have new eyes look at the city's finances. Has common sense really taken over city hall?

Yes, new eyes and new auditors are needed to look at the city's finances AND to provide a timely audit. The city should have done this years ago as a matter of policy. It is my opinion that auditors should be rotated about every five years so that "fresh" eyes are periodically looking over city finances. This is not a slam at auditors. It is just in the nature of the process that you miss things that you go over and over again repeatedly. You can catch typos and mathematical errors of others more easily than you can catch your own.

When I served on county commission from 2002-2006, getting a new county auditor was my first priority. I pushed for auditors from the State Comptroller's office to replace the long-time county auditor and the rest, as they say, is history. The first audit by new auditors looking at the handling of county finances with fresh eyes resulted in 29 findings and irregularities--more than any other county in the state of Tennessee. The initial state audit of Hamblen County led to numerous corrections of lax procedures and violations of state law. The long-time county auditor at the time was the same firm that is currently the long-time city auditor.

My call to have the state auditors come in also resulted in a saving to the county of about $17,000 per year over the cost of the private auditor! Because I still think that fresh eyes are needed periodically for audits, I would like to see state auditor staff rotated from county to county periodically, so that counties could get the benefit of a fresh set of eyes but still maintain the cost savings of contracting with state auditors.

The county recognized the audit problem almost seven years ago and did something about it. Now, there is a recommendation that the city consider new auditors. Only time will tell if the city will at long last fix its "audit problem."

April 6, 2009 2008 Hamblen County Audit: Drowning in Debt and Treading Water with Ten Years of Interest-only Payments

The Hamblen County Audit has been available on the Comptroller's Website for about a week.

Click here to go directly to the Hamblen audit.

For Hamblen County debt, go to pages 141-143 of the audit.

Here's the status in a not-so-pretty nutshell: The county borrowed large sums, primarily for school construction, from 1998-2001. The county has also borrowed large sums that were then lent to MH Hospital.

In a "plan" devised in 1998, the county has made interest-only payments on the $40 Million borrowed between 1998-2001. The MH Hospital debt of $28.7 Million has also been interest-only payments.

Drowning in debt and treading water.

$40 Million borrowed, the bulk of which was for the last (1998) school building program. [Page 141]

2008: $40 Million owed. [ Page 141]

$28.7 Million borrowed for M-H Hospital. The hospital is supposed to make payments to the county for this debt using hospital revenue. [Page 142]

2008: $28.7 Million owed. [Page 142]

May 26, 2008 Front Page "News"?

Do you read the truth about government in the newspaper or just a front-page press release?

Is a professional reporter concerned when the financial facts of a front page hard news story may be wrong? Will a reporter who says he "stands by" his article and the audited figures in it show where his "audited" figures came from? Click on the "news" headline and excerpts at left.

The newspaper article, written by Bob Moore, quoted Trustee Bill Brittain and County Mayor David Purkey and provided and compared "audited" expenditure figures for 1997 and 2001.

The article states that the 1997 audited total for the general government, highway, garbage, and general debt was $14.1 million. A review of the audit shows that this total appears to be correct.

The article maintains that spending only went up slightly from 1997 to 2001 and that the 2001 audited total for the general government, highway, garbage, and general debt was $14.8 million. According to an auditor, a review of the audit shows that this total appears to be incorrect.

If you actually look at the 2001 audit, you will find that the expenditures for 2001 are not $14,800,000 as reported. Instead audited expenditures for 2001 are about $16,500,000 (see below). The "news" report somehow left off about $1,700,000 of county spending that is shown in the audit!

2001 AUDITED EXPENDITURES

General government fund $9,755,386 (p. 65)
General debt fund 4,048,765 (p. 85)
Highway fund 1,955,371 (p. 71)
Garbage fund 1,812,099 (p. 68)
-----------------
TOTAL OF 4 FUNDS $17,571,621
Less Tax Anticipation $ 1,000,000
Notes for General Fund
and Garbage Fund -----------------

2001 TOTAL AUDITED $16,571,621
EXPENDITURES

The audit shows approximately $16,500,000 in "audited" expenditures in 2001, but the front-page news article reported only $14,800,000 in 2001 "audited" expenditures.

Neither the County Mayor nor Trustee would ever respond to anyone's questions or offer an explanation for the $1,700,000 in spending that is in the audit but that is not in the "news" article. ($16,500,000 AUDIT - $14,800,000 NEWS REPORT)

Since no one would discuss the discrepancies, I called the reporter--Robert (Bobby) Moore--and told him that I had talked to an auditor and it appeared that $16,500,000 was spent in 2001. I then asked Bob if he could explain the $1,700,000 discrepancy in the newspaper report and the actual audit expenditure totals for 2001.

WARNING: If anyone else out there is considering calling Bob Moore to ask a question about an article he has written, be prepared to get nothing except a roundabout response which I paraphrase as follows: "I stand by my article, but, no, I will not answer any questions, I will not look at the actual audit, and I certainly will not tell you whether the figures in my article are really correct or not."

The conversation--paraphrased-- went more or less like this:

Noe: Bob, you reported that $14.8 million was spent (in 2001)...An auditor reviewed the audit with me and says that that is not the case...An auditor says that way more than $14.8 million was spent in 2001. Will you show me in the (2001) audit where $14.8 million was spent?
Moore: I know where it is...I'm not going to tell you...I'm not going to show you.

Noe: Why won't you show me what the expenditures were?
Moore: Because of your blog.

Noe: Bob, I have said either the Tribune was wrong OR they were given false figures. Now you say you know where it is. You know the real expenditures. Where is it (the expenditures that were not reported)?
Moore: I do know. I do know. But I'm not going to tell you. Linda, you don't have a clue. You don't have a clue about how to be a politician.

Bob Moore is a pretty savvy guy with numbers. He could look at the 2001 audit, find the expenditures for each of the four funds, and total them up in just a few minutes--just like the auditor did and just like I did. Because it would be an easy and quick review, I offered to bring him a copy of the 2001 audit. However, he absolutely refused to look at the 2001 audit to see if the figures he had been given and reported were true or not.

On the professional level, Bob Moore is a numbers guy and he writes front-page articles covering city and county government. He can write about whatever he (or his editor) chooses.

A professional reporter, writing a front-page news article that reaches thousands of people, should be willing to explain the facts and figures in his front-page article when asked instead of responding "I'm not going to tell you."

A front-page "news" article is serious business---especially during an election. How many people believed that "news" article and the "audited" figures in it?

Bob Moore says that he "stands by" his article AND the figures. Bob Moore says that he knows where the expenditures that were not reported are, but he can't reveal that information! Super secret and all that. Yeah, sure. It's more likely that Bob got duped and was given bogus figures and now he doesn't want to admit it.

Why can't he show where the figures came from for HIS article? Why won't he look at the 2001 audit and add up the expenditures in the four funds and see if they match what he reported? If he knew that way more than $14.8 million had been spent in 2001, why didn't he report the real amount that was spent and explain what was going on?

Bob loves to talk, but he doesn't want to talk about this article and the "audited" expenditures he reported.

I would like to know if he can (1) show in the audit where there is a total of $14.8 of expenditures in the four funds as he reported; if that doesn't work, (2) I would like for him to explain what he knows about the $1,700,000 of expenditures that are in the audit but that were left out of his report; if that doesn't work either, then (3) I would hope that Bob would simply acknowledge that he was given false figures, reported them, and is not concerned about the accuracy of this or other front-page articles/stories.

Bob makes it sound like he knew all along that 2001 audited expenditures were higher than the $14.8 million that he reported, but for some strange reason he can't or won't reveal why he didn't report the real expenditure total.

If he REALLY knew that way more than $14.8 million had been spent and even knew where it was, why did he write a front-page "news" report saying only $14.8 million had been spent in 2001?

[NOTE: Bob Moore would hate to hear this, but I was not offended and in fact took it as a compliment when he said that I didn't 'have a clue about how to be a politician.' News flash! I never intended or wanted to be a politician!]

We've got more than enough of them in government.

May 4, 2008 Hamblen County Audit 2007 Is Available

The most recent audit of Hamblen County Government can be accessed at the State Comptroller's website. If you don't want to maneuver through the Comptroller's website, here is the direct link to the Hamblen County audit.

Good news in one major area.

Hamblen County Government's unreserved General Fund balance is up to just over $2,300,000. This is a major improvement from the unreserved General Fund balance of $83,000 FY 2003. A healthy Fund Balance is extremely important. It is sometimes called the county's "rainy day fund" or "savings account" for emergency needs.

There is a lot of history behind the Fund Balance reaching a low point in 2003 and then gradually increasing over the next four years. Explaining how the county ended up with a dangerously low FY 03 fund balance is simple. The county was spending more than it took in and doing so by pulling from its find balance/savings account.

When I took office on September 1, 2002, the previous commission had already approved the FY 03 budget.

My first major proposal to the new (2002-2006) commission was to have state auditors come in and perform Hamblen County's annual audit. This proposal passed in October 2002.

The reasoning behind this proposal was two-fold. First, the state auditors would charge approximately $13,000 for the annual audits where the private auditors had been charging $31,000. That meant an immediate $18,000/year savings! Over the past five audits (2003-2007) this one change has resulted in a savings of $90,000 to the county.

Second, I felt a fresh set of eyes should go over the books. I had observed that the county had been spending down its fund balance over a 10-year period, and I had also noticed several questionable financial transactions in previous audits.

The state auditors' first audit of Hamblen County involved FY 2003. When the 2003 audit was presented to the audit committee and county commission in the spring of 2004, there were 29 findings of irregularities and/or violations of state law--more than any other county in the state.

In addition to the findings, one of the most distressing revelations in the FY 03 audit was that more money was spent out of the general fund than was taken in (again). This time the problem was so serious that money from other funds and sources had to be dumped into the county's general fund just to keep the general fund afloat and to keep it from being declared officially "broke."

The public was never officially informed of this dire situation because the auditors had allowed the county to switch the money around and close out certain funds and dump that money into the general fund to keep it from ending in the red.

Even with all the dumping of money into the general fund in FY 03, the unreserved/ available general fund balance as of June 30, 2003, was at its lowest point in recent history--a dangerously low $83,000.

That is why I was always pushing to build up the fund balance and to encourage commissioners to think about the long-term consequences of various spending proposals during the four years that I served.

It was a slow 4-year climb out of a low-point of $83,000 (2003) to a fund balance of over $2.3 M (2007). Hopefully, the new commissioners will keep their budgets on an even-keel and maintain healthy fund balances.

Next, a bit of bad news.

After 10 years, nothing has been paid toward the principal of the $40 million debt on the
1998 School Construction bonds. Of course, this is not a surprise for regular readers of this blog.
The 1998 School Construction debt was set up for a lengthy period of "interest-only payments." Now 10 years and many millions of interest-only payments later, the county taxpayers still owe the whole $40 million principal and will still be paying out lots more interest for many more years!

The Audit Committee of the Hamblen County Commission will meet to review the audit.

February 20, 2008 Knox Audits Prove It: Regular Audits Do NOT Look for Fraud, Waste, and Abuse

I have not blogged in-depth about Knox County conflicts of interest, open meeting violations, p-card abuse (purchasing cards), and audits.

The outrageous and illegal actions of Knox officials and employees have been headline news in the Knox News-Sentinel, on Knox talk radio, and on internet sites for over a year and will likely continue at a hot clip for at least another year.


The audits of vehicle usage, P-cards (county credit cards), the hospitality slush fund, community grants and grant awards, and several others are set to be released at long last.

One pre-audit casualty is Cynthia Finch, the Mayor's long-time aide. What the regular audits missed (fraud, waste, and abuse), special audits found (fraud, waste, and abuse found).

Now it's a waiting game to find out who and how much and whether the abusers just resign with a hefty severance package or whether they are truly held accountable for their actions.

Knoxville is fortunate to have a paper that has decided to do true investigative reporting (here and here) instead of government press release reporting. Morristown and Hamblen County are not so fortunate. Part I Part II Part III Part IV

Knoxville is fortunate to have a paper that stood up for open meetings and joined in a suit that exposed backroom deals and deliberations made outside of the public eye. Morristown and Hamblen County are not so fortunate.

Knoxville is fortunate that their major talk radio stations are not owned/partly owned by the same individuals who own the only newspaper. Morristown and Hamblen County are not so fortunate.


If you wonder what would happen if anyone investigated what happens in Morristown and Hamblen County, just take a look at the Knox County audits, the coverups, the lawsuits that it has taken to start the clean-up process, and the multiple resignations of which Cynthia Finch is only the latest.

Many Knoxvillians who were apathetic or who assumed everything was OK are now aware of the widespread conflicts, corruption, fraud, waste, and abuse that are at the core of their government. With INFORMATION provided by the News-Sentinel and talk radio, Knoxvillians came out on February 5th and started the clean-up process.

January 20, 2008 $40M Hamblen County Debt: Interest Only Payments

The image above is Page 131 from the 2006 Hamblen County Audit. At the very bottom, it shows that the county issued $40M of debt in 1998-99-00-01. It also shows that as of June 30, 2006, NOT ONE PENNY OF THIS DEBT HAD BEEN PAID DOWN.

Most of this debt (about $35 Million) was for the 1998 School Building Program. The rest was for the Courthouse Addition and other small projects.

You can link to the entire Audit and scroll down to Page 131 to get a much better view of this page and the debt information.

The State of Tennessee is moaning about an impending "revenue shortfall." With the government, it's never "overspending." It's always a "revenue shortfall."

Morristown and Hamblen County? Same story. "Revenue shortfalls." We can manage to pay for new cars, SUV's, fancy trucks, computers, free (taxpayer-provided) lunches, and other perks for elected and appointed officials. But what does the lowly taxpayer get? Property tax increases, wheel taxes, new fees, increased fees, new permits, more costly permits.

And now just a few months after city officials zapped city taxpayers with a 40-cent property tax increase and county officials zapped county taxpayers with a 10-cent property tax increase, they are encouraging taxpayers to vote for a .25% sales tax increase to go with the 9.5% sales tax rate we already pay.

Is anyone minding the store at the city or the county?

The City of Morristown doesn't have a clue about its revenues, but the City has a really nifty $100 million dollar "wish list" according to a December Tribune headline and article.

Hamblen County muddles along adding more spending for SUV's and other vehicles, $600/mo car allowances, salary increases close to 10% for a few select employees, and on and on.

The School Board is asking for $57 Million or more for another school building program when we haven't even paid a dime on the old $35 Million building program. See the Audit above.

Who devised this brilliant "interest only" plan? The old 1998 county commission.

It's sort of a fiscal Ponzi scheme--nobody is quite sure who will get left holding the bag, but the idea is to pay interest only, postpone paying the debt itself, and hope someone else is left holding the bag.

While the School Board is talking about $57 Million or more for renovations to East and West High, County Commission Chair Stancil Ford apparently thinks the total may be $70-$100M. Nobody is quite sure what the plan really is or what the cost will be. A new East High? A new East High and renovations to West High? Renovations to East and West?

And, of course, nobody has asked why the School Board--just four years ago--built a new library that just sticks out like a sore thumb at East High for about $1.3 million and now that same Board is contemplating building a totally new East High somewhere else. Who is doing the planning at the Board offices?

[NOTE to anonymous commenters-to-be. Yes, I discovered and know a lot about the 1998 school building program. I was a teacher, pushing for school improvements in 1997, and then I saw it become a money grab, a bidding set-up, and a give-away of taxpayer dollars. When two entities---and it doesn't matter who they are---get 35 of 36 contracts where they "bid" for the work, something's going on and that something is not competitive bidding.

Besides, if the Board was so sure that it was all legal, why in the world wouldn't they let anyone see the 1999 letter that their lawyer Scott Reams wrote to them about letting the construction managers bid and get paid two, three, or even six ways on a school job? Surely that letter just explained how very legal it all was. Or did it?

The whole thing was a bidding set-up that circumvented the requirements of competitive bidding, so I met with the State Comptroller in August 2001 to explain face-to-face what was going on. The construction managers were set up with a huge bidding advantage by the Board--the construction management fee and reimbursables. Because the Board didn't provide this money/bidding cushion to other bidders, no other bidder wasted his time trying to bid against the (favored) construction manager. The managers knew they had an advantage. That's why they bid for lots of work but never tried to bid against each other. Result: The "managers" got paid to do the work under one or several contracts and got paid handsomely to manage themselves under another contract.

Stancil Ford was at the August 2001 meeting as our State Representative and Commissioner Larry Baker was there, too. The Comptroller prepared the new legislation, and the General Assembly UNANIMOUSLY passed the new law at its next session, making it clear to even the Hamblen County School Board that you don't let the fox guard the henhouse--and you sure don't pay the fox to guard the henhouse!]

Well, what are county commissioners saying now about taxes? Nothing. The only official who has mentioned the "T" word (taxes) is the county trustee who has said that it will take a 45-cent tax increase just to make INTEREST payments on a new $100 million dollar school building program. Yes, the trustee is talking about making INTEREST ONLY PAYMENTS AGAIN. Is that a great plan, or what? Is anyone ever going to pay the debt off?

The county goes 8+ years making "interest only" payments on a $35 Million dollar school building program, and now there is talk about borrowing $100 Million with "interest only" payments again. Who thinks up this stuff?

Spend, Spend, Spend! Tax, Tax, Tax!

Voters may have a short memory, but it really hasn't been that long since the infamous 2002 "pick your poison" wheel tax referendum. County officials tricked voters into voting "YES" in the wheel tax referendum by telling them via a Tribune article that it was either the wheel tax or a property tax increase. Then, just three months after the voters made their "choice" and voted for the wheel tax, the county enacted a 15-cent property tax anyway.

Today, there's a sales tax referendum on the ballot. And officials, just as they did in 2002, are telling taxpayers to vote YES in the sales tax referendum. If you vote YES, you will have the privilege of paying another 1/4 cent sales tax on top of the 9-1/2 cents in sales tax that you already pay for every $1 purchase. I think I'll vote NO.

Of course, some people will listen and respond to the city's version of "pick your poison." The city is telling its taxpayers that if the sales tax increase passes, then the City will take away 15-cents of last year's 40-cent increase. Really? For how long?

The county commission isn't offering to take away any of last year's 10-cent property tax hike. Commissioners are encouraging county taxpayers to vote YES to more sales tax (1) so the county can help boost city revenues and give city taxpayers tax relief and, of course, (2) to help the School Board get more money to shift all around "for the children."

You really can't make this stuff up!