As I have mentioned the 2004 audit indicates some improvement in the handling of county finances. It's really funny to look at the dramatic change in audit findings that occurred when the county started using the state auditors in 2003. The 2002 audit (1 solitary finding by the local private auditors) and then the 2003 audit (29 findings by the state auditors with numerous sub-findings) and then the 2004 audit (15 findings and again numerous sub-findings by the state auditors). Click here for 2004 audit findings.
Looking at the audit history, I find it very hard to believe that the county was operating just fine in 2002 with a glowing audit (1 finding) from the local private auditors and then suddenly in 2003 the county was violating state law, not budgeting money as required by law, spending more money than was approved, not controlling purchases, not maintaining a general ledger, totally unaware that the county had to go by the state comptroller's "chart of accounts," and boom there are 29 findings by the state auditors. It just seems more likely that all these violations and irregularities were occurring in 2002 but "somehow" went unreported.
Moving on to the 2004 audit, there were 15 findings. One finding reported problems in making debt payments--or actually making a debt payment for a debt that the county didn't even owe. The audit reported that the county made an interest payment of $45,326 in December 2003 for a debt that was actually owed by the City of Morristown, not Hamblen County. The city finally reimbursed the county for all but $408 in June 2004. The 2004 audit reports that the $408 was still owed to the county as of the audit report date.
There were major purchasing deficiencies. The Mayor's Finance Department apparently selected an employee to serve as a purchasing agent, but the agent didn't keep control over purchase orders. Blank purchase orders were just handed out to departments, so nobody knew what was being purchased (or how much had been spent) until after the bill arrived.
There were no employment work records for certain "exempt" county employees. County departments over the years had increasingly allowed more and more employees to be considered "exempt" employees. The "exempt" employees were salaried and didn't have to keep any time sheets. The state auditors said that all employees should be required to keep a record of time worked. They also pointed out that since vacation time was not tracked in some instances, "(exempt) employees [] obtain[ed] a higher benefit rate than the non-exempt (hourly) employees."
There were deficiencies in controls over travel. Apparently, nobody required an itemized receipt for meals paid with credit cards, so the county didn't know what it was paying for. It appears that the receipt total was submitted and paid without an itemized detail.
There were severe deficiencies in budgeting. The budgeting deficiencies were very important and included five different items (A-E)---four of which are discussed here.
(A) Despite state law, the audit states that the County Mayor didn't even present a budget to commission (and so didn't get approval to spend money) for certain funds (such as the sheriff's special revenue fund). Some budgets were brought to commission, but others weren't.
(C) The Finance Department overspent the legally approved spending amounts in several funds: the General Fund, the Highway Fund, the Special Debt Fund, the General Debt Fund, and the Hospital Debt Fund. If spending limits for county funds are going to be ignored, what's the purpose in going through a long, drawn-out budget process? And this occurred in 2003 as well--for example, the 2003 audit says that spending exceeded appropriations in the General Fund in amounts ranging from $737 all the way up to $296,964.
(E) There were huge budgeting problems. The beginning fund balance estimates provided to commissioners during the budget process were way off. Estimates of fund balance are estimates, but the auditors apparently think (and so do I) that county financial officials should be able to get at least reasonably close to the real figure.
When the county was preparing its '04 budget in July 2003, county financial officers estimated and told commissioners that the beginning fund balance for the general fund was $697,526 when it was really only $208,870. The Commission was told that the fund balance for the solid waste (garbage) fund was $56,265 when the fund really had a deficit balance of ($205,578). In an understatement, the auditors added: "County officials should better estimate the beginning fund balance when adopting the budget."
I've mentioned this problem several times at meetings because this is critical financially. If county officials can't come up with at least a close estimate of what's in the bank (fund balance), then it's no wonder that there is overspending and no one really knows what the county has or exactly where it's going.
(D) Finally, the audit also reported a finding where the County Mayor instructed the Finance Department to transfer money ($89,986) from the General Fund to the General Capital Projects Fund and to transfer money ($274,730) from the General Debt Fund to the General Capital Projects Fund without the required approval of county commission.
County commission not only never approved the transfers, but county commission apparently wasn't even told that the transfers were being made or that payments totalling $360,000 had been made in error for years.
In response to this finding, the Mayor told the auditors that he talked with the trustee and finance director (but not county commission) and then instructed his Finance Department to make the transfers to "restore" the accounts to what county commission had actually approved "over the years." It turns out that these wrong payments totalling over $360,000 included spending errors going all the way back to June 15, 1999 and continuing up to June 9, 2004.
It looks like the Capital Projects Fund was being used for over five years to pay for things that should have been paid out of the County's General Fund or the County's Debt Fund. In 2004, the Mayor talks with two county officials (but not to county commissioners) and instructs them to switch everything back around.
Why such secrecy--to the point that county commissioners didn't even know that $360,000 had been moved around until they read about it in the audit? Why did no one explain to county commission what had happened and then ask for the required approval to make the transfers?
More on these spending errors next time...
Saturday, March 25, 2006
Friday, March 24, 2006
March 24, 2006 The 2004 Audit: Moving from the 2003 break-out audit to the 2004 audit
The 2003 audit was the break-out audit. I fulfilled my campaign promise to bring in state auditors with their experience in governmental auditing to replace the local private auditors. As a result, Hamblen County was finally put on notice that its financial house was not in order and had not been in order for years.
A very few people probably knew of the problems, but no one would do anything until someone official came in and said "the emperor has no clothes." That someone official was the state audit group, and what they said, in essence, was that Hamblen County was in a financial mess. What kind of mess?
The state auditors reported that the garbage fund was broke at the end of 2003, ending the year with a deficit of $205,000. How did this happen? One reason was the old commission was given a wrong number for beginning fund balance during the 2003 budget process. They were told that the garbage fund had money that really wasn't there.
Just a few months after the old commission passed the 2003 garbage budget (based on the wrong beginning fund balance that the Mayor's Finance Dept. had provided), the Mayor came to the new commission and reported that the garbage fund was in trouble.
To take care of the garbage problem, the 2003 audit states that the Finance Department kept bringing county commission amendments that kept "appropriating" more money for the garbage fund and saying that the source of the additional appropriations was "beginning fund balance."
In reality, the beginning fund balance for the garbage fund was long gone, and the real source of the money was to be a huge tax increase in 2004 and money used from other funds. Like many financial problems, it goes back to proper accounting, proper budgeting, and at least getting close when you are estimating beginning fund balance (the amount of money you have to start the year with).
In addition, the general fund at the end of FY 2003 was unofficially broke. It would have ended the year with an official deficit of over $100,000 except that the auditors moved money from other funds into the general government fund to restate the fund balance. To erase the $100,000 projected general fund deficit, the county moved about $400,000 from other funds into the general fund, giving it a positive balance of just over $300,000---the lowest county fund balance in recent history. Click here for the 2003 audit findings.
When the 2004 audit came back, it was definitely an improvement from 2003 when Hamblen County had had more audit findings than any other county in the state of Tennessee. The improvement in the 2004 audit was a little like two steps forward and one step back. Some type of corrective action had been taken on most of the 29 findings from 2003 (two steps forward). However, nine of the 29 findings from 2003 had not yet been corrected (one step back).
The 2004 audit listed 15 separate findings, and many of those had "findings within a finding." Five findings contained multiple deficiencies. For example, one FINDING (04.05) has five budgeting deficiencies listed as A, B, C, D, and E. To see Hamblen County's 2004 findings at the State Comptroller's website, click here for 2004 findings.
Some of the "new" problems that the auditors reported in 2004 were actually deficiencies that had existed in 2003 as well as long before. So why were some of the problems that existed in 2003 not reported until 2004? As I've mentioned before, a yearly financial audit doesn't look at everything. It does a spot check in a few areas. Evidently, in 2003 some areas that had deficiencies were not looked at, so these deficiencies were not found and reported until later (2004 audit) when these areas happened to be checked during the next audit process.
More detail on the 2004 findings next time...
A very few people probably knew of the problems, but no one would do anything until someone official came in and said "the emperor has no clothes." That someone official was the state audit group, and what they said, in essence, was that Hamblen County was in a financial mess. What kind of mess?
The state auditors reported that the garbage fund was broke at the end of 2003, ending the year with a deficit of $205,000. How did this happen? One reason was the old commission was given a wrong number for beginning fund balance during the 2003 budget process. They were told that the garbage fund had money that really wasn't there.
Just a few months after the old commission passed the 2003 garbage budget (based on the wrong beginning fund balance that the Mayor's Finance Dept. had provided), the Mayor came to the new commission and reported that the garbage fund was in trouble.
To take care of the garbage problem, the 2003 audit states that the Finance Department kept bringing county commission amendments that kept "appropriating" more money for the garbage fund and saying that the source of the additional appropriations was "beginning fund balance."
In reality, the beginning fund balance for the garbage fund was long gone, and the real source of the money was to be a huge tax increase in 2004 and money used from other funds. Like many financial problems, it goes back to proper accounting, proper budgeting, and at least getting close when you are estimating beginning fund balance (the amount of money you have to start the year with).
In addition, the general fund at the end of FY 2003 was unofficially broke. It would have ended the year with an official deficit of over $100,000 except that the auditors moved money from other funds into the general government fund to restate the fund balance. To erase the $100,000 projected general fund deficit, the county moved about $400,000 from other funds into the general fund, giving it a positive balance of just over $300,000---the lowest county fund balance in recent history. Click here for the 2003 audit findings.
When the 2004 audit came back, it was definitely an improvement from 2003 when Hamblen County had had more audit findings than any other county in the state of Tennessee. The improvement in the 2004 audit was a little like two steps forward and one step back. Some type of corrective action had been taken on most of the 29 findings from 2003 (two steps forward). However, nine of the 29 findings from 2003 had not yet been corrected (one step back).
The 2004 audit listed 15 separate findings, and many of those had "findings within a finding." Five findings contained multiple deficiencies. For example, one FINDING (04.05) has five budgeting deficiencies listed as A, B, C, D, and E. To see Hamblen County's 2004 findings at the State Comptroller's website, click here for 2004 findings.
Some of the "new" problems that the auditors reported in 2004 were actually deficiencies that had existed in 2003 as well as long before. So why were some of the problems that existed in 2003 not reported until 2004? As I've mentioned before, a yearly financial audit doesn't look at everything. It does a spot check in a few areas. Evidently, in 2003 some areas that had deficiencies were not looked at, so these deficiencies were not found and reported until later (2004 audit) when these areas happened to be checked during the next audit process.
More detail on the 2004 findings next time...
Wednesday, March 15, 2006
March 15, 2006 Spring is coming!
A lot of people are out raking leaves in Hamblen County, and some have started mowing their lawns. Not me. I figure that the leaves are nature's mulch for my yard. Yes, I know that's just a way to justify not raking leaves.
I can't justify not mowing though---I'll be out there soon with the trusty mower. Fortunately, I actually like to mow. I guess that goes back to my youth when getting to ride a lawnmower was the first "grown up driving" that I could do.
Speaking of mowing and raking, I still think of March and April as "clean-up, paint-up, and fix-up" months. This goes back to years ago when that was an official declaration in Morristown, and the community really took it to heart. People would get out and work hard to improve their part of Morristown and Hamblen County.
With litter being such a huge problem in Hamblen County and throughout the state, we really need to make a stronger effort to clean up our area. Travel any road in Hamblen County, and you'll see where people have thoughtlessly tossed out fast food papers, bottles, soft drink cans, and everything else imaginable.
Morristown and Hamblen County provide door-to-door garbage pick-up. It is difficult to understand why people toss trash onto the roadside instead of into their own trash can.
Some small steps in having a cleaner community are very simple. Don't toss trash along county roadsides. Teach your children to take pride in their community. When you can do so safely, pick up trash that others have thoughtlessly dropped and put it in a trash can.
A few simple acts by citizens can help clean up our community.
Recently, when walking up to the Courthouse with Commissioner Bobby Reinhardt to attend county commission committee meetings, I saw a cardboard box on the Courthouse lawn. I reached down, picked it up, and tossed it in the trash can as we went in.
It wasn't hard. It took only 5 seconds. It was a small thing to do. But it helped.
I can't justify not mowing though---I'll be out there soon with the trusty mower. Fortunately, I actually like to mow. I guess that goes back to my youth when getting to ride a lawnmower was the first "grown up driving" that I could do.
Speaking of mowing and raking, I still think of March and April as "clean-up, paint-up, and fix-up" months. This goes back to years ago when that was an official declaration in Morristown, and the community really took it to heart. People would get out and work hard to improve their part of Morristown and Hamblen County.
With litter being such a huge problem in Hamblen County and throughout the state, we really need to make a stronger effort to clean up our area. Travel any road in Hamblen County, and you'll see where people have thoughtlessly tossed out fast food papers, bottles, soft drink cans, and everything else imaginable.
Morristown and Hamblen County provide door-to-door garbage pick-up. It is difficult to understand why people toss trash onto the roadside instead of into their own trash can.
Some small steps in having a cleaner community are very simple. Don't toss trash along county roadsides. Teach your children to take pride in their community. When you can do so safely, pick up trash that others have thoughtlessly dropped and put it in a trash can.
A few simple acts by citizens can help clean up our community.
Recently, when walking up to the Courthouse with Commissioner Bobby Reinhardt to attend county commission committee meetings, I saw a cardboard box on the Courthouse lawn. I reached down, picked it up, and tossed it in the trash can as we went in.
It wasn't hard. It took only 5 seconds. It was a small thing to do. But it helped.
Thursday, March 09, 2006
March 10, 2006 The county is "broke" and leads the state in audit problems
Before I move on to the 2004 audit, I want to make one additional post about the 2003 audit on items that I have touched on in previous posts but which bear repeating.
1. The 2003 audit of Hamblen County government showed 29 findings (irregularities, violations of state law, accounting and purchasing problems). Hamblen County had more audit findings than any other county in the entire state and that includes the big four of Hamilton, Davidson, Knox, and Shelby.
2. Hamblen County government's general fund (the county's checking account) was broke at the end of the 2003 audit year and only a shifting of funds from several other funds into the general fund gave Hamblen County enough money to pay its general government bills.
Mismanagement and budgeting and purchasing deficiencies had plagued the county for years. The only difference in 2003 was that there were new auditors who finally pointed out what had been going on.
1. The 2003 audit of Hamblen County government showed 29 findings (irregularities, violations of state law, accounting and purchasing problems). Hamblen County had more audit findings than any other county in the entire state and that includes the big four of Hamilton, Davidson, Knox, and Shelby.
2. Hamblen County government's general fund (the county's checking account) was broke at the end of the 2003 audit year and only a shifting of funds from several other funds into the general fund gave Hamblen County enough money to pay its general government bills.
Mismanagement and budgeting and purchasing deficiencies had plagued the county for years. The only difference in 2003 was that there were new auditors who finally pointed out what had been going on.
2003 was the big KA-BOOM year. Some of the bitterness and red-faced rants that some officials still resort to when I ask financial questions can be traced to the fact that I was the one who made the initial proposal to have the state auditors come in.
The mismanagement of public money, conflicts of interest, ethical shortcomings, and insider deals that are rampant in local politics (and in state and national politics, too) have naturally, and unfortunately, led to the overall lack of trust in public officials.
Nowhere is the motto "trust, but verify" more necessary (and more resisted) than in government.
A lot of people who have watched government in action have said that if they managed their family finances like the government does, they'd be broke. The 2003 county budget process is a fine example of this. The 2003 budget, like so many before it, was a hurry-up and pass something budget. Let's throw something together before anyone comes in asking questions.
That hurry-up process with its last-minute tax increase and last-minute vote on a 2003 budget turned out to be a disaster for county taxpayers.
First, the old (2002) commission raised property taxes at the last-minute--- even though the chairman of the commission Maudie Briggs had told voters months earlier that if they would just vote to extend the wheel tax (in the famous "pick-your-poison" wheel tax referendum) then there wouldn't be a property tax increase.
Then the old commission voted for a budget or spending plan that left off lots of the spending--kind of like a family that "forgets" to include the car payment in preparing their family budget.
2003: Despite taking in more money due to the property tax increase and extension of the wheel tax, the county AGAIN spent more than it took in. In fact, it spent so much more than it took in during 2003 that the tiny savings that the county had from 2002 (fund balance) was wiped out and the county had to go take money from other funds to shore up the general fund that was broke.
Were any other funds "broke" in 2003? Yes. The hurry-up, pass it, don't ask questions process also ended up with the county garbage fund going broke in 2003, too.
How did the county pay its bills? The new state auditors had the county dumping money from several other funds--like the DUI control fund, the Rural Services Fund, the Volunteer Fire Department Fund, etc.-- into the county government fund to help keep Hamblen County government afloat.
Sadly, overspending in 2003 was nothing new for Hamblen County government. Overspending has been a serious problem in Hamblen County government for years and years. Looking back at the 12 fiscal years (1992-2003), the county spent more than it took in during 8 of those 12 years. Not a good track record.
Of course, the official reaction is always that there's a shortage of money. So was the county suffering from some kind of revenue (money) shortage during these years? No. Revenues were increasing but expenditures were increasing even more rapidly. There's your problem.
In 2002 the county spent $923,000 more than it took in, and in 2003 the county increased taxes and still spent more than it took in. With the June 30, 2003 audit report, the bubble burst. Hamblen County was broke and Hamblen County had more financial audit findings of irregularities than any other county in the state.
To paraphrase one commissioner, "we've been robbing Peter to pay Paul and now Peter has left town." Actually, we had robbed Peter so much through the years that Peter was broke, just like Paul.
Peter left town all right---penniless.
Saturday, March 04, 2006
March 4, 2006 If anyone had looked and asked the obvious questions that I did...
My February 28th post discusses the 2003 Hamblen County Audit---the first audit performed by state auditors after years and years of local, private auditing.
All of a sudden with the 2003 audit, the county got a resounding wake-up call that emphasized the lack of accountability that has marked the handling of county finances for years.
The state auditors pointed out that record-keeping was lax (or non-existent) , money was missing, checks were written where there were inadequate funds, money was shifted around without county commission's knowledge or approval, accounts were overspent, and the Mayor and his Finance Department spent money that had never been brought to county commission for approval.
I was not surprised in the least at the 2003 findings. Why? Because as a citizen and as a new county commissioner, I had actually gone through the 2002 audit and previous audits. As a commissioner, I tried (unsuccessfully) to get other members of the audit committee to listen and to really look at the audits as well. Click here on 2003 audit findings to see Hamblen County audit findings section on the State Comptroller's website.
Would county commissioners look at the 2002 audit? No. Did they have any questions about the 2002 audit? No.
Audit Chairman Maudie Briggs told me that if I had any questions, I could try and get them answered on my own. I prepared questions, and I tried to get them answered. Had anyone asked the obvious questions about the 2002 audit like I did or had anyone asked to see the responses (and non-responses), then the 2003 audit might have had fewer findings because some changes could have been made before the fiscal year 2003 ended.
With questions and answers on our own, the county could have been further down the road to accountability instead of having to wait for the state auditors to tell us what the local auditors would not tell us--there are no checks and balances, certain individuals and officials have assumed that they can spend taxpayer money as they please rather than within the legal budgeting process, and there is little or no accountability in the handling of the county's finances.
Some of the questions I asked were just commonsense questions that seemed very obvious:
I asked about the fact that the 2002 audit showed that money was spent out of some funds (like the county drug fund and the special revenue fund) but those funds had no "budgeted spending" or appropriations that had been approved by county commission.
I was never told why expenditures had been made and who was spending money without approval by county commission. The 2003 audit, however, explained loudly and clearly why no one would answer that question. Spending that money without approval or appropriation by county commission was a violation of state law. All monies spent by the county must be budgeted and approved by county commission.
I asked whether all legal fees of $83,558 as shown in the 2002 audit were solely for the county's part-time attorney Rusty Cantwell. I was told, yes, that this amount was "only Rusty." When I then pulled financial records about legal charges, it appeared that the answer that I was given was not correct and that about $54,000 was paid to "Rusty" (Mr. Cantwell) in 2002 with large amounts going to other attorneys. Is there a different county financial record somewhere? Obviously, I don't know that. All I can do is go with what I am given as the spending record.
I asked for clarification about several items. One item I asked about was shown in the 2002 audit as "other charges $97,305." When you see huge spending labeled as "other," it's common sense to ask what it's for. The answer I got was that "other" spending was "miscellaneous through county executive."
Yes, the answer to the question is that "other" really means "miscellaneous through county executive." And that answer was supposed to help explain and clarify where $97,305 went? Yeah, sure! Perhaps it's nothing. Maybe the "other" or "miscellaneous" spending of $97,305 was perfectly legitimate. Then why didn't the Mayor or the Mayor's Finance Department just explain or provide an itemized list of what "other" or "miscellaneous" spending of $97,305 was? That's the simple and accountable way to address a question about county spending.
I won't go on with details about the other audit questions. Most of the other answers were about like the ones I have discussed. As is often the case with financial questions, a lot of the questions were just ignored or the answer was one word: "error."
IF someone, anyone, had bothered to look at the 2001 audit that practically screams "misleading financial data" or if someone, anyone, had looked at the 2002 audit and taken the time to ask questions or to listen to the questions of those who did look at the 2002 audit, then we all could have worked together to straighten out the county's financial mess more quickly.
As it is, trying to go down the road to true openness and accountability has been difficult because there are some officials for whom accountability is a foreign word.
The officials who don't know the meaning of accountability are the same officials who consistently react with anger and resentment when financial questions are asked and who are upset that their financial playhouse (playpen) has been rearranged (at least a little bit) since the state auditors came in. The officials who resent the word accountability are the same ones who are having a tough time adjusting to the law that says that no one person--no, not even the County Mayor-- can spend money or switch money around without the approval of county commission.
Unfortunately, in 2004 the transfers of money by the County Mayor continued and even accelerated. Why didn't switching money around stop in 2004 since the 2003 audit had pointed out that that these actions were illegal? One reason is because audits are done after the accounting year is over and after all the money has already been switched or overspent. I guess you could say that auditors come in after the milk has already been spilt and they report that you spilled the milk and they tell you that you shouldn't do it again.
So what will the post on the 2004 audit show?
More shifting of money.
Why? The Mayor told the auditors that he was shifting money back to try and correct hundreds of thousands dollars worth of payments that the Mayor and his Finance Department paid out of the wrong accounts going all the way back to 1999.
How much was incorrectly paid due to 4-5 years of paying money out of the wrong funds and accounts? About $360,000.
Was county commission asked to approve the transfers as required? No. Was county commission even told that the transfers and corrections were taking place. No. How did county commissioners finally find out about the switching of money? They read about it in the audit--after the money switching had already taken place.
Why wasn't commission told what was going on and asked to approve the transfer? No official response.
Did anyone ask why the transfers occurred and what was being corrected? Yes, I submitted that very question through the Audit Committee.
What was the response from the County Mayor? The same tired old response he gives to just about every financial question. No response to the actual question, just lots of angry words and red-faced attacks upon the person who asked the question.
Click here to see my post of August 31, 2005 for the County Mayor's response to questions that were asked about the 2004 audit--questions that included my question asking what money was switched around and why. You can also access this post and other previous posts by looking at the right side of this blog page and then scrolling down to the archives section.
All of a sudden with the 2003 audit, the county got a resounding wake-up call that emphasized the lack of accountability that has marked the handling of county finances for years.
The state auditors pointed out that record-keeping was lax (or non-existent) , money was missing, checks were written where there were inadequate funds, money was shifted around without county commission's knowledge or approval, accounts were overspent, and the Mayor and his Finance Department spent money that had never been brought to county commission for approval.
I was not surprised in the least at the 2003 findings. Why? Because as a citizen and as a new county commissioner, I had actually gone through the 2002 audit and previous audits. As a commissioner, I tried (unsuccessfully) to get other members of the audit committee to listen and to really look at the audits as well. Click here on 2003 audit findings to see Hamblen County audit findings section on the State Comptroller's website.
Would county commissioners look at the 2002 audit? No. Did they have any questions about the 2002 audit? No.
Audit Chairman Maudie Briggs told me that if I had any questions, I could try and get them answered on my own. I prepared questions, and I tried to get them answered. Had anyone asked the obvious questions about the 2002 audit like I did or had anyone asked to see the responses (and non-responses), then the 2003 audit might have had fewer findings because some changes could have been made before the fiscal year 2003 ended.
With questions and answers on our own, the county could have been further down the road to accountability instead of having to wait for the state auditors to tell us what the local auditors would not tell us--there are no checks and balances, certain individuals and officials have assumed that they can spend taxpayer money as they please rather than within the legal budgeting process, and there is little or no accountability in the handling of the county's finances.
Some of the questions I asked were just commonsense questions that seemed very obvious:
I asked about the fact that the 2002 audit showed that money was spent out of some funds (like the county drug fund and the special revenue fund) but those funds had no "budgeted spending" or appropriations that had been approved by county commission.
I was never told why expenditures had been made and who was spending money without approval by county commission. The 2003 audit, however, explained loudly and clearly why no one would answer that question. Spending that money without approval or appropriation by county commission was a violation of state law. All monies spent by the county must be budgeted and approved by county commission.
I asked whether all legal fees of $83,558 as shown in the 2002 audit were solely for the county's part-time attorney Rusty Cantwell. I was told, yes, that this amount was "only Rusty." When I then pulled financial records about legal charges, it appeared that the answer that I was given was not correct and that about $54,000 was paid to "Rusty" (Mr. Cantwell) in 2002 with large amounts going to other attorneys. Is there a different county financial record somewhere? Obviously, I don't know that. All I can do is go with what I am given as the spending record.
I asked for clarification about several items. One item I asked about was shown in the 2002 audit as "other charges $97,305." When you see huge spending labeled as "other," it's common sense to ask what it's for. The answer I got was that "other" spending was "miscellaneous through county executive."
Yes, the answer to the question is that "other" really means "miscellaneous through county executive." And that answer was supposed to help explain and clarify where $97,305 went? Yeah, sure! Perhaps it's nothing. Maybe the "other" or "miscellaneous" spending of $97,305 was perfectly legitimate. Then why didn't the Mayor or the Mayor's Finance Department just explain or provide an itemized list of what "other" or "miscellaneous" spending of $97,305 was? That's the simple and accountable way to address a question about county spending.
I won't go on with details about the other audit questions. Most of the other answers were about like the ones I have discussed. As is often the case with financial questions, a lot of the questions were just ignored or the answer was one word: "error."
IF someone, anyone, had bothered to look at the 2001 audit that practically screams "misleading financial data" or if someone, anyone, had looked at the 2002 audit and taken the time to ask questions or to listen to the questions of those who did look at the 2002 audit, then we all could have worked together to straighten out the county's financial mess more quickly.
As it is, trying to go down the road to true openness and accountability has been difficult because there are some officials for whom accountability is a foreign word.
The officials who don't know the meaning of accountability are the same officials who consistently react with anger and resentment when financial questions are asked and who are upset that their financial playhouse (playpen) has been rearranged (at least a little bit) since the state auditors came in. The officials who resent the word accountability are the same ones who are having a tough time adjusting to the law that says that no one person--no, not even the County Mayor-- can spend money or switch money around without the approval of county commission.
Unfortunately, in 2004 the transfers of money by the County Mayor continued and even accelerated. Why didn't switching money around stop in 2004 since the 2003 audit had pointed out that that these actions were illegal? One reason is because audits are done after the accounting year is over and after all the money has already been switched or overspent. I guess you could say that auditors come in after the milk has already been spilt and they report that you spilled the milk and they tell you that you shouldn't do it again.
So what will the post on the 2004 audit show?
More shifting of money.
Why? The Mayor told the auditors that he was shifting money back to try and correct hundreds of thousands dollars worth of payments that the Mayor and his Finance Department paid out of the wrong accounts going all the way back to 1999.
How much was incorrectly paid due to 4-5 years of paying money out of the wrong funds and accounts? About $360,000.
Was county commission asked to approve the transfers as required? No. Was county commission even told that the transfers and corrections were taking place. No. How did county commissioners finally find out about the switching of money? They read about it in the audit--after the money switching had already taken place.
Why wasn't commission told what was going on and asked to approve the transfer? No official response.
Did anyone ask why the transfers occurred and what was being corrected? Yes, I submitted that very question through the Audit Committee.
What was the response from the County Mayor? The same tired old response he gives to just about every financial question. No response to the actual question, just lots of angry words and red-faced attacks upon the person who asked the question.
Click here to see my post of August 31, 2005 for the County Mayor's response to questions that were asked about the 2004 audit--questions that included my question asking what money was switched around and why. You can also access this post and other previous posts by looking at the right side of this blog page and then scrolling down to the archives section.
Tuesday, February 28, 2006
February 28, 2006 The 2003 county audit: what a difference an auditor makes
In previous posts, we have looked at the 2002 audit where the county spent $923,000 more than it took in and the 2001 audit that required two blog postings because it is a pretty outrageous financial "record" that provides large volumes of false or misleading financial data about county spending.
Somebody probably should have asked for a refund of the $28,000 that was paid for (wasted on?) the 2001 audit! (See 2001 audit posts of Jan. 4 and Jan. 21).
The 2003 audit that we discuss today is unique--primarily because it was the first audit in recent history performed by someone outside Hamblen County.
I am proud to have had the honor to be the driving force in leading the county commission to hire the state auditors instead of local, private auditors to perform the county audit in 2003, 2004, 2005, and beyond.
I wanted the state to perform the Hamblen County audit for three important reasons:
1. EXPERIENCE. State auditors are more experienced in performing county audits. They know what to look for, and that is a major reason that almost all counties use the state auditors.
2. INDEPENDENCE. I hoped that the actual audit personnel would be more independent since they were less likely to live in Hamblen County and have direct ties with Finance Personnel or local elected officials.
3. SAVINGS. The state charged about $13,000 for the same audit that the local auditors were charging $31,000 for, so I knew there would be a savings of $18,000 by having the state auditors come in.
The first audit by the state auditors proved that the county saved money ($18,000 in SAVINGS) plus the new auditors provided a better audit. The state auditors have tons of EXPERIENCE in performing county audits because they work on county audits throughout East Tennessee almost all year long instead of just performing one county audit each year. In addition, the state auditors, despite some local ties, are more INDEPENDENT than the local auditors were.
How much better was the state-performed audit? Well, the state auditors pointed out problems and violations of state law that had been overlooked, ignored, or missed year after year in previous audits. Most of the violations that the state auditors found were violations that had been occurring (unreported) for years.
Example: There was only one finding in the 2002 audit (the last one performed by the local, private auditors). There were 29 findings in the 2003 audit (the first one performed by state auditors). And, sad to say, some of those 29 separate findings had 4-5 sub-findings.
Almost half (13) of the 29 findings were connected to two offices--the Sheriff's Office (Otto Purkey) and the Office of the County Mayor (David Purkey, Otto's brother). Click here on 2003 audit findings to see the complete list from the audit document.
The Sheriff's Office (Otto Purkey) had 6 findings.
A cash shortage of $14,326.40. Deficiencies and poor record-keeping. Jail receipts unaccounted for. Serious accounting weaknesses for prisoner's funds and personal effects, and weaknesses in controls over cash collections.
The County Mayor's Office (David Purkey) had 7 findings with many sub-findings.
Purchasing deficiencies were noted because there was essentially no purchasing system with blank purchase orders just handed out to departments with no control.
The county's general ledger was not properly maintained or reconciled monthly. Receivables and payables were not accurately reflected.
The state chart of accounts (that is mentioned in the county's financial management contract) was not used as required by law.
There were deficiencies in controls over travel and credit card use.
There were deficiencies in budgeting procedures--where the Mayor did not present a budget to county commission for the drug control fund or the Special Revenue Fund (despite the fact that state law requires this) and where the Mayor expended money from those funds without appropriation or approval of county commission.
In other instances, transfers of appropriations/money were made without the required approval of county commission. This, too, was a violation of state law.
Expenditures and encumbrances (amounts owed at the end of the fiscal year) exceeded the amounts that had been approved by county commission in amounts ranging from $737 to $296,264 in several categories of the General Fund. This, too, was a violation of state law.
There was a fund deficit in the garbage fund of $205,578.
The Capital Improvement (Capital Projects Fund) had a cash overdraft of $34,737.
The Director of Schools had 2 findings:
The Trustee had 3 findings.
The County Court Clerk had 3 findings.
Circuit and General Sessions Court Clerk had 2 findings.
Clerk & Master had 3 findings.
Register's of Deed Office had 1 finding.
Other Findings: 2
More to come on the 2003 audit as the county starts to round the corner.
The county got a "wake-up call" to accountability with the 2003 audit. Most office holders quickly and gladly adjusted to the higher standards and are to be saluted for their work and efforts.
A few office holders who heard the accountability trumpet blaring reacted with silence or fits of uncontrolled rage punctuated by repeated, red-faced public outbursts.
Somebody probably should have asked for a refund of the $28,000 that was paid for (wasted on?) the 2001 audit! (See 2001 audit posts of Jan. 4 and Jan. 21).
The 2003 audit that we discuss today is unique--primarily because it was the first audit in recent history performed by someone outside Hamblen County.
I am proud to have had the honor to be the driving force in leading the county commission to hire the state auditors instead of local, private auditors to perform the county audit in 2003, 2004, 2005, and beyond.
I wanted the state to perform the Hamblen County audit for three important reasons:
1. EXPERIENCE. State auditors are more experienced in performing county audits. They know what to look for, and that is a major reason that almost all counties use the state auditors.
2. INDEPENDENCE. I hoped that the actual audit personnel would be more independent since they were less likely to live in Hamblen County and have direct ties with Finance Personnel or local elected officials.
3. SAVINGS. The state charged about $13,000 for the same audit that the local auditors were charging $31,000 for, so I knew there would be a savings of $18,000 by having the state auditors come in.
The first audit by the state auditors proved that the county saved money ($18,000 in SAVINGS) plus the new auditors provided a better audit. The state auditors have tons of EXPERIENCE in performing county audits because they work on county audits throughout East Tennessee almost all year long instead of just performing one county audit each year. In addition, the state auditors, despite some local ties, are more INDEPENDENT than the local auditors were.
How much better was the state-performed audit? Well, the state auditors pointed out problems and violations of state law that had been overlooked, ignored, or missed year after year in previous audits. Most of the violations that the state auditors found were violations that had been occurring (unreported) for years.
Example: There was only one finding in the 2002 audit (the last one performed by the local, private auditors). There were 29 findings in the 2003 audit (the first one performed by state auditors). And, sad to say, some of those 29 separate findings had 4-5 sub-findings.
Almost half (13) of the 29 findings were connected to two offices--the Sheriff's Office (Otto Purkey) and the Office of the County Mayor (David Purkey, Otto's brother). Click here on 2003 audit findings to see the complete list from the audit document.
The Sheriff's Office (Otto Purkey) had 6 findings.
A cash shortage of $14,326.40. Deficiencies and poor record-keeping. Jail receipts unaccounted for. Serious accounting weaknesses for prisoner's funds and personal effects, and weaknesses in controls over cash collections.
The County Mayor's Office (David Purkey) had 7 findings with many sub-findings.
Purchasing deficiencies were noted because there was essentially no purchasing system with blank purchase orders just handed out to departments with no control.
The county's general ledger was not properly maintained or reconciled monthly. Receivables and payables were not accurately reflected.
The state chart of accounts (that is mentioned in the county's financial management contract) was not used as required by law.
There were deficiencies in controls over travel and credit card use.
There were deficiencies in budgeting procedures--where the Mayor did not present a budget to county commission for the drug control fund or the Special Revenue Fund (despite the fact that state law requires this) and where the Mayor expended money from those funds without appropriation or approval of county commission.
In other instances, transfers of appropriations/money were made without the required approval of county commission. This, too, was a violation of state law.
Expenditures and encumbrances (amounts owed at the end of the fiscal year) exceeded the amounts that had been approved by county commission in amounts ranging from $737 to $296,264 in several categories of the General Fund. This, too, was a violation of state law.
There was a fund deficit in the garbage fund of $205,578.
The Capital Improvement (Capital Projects Fund) had a cash overdraft of $34,737.
The Director of Schools had 2 findings:
The Trustee had 3 findings.
The County Court Clerk had 3 findings.
Circuit and General Sessions Court Clerk had 2 findings.
Clerk & Master had 3 findings.
Register's of Deed Office had 1 finding.
Other Findings: 2
More to come on the 2003 audit as the county starts to round the corner.
The county got a "wake-up call" to accountability with the 2003 audit. Most office holders quickly and gladly adjusted to the higher standards and are to be saluted for their work and efforts.
A few office holders who heard the accountability trumpet blaring reacted with silence or fits of uncontrolled rage punctuated by repeated, red-faced public outbursts.
Sunday, February 26, 2006
February 26, 2006 State Conflicts of Interest: Money and Influence
Just read an interesting article by Brad Schrade in the Nashville Tennessean on conflicts of interest at the state level (Tennessee Highway Patrol and Deputy Governor Dave Cooley) and how money buys influence.
If you have read any of my past blogs, you know that conflicts of interest in our local government are a specific concern of mine. What happened/happens on the state level points out how conflicts of interest compromise the public trust and undermine the integrity of state and local departments.
The Tennessean reports that Deputy Gov. Dave Cooley has apparently tried to stay involved in politics and promotions at the Tennessee Highway Patrol even after Gov. Phil Bredesen told him to keep out.
Bredesen told Cooley to keep out of THP matters over a year ago following a scandal in which a THP lieutenant fixed a Cooley speeding ticket. Just recently, Bredesen condemned cronyism at THP and forced out its top three officials.
Cooley, however, apparently doesn't understand what "keep out" means. Cooley contacted Gerald Nicely, interim commissioner at the THP's parent agency, the Safety Department, commented about "the mess" the Safety Dept. was in, and then asked for Nicely's personal home e-mail address.
It appears that Cooley wanted to be able to contact Nicely at home (instead of using state e-mail) with the idea that such communications would not be subject to public-record laws.
The Tennessean reports that Cooley was "kept informed" about THP issues by his wife, Melanie Cooley, who was executive assistant to then-Safety Commissioner Fred Phillips. Melanie Cooley was appointed to the Safety Dept. by Bredesen shortly after his election.
While at the Safety Dept, it appears that Melanie Cooley had influence at the Highway Patrol. In e-mails to her husband, she mentions THP promotion rosters and requests for favors. Her e-mails also discuss hiring and promotion requests from citizens-- well-heeled citizens who donated large amounts to the Governor's 2002 campaign.
(According to the article, Nicely did provide his home e-mail address to Cooley, but Nicely has said that the deputy governor has not contacted him at his home e-mail account.)
Apparently, Cooley was the go-to man if you needed a THP favor. The article states that when a THP captain wanted to get his fiancee's niece hired as a trooper, the captain wrote a letter to Cooley.
The captain, Larry W. Rucker, asked for Cooley's help in a letter dated Sept. 23, 2003, telling him any "consideration you can give to her (his fiancee's niece) would be greatly appreciated." Rucker and his fianceé apparently contributed$6,300 to the Bredesen campaign, and Rucker himself has since been promoted twice by the Bredesen administration.
The Tennessean reports that the niece was hired in January 2004 and then fired from the patrol last fall after a random drug test came back positive for amphetamines. The niece is apparently appealing the firing, saying she was under treatment for narcolepsy at the time. Rucker, now the lieutenant colonel, is acting commander of the Highway Patrol.
Melanie Cooley no longer works at the Safety Dept. She has been transferred to another state agency.
Conflicts of interest and money and influence!
Just like the song lyrics, they go together like "a horse and carriage" or, in the case of Dave and Melanie Cooley, they go together like "love and marriage."
If you have read any of my past blogs, you know that conflicts of interest in our local government are a specific concern of mine. What happened/happens on the state level points out how conflicts of interest compromise the public trust and undermine the integrity of state and local departments.
The Tennessean reports that Deputy Gov. Dave Cooley has apparently tried to stay involved in politics and promotions at the Tennessee Highway Patrol even after Gov. Phil Bredesen told him to keep out.
Bredesen told Cooley to keep out of THP matters over a year ago following a scandal in which a THP lieutenant fixed a Cooley speeding ticket. Just recently, Bredesen condemned cronyism at THP and forced out its top three officials.
Cooley, however, apparently doesn't understand what "keep out" means. Cooley contacted Gerald Nicely, interim commissioner at the THP's parent agency, the Safety Department, commented about "the mess" the Safety Dept. was in, and then asked for Nicely's personal home e-mail address.
It appears that Cooley wanted to be able to contact Nicely at home (instead of using state e-mail) with the idea that such communications would not be subject to public-record laws.
The Tennessean reports that Cooley was "kept informed" about THP issues by his wife, Melanie Cooley, who was executive assistant to then-Safety Commissioner Fred Phillips. Melanie Cooley was appointed to the Safety Dept. by Bredesen shortly after his election.
While at the Safety Dept, it appears that Melanie Cooley had influence at the Highway Patrol. In e-mails to her husband, she mentions THP promotion rosters and requests for favors. Her e-mails also discuss hiring and promotion requests from citizens-- well-heeled citizens who donated large amounts to the Governor's 2002 campaign.
(According to the article, Nicely did provide his home e-mail address to Cooley, but Nicely has said that the deputy governor has not contacted him at his home e-mail account.)
Apparently, Cooley was the go-to man if you needed a THP favor. The article states that when a THP captain wanted to get his fiancee's niece hired as a trooper, the captain wrote a letter to Cooley.
The captain, Larry W. Rucker, asked for Cooley's help in a letter dated Sept. 23, 2003, telling him any "consideration you can give to her (his fiancee's niece) would be greatly appreciated." Rucker and his fianceé apparently contributed$6,300 to the Bredesen campaign, and Rucker himself has since been promoted twice by the Bredesen administration.
The Tennessean reports that the niece was hired in January 2004 and then fired from the patrol last fall after a random drug test came back positive for amphetamines. The niece is apparently appealing the firing, saying she was under treatment for narcolepsy at the time. Rucker, now the lieutenant colonel, is acting commander of the Highway Patrol.
Melanie Cooley no longer works at the Safety Dept. She has been transferred to another state agency.
Conflicts of interest and money and influence!
Just like the song lyrics, they go together like "a horse and carriage" or, in the case of Dave and Melanie Cooley, they go together like "love and marriage."
February 26, 2006 Proposals for Openness and Improvements in Hamblen County Government
A Strategic Planning Committee was named by the Chairman of the Commission several months ago. It recently held its very first meeting.
Committee Chairman Edwin Osborne asked each commissioner to submit five suggestions or priority areas for government improvement.
I submitted my ideas on Thursday, February 23.
I will just briefly sketch them here. In future posts, I will provide more detail.
1. Ethics--Formulate a thorough ethics policy and guidelines for Hamblen County government. Lots more to come on this. This will be a complicated, but very important process.
2. Policy Initiatives
A. Open up the solicitation process for professional services of engineers and architects in connection with work for the county by issuing requests for proposals when engineering and architectural services are needed and when the amount involved is significant. Seek input from a number of individuals/firms, examine their qualifications, charges, and experience, and then select the best-qualified individual/firm based upon a complete examination of all criteria. There are many good individuals and firms that should be asked and allowed to offer a proposal on county work.
B. Meetings policy: Provide that all meetings of county government are listed on the HC website and publicized in the newspaper at least 48 hours before they occur-- along with a list of major items to be considered. Eliminate the scheduling of meetings prior to 4:00 or 5:00 pm in order to provide the greatest opportunity for citizens to attend. We serve the citizens and their convenience should be uppermost in scheduling meetings.
C. Provide a county number that can be dialed (like 211 East Tennessee Information and Referral in Knox County) to serve as a one-stop referral service for people needing special assistance from government, health and community services, emergency food, substance abuse counseling, low-cost recreation for families or volunteer opportunities.
3. Financial planning:
A. Calculate the effect that OPEB's ("other post-employment benefits") will have on the upcoming 06-07 FY budget and beyond. Commissioners Osborne and Bruce have indicated that this is a huge cost area in the school system. Examples of OPEB's are where the school system makes a lump sum payment to teachers at the time of retirement and pays a part of their health insurance premium after retirement until they reach Medicare age of 65. Donald Gregg from the school system alone or along with Commissioners Bruce and Osborne could present a report before June 1, 2006, with current and projected costs of OPEB's.
B. Pay down the county's debt. Low interest rates are good but eliminating as much of the county debt as possible is even better and frees up money that would be paid out as interest for useful purposes such as equipment upgrades, employee raises, and the like. Don't borrow and spend or tax and spend and pass on the debt to our children and grandchildren unless it's absolutely necessary.
C. Consider creative solutions to education in Hamblen County.
Discipline: To really address school issues, one needs to address the problems created by children who don't want to be at school, are constantly disruptive, don't care if they or anyone else get an education, and are only there because they cannot drop out yet.
If teachers were allowed more time to teach, students would have a better chance of receiving quality education across the board regardless of funding levels.
The problems of the disruptive students should be addressed through a community-wide effort to provide student mentors, information about sources of help, and adult volunteers.
Curriculum: Requiring more math credits--particularly an additional course or at least a refresher course in the senior year before going to college, trade school, or work.
Block scheduling: Is it effective? Or does it just allow students to earn lots of credits outside of the core areas of math, science, English, and social studies? One weakness (trying to cram certain math courses into a semester) has been addressed by making certain math courses year-round. Should we stay with block scheduling? Should we modify block scheduling even further?
Year-round school: This has been kicked around forever. A study was done once. Nine-week sessions with 2-3 weeks off between and 8-10 weeks off in the summer. Is it effective? Is it desirable? Is it still being considered? What do parents think?
Early intervention: When a child K-3 is experiencing learning problems and is not up to grade level, there needs to be immediate detection and then help (not a label). Sending students on to the next grade when they can't read or perform math at their current grade level is a recipe for continuing academic failure and the growth of discipline problems. The problems don't go away. They just increase. Again, community involvement with help from teacher-ed students at WSCC or Carson-Newman, community volunteers (young and old), and student mentors could be a source of critical help for these students.
4. Openness and accountability: Provide complete detail reports of revenues and expenditures from all funds (not just gen, hwy, and garbage) as a standard practice at least quarterly. Placement and updating of this and certain other county financial data on the Hamblen County (HC) website would allow easy access for commissioners and the public. Place the most recent HC audits on the HC website (or provide a link on the HC website that takes one to the audits for certain years as they appear on the Comptroller's website).
5. Completion and indexing of a Hamblen County Code. I spoke to County Attorney Rusty Cantwell about this many months ago and mentioned this again to Commissioner Phillips in January. Numbering, grouping, and indexing resolutions is the key to an efficient record. Having to look back through an index of county commission minutes over a period of 10 years or more to find out whether there is a county resolution about billboards, or any other topic, is inefficient and should never happen. When we have an organized "code" such as other counties have and such as the state has (Tennessee Code Annotated), then it should be made accessible online as well as in hard copy form.
I have not tried to number these in order of importance. They are all important.
There are plenty of other ideas that should be considered such as a (1) local tipline for reporting fraud, waste, or abuse, and (2) a reward and incentive system for employees who come up with ways to save the county money or to improve services.
One other suggestion--let's invite the public to submit suggestions, too.
Committee Chairman Edwin Osborne asked each commissioner to submit five suggestions or priority areas for government improvement.
I submitted my ideas on Thursday, February 23.
I will just briefly sketch them here. In future posts, I will provide more detail.
1. Ethics--Formulate a thorough ethics policy and guidelines for Hamblen County government. Lots more to come on this. This will be a complicated, but very important process.
2. Policy Initiatives
A. Open up the solicitation process for professional services of engineers and architects in connection with work for the county by issuing requests for proposals when engineering and architectural services are needed and when the amount involved is significant. Seek input from a number of individuals/firms, examine their qualifications, charges, and experience, and then select the best-qualified individual/firm based upon a complete examination of all criteria. There are many good individuals and firms that should be asked and allowed to offer a proposal on county work.
B. Meetings policy: Provide that all meetings of county government are listed on the HC website and publicized in the newspaper at least 48 hours before they occur-- along with a list of major items to be considered. Eliminate the scheduling of meetings prior to 4:00 or 5:00 pm in order to provide the greatest opportunity for citizens to attend. We serve the citizens and their convenience should be uppermost in scheduling meetings.
C. Provide a county number that can be dialed (like 211 East Tennessee Information and Referral in Knox County) to serve as a one-stop referral service for people needing special assistance from government, health and community services, emergency food, substance abuse counseling, low-cost recreation for families or volunteer opportunities.
3. Financial planning:
A. Calculate the effect that OPEB's ("other post-employment benefits") will have on the upcoming 06-07 FY budget and beyond. Commissioners Osborne and Bruce have indicated that this is a huge cost area in the school system. Examples of OPEB's are where the school system makes a lump sum payment to teachers at the time of retirement and pays a part of their health insurance premium after retirement until they reach Medicare age of 65. Donald Gregg from the school system alone or along with Commissioners Bruce and Osborne could present a report before June 1, 2006, with current and projected costs of OPEB's.
B. Pay down the county's debt. Low interest rates are good but eliminating as much of the county debt as possible is even better and frees up money that would be paid out as interest for useful purposes such as equipment upgrades, employee raises, and the like. Don't borrow and spend or tax and spend and pass on the debt to our children and grandchildren unless it's absolutely necessary.
C. Consider creative solutions to education in Hamblen County.
Discipline: To really address school issues, one needs to address the problems created by children who don't want to be at school, are constantly disruptive, don't care if they or anyone else get an education, and are only there because they cannot drop out yet.
If teachers were allowed more time to teach, students would have a better chance of receiving quality education across the board regardless of funding levels.
The problems of the disruptive students should be addressed through a community-wide effort to provide student mentors, information about sources of help, and adult volunteers.
Curriculum: Requiring more math credits--particularly an additional course or at least a refresher course in the senior year before going to college, trade school, or work.
Block scheduling: Is it effective? Or does it just allow students to earn lots of credits outside of the core areas of math, science, English, and social studies? One weakness (trying to cram certain math courses into a semester) has been addressed by making certain math courses year-round. Should we stay with block scheduling? Should we modify block scheduling even further?
Year-round school: This has been kicked around forever. A study was done once. Nine-week sessions with 2-3 weeks off between and 8-10 weeks off in the summer. Is it effective? Is it desirable? Is it still being considered? What do parents think?
Early intervention: When a child K-3 is experiencing learning problems and is not up to grade level, there needs to be immediate detection and then help (not a label). Sending students on to the next grade when they can't read or perform math at their current grade level is a recipe for continuing academic failure and the growth of discipline problems. The problems don't go away. They just increase. Again, community involvement with help from teacher-ed students at WSCC or Carson-Newman, community volunteers (young and old), and student mentors could be a source of critical help for these students.
4. Openness and accountability: Provide complete detail reports of revenues and expenditures from all funds (not just gen, hwy, and garbage) as a standard practice at least quarterly. Placement and updating of this and certain other county financial data on the Hamblen County (HC) website would allow easy access for commissioners and the public. Place the most recent HC audits on the HC website (or provide a link on the HC website that takes one to the audits for certain years as they appear on the Comptroller's website).
5. Completion and indexing of a Hamblen County Code. I spoke to County Attorney Rusty Cantwell about this many months ago and mentioned this again to Commissioner Phillips in January. Numbering, grouping, and indexing resolutions is the key to an efficient record. Having to look back through an index of county commission minutes over a period of 10 years or more to find out whether there is a county resolution about billboards, or any other topic, is inefficient and should never happen. When we have an organized "code" such as other counties have and such as the state has (Tennessee Code Annotated), then it should be made accessible online as well as in hard copy form.
I have not tried to number these in order of importance. They are all important.
There are plenty of other ideas that should be considered such as a (1) local tipline for reporting fraud, waste, or abuse, and (2) a reward and incentive system for employees who come up with ways to save the county money or to improve services.
One other suggestion--let's invite the public to submit suggestions, too.
Thursday, February 16, 2006
February 16, 2006 A New Political and Personal Direction
I am not running for re-election to county commission in 2006. I went back and forth on whether or not to run for the past several weeks. The decision was finally made last night.
Although many people encouraged another run and family and supporters were ready to hit the campaign trail, I made the decision not to run so that I can devote more time to my family and start using my law license to help people. I will continue to work on local accountability issues. However, I will simply do so in ways other than serving on county commission.
I will continue to use this blog as one way of getting the continuing message of accountability out.
In looking back and in looking forward to the remaining seven months of my term, I can say that I did what I said I would do and that I will continue to do so. I have never wavered, and I achieved my campaign goals. Among the many achievements were the following:
1. The state, instead of a local private auditor, now performs the yearly county audit. The savings to the county have been huge--$18,000/year. During the past 3 years, that has meant a total saving to the county of over $54,000 plus a better overall audit.
2. County Commission meetings are now taped and televised on Charter and Adelphia cable television. This was a big push on my part because of my belief in open government and knowing that sunshine acts as a "purifier" in the conduct of the public's business. Charter Cable Company donated video equipment, and Commissioner Phillips and I secured and donated audio equipment and microphones. My husband Ron provided materials free of charge and donated his own time to build a platform where the camera operator could sit. If you can't get to the commission meeting, you can watch it at home.
3. I made a proposal in November 2002 to have the county provide the financing for HVAC units (heating, venting, and air conditioning units for Lincoln and Meadowview Schools) so the schools could accept the low equipment bid and save $60,000. Although the schools chose not to let the county provide financing on the HVAC units at that time and thus gave up a possible savings of $60,000, the school system later accepted the idea of county financing on purchases such as buses and has saved money.
4. One of the most dramatic savings--to the tune of $1.1 million dollars for the county taxpayers-- occurred when I did not just blindly accept the state calculation of the Hamblen County certified (post-appraisal) tax rate in July 2005. All commissioners were sent packets from the County Mayor with the new state-certified tax rate along with local budgets that had been prepared by the Mayor's Finance Department using the proposed state tax rate.
I looked at the rate and the related budgets that had been prepared by the County Mayor and knew that something was wrong with both. The rate that the state had sent to Hamblen County, the rate that the Mayor's Finance Department had used to prepare a revised county budget in July 2005, was too high.
I called the Assessor and told him what I had found--that the state certified tax rate was incorrect and that the new tax rate should be about 11 cents less. After a phone call, the state provided a corrected, lower tax rate, and the resulting savings benefited the taxpayers of Hamblen County to the tune of about $1.1 million dollars.
Trust but verify has been my motto in connection with pushing for accountability for tax dollars. The importance of checking everything was proven big-time with my review of those state tax calculations. For me, doing that check was nothing special. I try to check as much county financial information as I possibly can because public service means working to save the taxpayers every dollar and being accountable in seeing that every dollar that is spent, is spent wisely.
I have served my constituents and tried to address their concerns--from having a tree removed that obstructed the view at a dangerous intersection, to saving the taxpayers $18,000/year on the county audit, to saving Hamblen County taxpayers over $1.1 million dollars by checking the state's certified tax rate.
I would like to express my sincere thanks to the voters of the 14th district who supported and elected me to the Hamblen County Commission in 2002. Serving the people of my district during the past four years has been a great honor, and I can never adequately express my appreciation for the trust that was placed in me.
At this time, however, I need to devote more time to helping my family, and I need to use my law degree to help others. I will stay involved, and I will continue to be a guardian for taxpayers. I will continue to attend meetings, and I will speak out about controlling taxes and controlling spending just as I did before I was elected.
I do not rule out the possibility of a future run for office or some other sort of involvement in government.
The taxpayers and everyday citizens of Hamblen County deserve an open and accountable government. That requires constant vigilance and a careful watch over county spending.
On a very personal note, I want to thank my family for their love and support. My husband Ron, my son Will, and my daughters Jenny and Katie have supported me through three years of law school, helped in my campaign for office in 2002, and have listened and provided input as I have come up with proposals to save the county money and to balance county budgets.
I have been blessed with very special parents, Bill and Helen Catron, who have been a source of strength and support in whatever I have attempted. My father passed away in May 2005, but his legacy of hard work, integrity, and honesty remain. I strive to live up to the example that he set. I also want to thank my sisters--Laura Catron and Lisa Catron Bible. I can not say enough about their encouragement and support and the many memories and experiences we have shared.
In future posts, I will explain the events that led up to entering law school and that resulted in my run for county commission in 2002.
In the meantime, I will continue to be the voice of fiscal conservatism and a watchdog for the citizens of Hamblen County.
Although many people encouraged another run and family and supporters were ready to hit the campaign trail, I made the decision not to run so that I can devote more time to my family and start using my law license to help people. I will continue to work on local accountability issues. However, I will simply do so in ways other than serving on county commission.
I will continue to use this blog as one way of getting the continuing message of accountability out.
In looking back and in looking forward to the remaining seven months of my term, I can say that I did what I said I would do and that I will continue to do so. I have never wavered, and I achieved my campaign goals. Among the many achievements were the following:
1. The state, instead of a local private auditor, now performs the yearly county audit. The savings to the county have been huge--$18,000/year. During the past 3 years, that has meant a total saving to the county of over $54,000 plus a better overall audit.
2. County Commission meetings are now taped and televised on Charter and Adelphia cable television. This was a big push on my part because of my belief in open government and knowing that sunshine acts as a "purifier" in the conduct of the public's business. Charter Cable Company donated video equipment, and Commissioner Phillips and I secured and donated audio equipment and microphones. My husband Ron provided materials free of charge and donated his own time to build a platform where the camera operator could sit. If you can't get to the commission meeting, you can watch it at home.
3. I made a proposal in November 2002 to have the county provide the financing for HVAC units (heating, venting, and air conditioning units for Lincoln and Meadowview Schools) so the schools could accept the low equipment bid and save $60,000. Although the schools chose not to let the county provide financing on the HVAC units at that time and thus gave up a possible savings of $60,000, the school system later accepted the idea of county financing on purchases such as buses and has saved money.
4. One of the most dramatic savings--to the tune of $1.1 million dollars for the county taxpayers-- occurred when I did not just blindly accept the state calculation of the Hamblen County certified (post-appraisal) tax rate in July 2005. All commissioners were sent packets from the County Mayor with the new state-certified tax rate along with local budgets that had been prepared by the Mayor's Finance Department using the proposed state tax rate.
I looked at the rate and the related budgets that had been prepared by the County Mayor and knew that something was wrong with both. The rate that the state had sent to Hamblen County, the rate that the Mayor's Finance Department had used to prepare a revised county budget in July 2005, was too high.
I called the Assessor and told him what I had found--that the state certified tax rate was incorrect and that the new tax rate should be about 11 cents less. After a phone call, the state provided a corrected, lower tax rate, and the resulting savings benefited the taxpayers of Hamblen County to the tune of about $1.1 million dollars.
Trust but verify has been my motto in connection with pushing for accountability for tax dollars. The importance of checking everything was proven big-time with my review of those state tax calculations. For me, doing that check was nothing special. I try to check as much county financial information as I possibly can because public service means working to save the taxpayers every dollar and being accountable in seeing that every dollar that is spent, is spent wisely.
I have served my constituents and tried to address their concerns--from having a tree removed that obstructed the view at a dangerous intersection, to saving the taxpayers $18,000/year on the county audit, to saving Hamblen County taxpayers over $1.1 million dollars by checking the state's certified tax rate.
I would like to express my sincere thanks to the voters of the 14th district who supported and elected me to the Hamblen County Commission in 2002. Serving the people of my district during the past four years has been a great honor, and I can never adequately express my appreciation for the trust that was placed in me.
At this time, however, I need to devote more time to helping my family, and I need to use my law degree to help others. I will stay involved, and I will continue to be a guardian for taxpayers. I will continue to attend meetings, and I will speak out about controlling taxes and controlling spending just as I did before I was elected.
I do not rule out the possibility of a future run for office or some other sort of involvement in government.
The taxpayers and everyday citizens of Hamblen County deserve an open and accountable government. That requires constant vigilance and a careful watch over county spending.
On a very personal note, I want to thank my family for their love and support. My husband Ron, my son Will, and my daughters Jenny and Katie have supported me through three years of law school, helped in my campaign for office in 2002, and have listened and provided input as I have come up with proposals to save the county money and to balance county budgets.
I have been blessed with very special parents, Bill and Helen Catron, who have been a source of strength and support in whatever I have attempted. My father passed away in May 2005, but his legacy of hard work, integrity, and honesty remain. I strive to live up to the example that he set. I also want to thank my sisters--Laura Catron and Lisa Catron Bible. I can not say enough about their encouragement and support and the many memories and experiences we have shared.
In future posts, I will explain the events that led up to entering law school and that resulted in my run for county commission in 2002.
In the meantime, I will continue to be the voice of fiscal conservatism and a watchdog for the citizens of Hamblen County.
Tuesday, February 14, 2006
February 14, 2006 Investigative Audit: Tn School Boards Assn.
Audits come in many sizes and varieties.
The type of audit that I have been discussing in recent posts is a simple "financial" audit involving a limited examination of a very small number or sampling of financial transactions (such as occurs
with the required audits of all Tennessee counties).
Another type of audit is an "investigative audit" and one such audit just made big news in Tennessee. As a result of a tipster's report to the state, an investigative audit of the Tennessee School Boards Association (TSBA) was performed.
An investigative audit is special. It is far more extensive than a financial audit. The investigative auditor actually searches out information and looks for fraud and illegalities (unlike the routine random examination of a small sampling of transactions that occurs in a financial audit).
In a very simplistic way, the two audits can be compared as follows: A financial audit just looks at a few checks to see if everything adds up. An investigative audit goes deeper and attempts to find out if the checks and financial data are correct and whether the checks were ever legally authorized.
Obviously, there's a lot of difference in having an auditor come in, look at a few checks, and say everything "adds up" (financial audit) and having an auditor come in, look at several checks in depth, and find that there are checks that shouldn't have been written at all and that illegal payments were made (investigative audit).
So what did the in-depth investigative audit of the TSBA (Tennessee School Boards Assn.) find? Well, for starters, the audit reported that John Evans, program manager of the TSBA Risk Management Insurance Trust, had received over $500,000 in unauthorized commissions and interest.
It also stated that Dan Tollett, former executive director of TSBA, had received more than $400,000 in improper payments from the taxpayer-funded organization. Tollett resigned as a director of the Risk
Management Trust on Jan. 31.
Evans was recently questioned about his actions by the House-Senate Education Committee of the Tennessee Legislature.
Auditors found that payment of $492,694 in special commissions to Evans had not been authorized. Although auditors reported that board members could not recall any authorization and records reflect no such approval, Evans said that all fees and commissions were authorized and that three board members now recall the authorization. The records, he said, are "being reconstructed."
Evans admitted that he was involved, until 1999, in the establishment and operation of an insurance trust fund that subsequently went bankrupt and cost the governments involved more than $4 million. Evans also admitted that he had at least 52 insurance licensing violations levied against him in Kentucky.
Tollett, who declined to appear before the Committee, "retired" from TSBA in 1994 and drew state retirement benefits totalling $276,856 from 1994-2000.
During his "retirement," however, he was still employed by TSBA through a separate TSBA entity that he had created just prior to "retiring."
The audit says that Tollett misled TCRS (Tennessee consolidated Retirement System). Instead of making Tollett repay the "retirement" benefits, Tennessee School Boards (through TSBA) refunded the benefits owed back to the state retirement system.
TSBA members face a huge credibility challenge. Corporate scandals in recent years reveal numerous cases of board members who didn't know squat about the organization's financial arrangements and didn't try to find out. Blind ignorance is no longer a good defense.
The individual members of the TSBA — and in particular TSBA board members — are responsible for the efficient operation of schools in 136 districts across Tennessee.
Tax money used to fund TSBA appears to have been abused as TSBA leaders drew retirement benefits while continuing to draw a TSBA salary through a "sham" organization.
Taxpayers across the state can only hope that local School Boards are more careful with the tax money used to run their local schools than these same local School Boards have been in monitoring the tax money they provided to fund their Tennessee School Boards Association (TSBA).
The type of audit that I have been discussing in recent posts is a simple "financial" audit involving a limited examination of a very small number or sampling of financial transactions (such as occurs
with the required audits of all Tennessee counties).
Another type of audit is an "investigative audit" and one such audit just made big news in Tennessee. As a result of a tipster's report to the state, an investigative audit of the Tennessee School Boards Association (TSBA) was performed.
An investigative audit is special. It is far more extensive than a financial audit. The investigative auditor actually searches out information and looks for fraud and illegalities (unlike the routine random examination of a small sampling of transactions that occurs in a financial audit).
In a very simplistic way, the two audits can be compared as follows: A financial audit just looks at a few checks to see if everything adds up. An investigative audit goes deeper and attempts to find out if the checks and financial data are correct and whether the checks were ever legally authorized.
Obviously, there's a lot of difference in having an auditor come in, look at a few checks, and say everything "adds up" (financial audit) and having an auditor come in, look at several checks in depth, and find that there are checks that shouldn't have been written at all and that illegal payments were made (investigative audit).
So what did the in-depth investigative audit of the TSBA (Tennessee School Boards Assn.) find? Well, for starters, the audit reported that John Evans, program manager of the TSBA Risk Management Insurance Trust, had received over $500,000 in unauthorized commissions and interest.
It also stated that Dan Tollett, former executive director of TSBA, had received more than $400,000 in improper payments from the taxpayer-funded organization. Tollett resigned as a director of the Risk
Management Trust on Jan. 31.
Evans was recently questioned about his actions by the House-Senate Education Committee of the Tennessee Legislature.
Auditors found that payment of $492,694 in special commissions to Evans had not been authorized. Although auditors reported that board members could not recall any authorization and records reflect no such approval, Evans said that all fees and commissions were authorized and that three board members now recall the authorization. The records, he said, are "being reconstructed."
Evans admitted that he was involved, until 1999, in the establishment and operation of an insurance trust fund that subsequently went bankrupt and cost the governments involved more than $4 million. Evans also admitted that he had at least 52 insurance licensing violations levied against him in Kentucky.
Tollett, who declined to appear before the Committee, "retired" from TSBA in 1994 and drew state retirement benefits totalling $276,856 from 1994-2000.
During his "retirement," however, he was still employed by TSBA through a separate TSBA entity that he had created just prior to "retiring."
The audit says that Tollett misled TCRS (Tennessee consolidated Retirement System). Instead of making Tollett repay the "retirement" benefits, Tennessee School Boards (through TSBA) refunded the benefits owed back to the state retirement system.
TSBA members face a huge credibility challenge. Corporate scandals in recent years reveal numerous cases of board members who didn't know squat about the organization's financial arrangements and didn't try to find out. Blind ignorance is no longer a good defense.
The individual members of the TSBA — and in particular TSBA board members — are responsible for the efficient operation of schools in 136 districts across Tennessee.
Tax money used to fund TSBA appears to have been abused as TSBA leaders drew retirement benefits while continuing to draw a TSBA salary through a "sham" organization.
Taxpayers across the state can only hope that local School Boards are more careful with the tax money used to run their local schools than these same local School Boards have been in monitoring the tax money they provided to fund their Tennessee School Boards Association (TSBA).
Thursday, February 09, 2006
February 11, 2006 Ethics Legislation at the State
A brief post on the state ethics legislation that passed this past Monday.
It is unfortunate that it takes a political crisis, such as the Tennessee Waltz indictments, to lead to legislation and efforts to restrain lawmakers from using their offices for personal gain.
That, however, appears to be the nature of politics at the present time. Get as much as you can for you and for your family before someone blows the whistle.
Having looked at summaries of the new ethics legislation, my feeling is that the new legislation is an improvement. And, let's face it, just about anything would have been an improvement. However, the laws regulating lobbying and conflicts of interest are still not strong enough.
My personal feeling is that special interest groups wield too much influence in Nashville. Too much influence is exerted by dollars, political contributions, and wining and dining instead of through open and public discussion and consideration in committee and legislative meetings.
The more that is disclosed about legislators, lobbyists, committee and legislative votes, the more open and responsive all legislators will be--both to groups and to individual constituents.
One of my primary concerns in government at all levels (local, state, national) is conflicts of interest. When someone takes office and then puts 3 or 4 or more family members on the government payroll, that official is starting down a slippery slope. Eventually, the situation gives the appearance of using one's office and the public trust for the financial benefit of one's family.
Of course, there is also a problem of conflicts of interest where family members serve in numerous elected or appointed positions.
This is a problem at the local level, and I have discussed conflicts on the county commission previously such as when School Board member Carolyn Spoone Holt comes to County Commission and requests that her brother Commissioner Joe Spoone provide funds for an International School for non-English speaking students.
Or when Paula Bruce Combs, an asst. principal and school system employee, sits in the audience at a County Commission meeting or watches the tape at home as her brother Commissioner Ricky Bruce votes on funding issues that will affect the amount of pay and benefits that Paula receives.
Or when Charlene Spoone, who works as a computer technician for the school system, sits at home with her county commission husband Joe Spoone, and school funding comes up.
Or when Witt principal Stan Harville sits in the audience at a commission meeting as his father Commissioner Herbert Harville votes on school funding that will affect both Stan's and his wife's pay and benefits.
Before anyone gets too upset at the mention of these names, let's remember that these are simply facts and the most well-known relationships. Having pointed out the facts and the relationships, this is not to say that Carolyn Spoone Holt shouldn't serve on the school board or that Joe Spoone shouldn't serve on county commission or that Charlene Spoone shouldn't be a school board employee.
Perhaps, however, Joe should abstain from the vote when school funding issues are presented.
Conflicts are found at the state level as well. There has been a lot of reporting recently about the Tennessee Highway Patrol. One report was about the "fixing" of a speeding ticket that had been given to Deputy Governor Dave Cooley. As the story began to unfold, it was reported that Melanie Cooley (Dave Cooley's wife) had recently served as executive assistant to the safety commissioner who is over the THP, but she was transferred to another government job after her husband's ticket scandal was reported.
Other reports have questioned whether conflicts of interest exist where Speaker of the House Jimmy Naifeh's wife works as a highly paid lobbyist trying to sway votes in the Tennessee legislature. She represents a lot of different companies and groups. Is there a legal conflict of interest in lobbying her own husband and trying to sway votes in the Legislature? Perhaps not. Is there a moral and ethical conflict of interest? In my opinion, there is.
An elected official occupies a position of public trust. Many officials find it extremely difficult to resist the temptation to use their office for financial gain for themselves and their family. And likewise family members of elected officials find it difficult to resist using the political connections of their relative to seek financial gain for themselves and their family.
We've all heard the statement that you can't legislate ethics and morality. However, you can enact laws that prohibit conflicts of interest and you can provide punishment for those who abuse the public trust and who use their offices for financial gain.
There are already a number of laws on the books in this regard. Additional prohibitions on conflicts of interest and abuse of offices of public trust would strengthen the standards that we set for elected and appointed officials.
Instead of trying to stay just within the bounds of the law, officials should strive to meet the highest ethical standards and should avoid even the appearance of ethical or moral impropriety.
At times, that might necessitate that one recuse himself or herself from voting where there is a potential conflict or the appearance of impropriety.
It is unfortunate that it takes a political crisis, such as the Tennessee Waltz indictments, to lead to legislation and efforts to restrain lawmakers from using their offices for personal gain.
That, however, appears to be the nature of politics at the present time. Get as much as you can for you and for your family before someone blows the whistle.
Having looked at summaries of the new ethics legislation, my feeling is that the new legislation is an improvement. And, let's face it, just about anything would have been an improvement. However, the laws regulating lobbying and conflicts of interest are still not strong enough.
My personal feeling is that special interest groups wield too much influence in Nashville. Too much influence is exerted by dollars, political contributions, and wining and dining instead of through open and public discussion and consideration in committee and legislative meetings.
The more that is disclosed about legislators, lobbyists, committee and legislative votes, the more open and responsive all legislators will be--both to groups and to individual constituents.
One of my primary concerns in government at all levels (local, state, national) is conflicts of interest. When someone takes office and then puts 3 or 4 or more family members on the government payroll, that official is starting down a slippery slope. Eventually, the situation gives the appearance of using one's office and the public trust for the financial benefit of one's family.
Of course, there is also a problem of conflicts of interest where family members serve in numerous elected or appointed positions.
This is a problem at the local level, and I have discussed conflicts on the county commission previously such as when School Board member Carolyn Spoone Holt comes to County Commission and requests that her brother Commissioner Joe Spoone provide funds for an International School for non-English speaking students.
Or when Paula Bruce Combs, an asst. principal and school system employee, sits in the audience at a County Commission meeting or watches the tape at home as her brother Commissioner Ricky Bruce votes on funding issues that will affect the amount of pay and benefits that Paula receives.
Or when Charlene Spoone, who works as a computer technician for the school system, sits at home with her county commission husband Joe Spoone, and school funding comes up.
Or when Witt principal Stan Harville sits in the audience at a commission meeting as his father Commissioner Herbert Harville votes on school funding that will affect both Stan's and his wife's pay and benefits.
Before anyone gets too upset at the mention of these names, let's remember that these are simply facts and the most well-known relationships. Having pointed out the facts and the relationships, this is not to say that Carolyn Spoone Holt shouldn't serve on the school board or that Joe Spoone shouldn't serve on county commission or that Charlene Spoone shouldn't be a school board employee.
Perhaps, however, Joe should abstain from the vote when school funding issues are presented.
Conflicts are found at the state level as well. There has been a lot of reporting recently about the Tennessee Highway Patrol. One report was about the "fixing" of a speeding ticket that had been given to Deputy Governor Dave Cooley. As the story began to unfold, it was reported that Melanie Cooley (Dave Cooley's wife) had recently served as executive assistant to the safety commissioner who is over the THP, but she was transferred to another government job after her husband's ticket scandal was reported.
Other reports have questioned whether conflicts of interest exist where Speaker of the House Jimmy Naifeh's wife works as a highly paid lobbyist trying to sway votes in the Tennessee legislature. She represents a lot of different companies and groups. Is there a legal conflict of interest in lobbying her own husband and trying to sway votes in the Legislature? Perhaps not. Is there a moral and ethical conflict of interest? In my opinion, there is.
An elected official occupies a position of public trust. Many officials find it extremely difficult to resist the temptation to use their office for financial gain for themselves and their family. And likewise family members of elected officials find it difficult to resist using the political connections of their relative to seek financial gain for themselves and their family.
We've all heard the statement that you can't legislate ethics and morality. However, you can enact laws that prohibit conflicts of interest and you can provide punishment for those who abuse the public trust and who use their offices for financial gain.
There are already a number of laws on the books in this regard. Additional prohibitions on conflicts of interest and abuse of offices of public trust would strengthen the standards that we set for elected and appointed officials.
Instead of trying to stay just within the bounds of the law, officials should strive to meet the highest ethical standards and should avoid even the appearance of ethical or moral impropriety.
At times, that might necessitate that one recuse himself or herself from voting where there is a potential conflict or the appearance of impropriety.
Monday, January 30, 2006
January 30, 2006 The 2002 Audit Bottom Line: The county spent $923,000 more than it took in
As I continue to report on Hamblen County audits starting with the year 2001, we move to 2002 with this reminder. County financial audits have a certain usefulness, but they are very limited in scope and they are not designed to detect fraud, waste, or abuse, according to the State Comptroller's Office--the state department that monitors all audits of county government.
The title of this post tells the big headline story for 2002.
According to the 2002 audit (the last one performed by the private, local auditors), the county spent $923,000 more than it took in.
Unfortunately, there was nothing new about the county spending more than it took in---in fact, going all the way back to 1992, 2002 was the 7th year that the county spent more than it took in.
One dramatic difference, however, was the size of the deficit---$923,000. The previous high deficit was $815,666.
Another dramatic difference was that with this huge deficit, the county ended up with its lowest fund balance as of 6/30/02-- an ending fund balance of just $389,568.
The third important item to note is that the county found itself in this financial mess less than three years after a wheel tax was started "to build up the general fund balance."
There was only one major finding or accounting irregularity reported in the audit and that was to state that the Finance Department spent more than county commission had appropriated out of the General Fund, Garbage Fund, and Highway Fund. This is a violation of state law.
(This one reported finding by the local auditors will contrast dramatically with the 29 reported "findings" in the next year's 2003 audit that was performed by state auditors at a significant financial savings to the county and that will be the subject of a future post.)
The local auditors also stated that Hamblen County operated on a cash basis in 2002 when officials should recognize that "Hamblen County is required to report on the modified accrual basis." Accrual is an accounting term that in general means that you put income and expenses in the year where they belong even if you haven't yet received the income or written the expense check.
The reply to this audit finding from the Finance Department was that Hamblen County had "consistently" been using the cash basis of accounting in previous years.
So why hadn't this problem been reported in prior audits and corrected?
These two statements seem odd.
Did the auditor tell the County Mayor and the Finance Department during the many prior years that he had been performing the county audit that they were required to operate on the modified accrual basis?
1. If the auditor did tell the county repeatedly that it must operate on the modified accrual basis, why did the county (according to the Finance Department) say it had "consistently" been using the cash basis of accounting instead?
2. If the auditor did not tell the county that it was required to report on the modified accrual basis during the many prior audits, then why did he suddenly bring this up in the 2002 audit?
More on 2002 next time.
Any comments may be sent to noe4accountability@yahoo.com. If you would like to have your comments published, please include your name, address, and phone number for contact and verification.
The title of this post tells the big headline story for 2002.
According to the 2002 audit (the last one performed by the private, local auditors), the county spent $923,000 more than it took in.
Unfortunately, there was nothing new about the county spending more than it took in---in fact, going all the way back to 1992, 2002 was the 7th year that the county spent more than it took in.
One dramatic difference, however, was the size of the deficit---$923,000. The previous high deficit was $815,666.
Another dramatic difference was that with this huge deficit, the county ended up with its lowest fund balance as of 6/30/02-- an ending fund balance of just $389,568.
The third important item to note is that the county found itself in this financial mess less than three years after a wheel tax was started "to build up the general fund balance."
There was only one major finding or accounting irregularity reported in the audit and that was to state that the Finance Department spent more than county commission had appropriated out of the General Fund, Garbage Fund, and Highway Fund. This is a violation of state law.
(This one reported finding by the local auditors will contrast dramatically with the 29 reported "findings" in the next year's 2003 audit that was performed by state auditors at a significant financial savings to the county and that will be the subject of a future post.)
The local auditors also stated that Hamblen County operated on a cash basis in 2002 when officials should recognize that "Hamblen County is required to report on the modified accrual basis." Accrual is an accounting term that in general means that you put income and expenses in the year where they belong even if you haven't yet received the income or written the expense check.
The reply to this audit finding from the Finance Department was that Hamblen County had "consistently" been using the cash basis of accounting in previous years.
So why hadn't this problem been reported in prior audits and corrected?
These two statements seem odd.
Did the auditor tell the County Mayor and the Finance Department during the many prior years that he had been performing the county audit that they were required to operate on the modified accrual basis?
1. If the auditor did tell the county repeatedly that it must operate on the modified accrual basis, why did the county (according to the Finance Department) say it had "consistently" been using the cash basis of accounting instead?
2. If the auditor did not tell the county that it was required to report on the modified accrual basis during the many prior audits, then why did he suddenly bring this up in the 2002 audit?
More on 2002 next time.
Any comments may be sent to noe4accountability@yahoo.com. If you would like to have your comments published, please include your name, address, and phone number for contact and verification.
Friday, January 20, 2006
January 22, 2006 2001 Spending Reported to/by the Tribune
Before you read this post, it would be helpful to review previous posts of January 4th, 20th, and 22nd for background information on county spending figures as reported in the official 2001 audit.
This is the text of an article that appeared in the Citizen-Tribune on April 16, 2002.
The 2002 primary elections were about 3 weeks away.
The article refers to and compares county spending in 1997 and in 2001 (the year that the audit of county spending showed hundreds of end-of-year adjustments).
The headline is shown in red.
------------------------------------------------------------------------------------
Purkey: County Spending within Bounds
BY ROBERT MOORE
Tribune Staff Writer
Political candidates and interested bystanders who say Hamblen County government spending is out of control are wrong, county officials say.
Between 1997 and 2001, expenditures on county government-- not counting the school system-- grew at a slower rate than the rate of inflation, Hamblen County Executive David Purkey reported Monday afternoon.
During that five-year period, county government grew by 5.8%. In the same period, the inflation rate was 8.5%, according to statistics compiled by Trustee Bill Brittain.
"The answer is the management of money," Purkey said. "It's very simple. I get real upset when I hear people in the community and candidates who are running against us wail and gnash their teeth about spending being out of control. That's not true. We do a lot of things here in the courthouse and in county government to share duties. Employees are being shared."
The audited numbers indicate that the 1997 non-school budget was $14.1 million. The non-school budget in 2001 was $14.8 million. Purkey's comments came at a county commission work session Monday afternoon.
The school system's budget is not included in the report because it has its own board that decides how money should be spent. Also, once the county commission allocates money to the school system, the county commission has not spending oversight function.
The numbers take into account general-fund expenditures, garbage and highway funds and debt service, including the initial debt service on the $34.7 million school spending program, according to Brittain.
"They tell me that spending in county government is out of control as the accusations have been made," the trustee said. "We're providing quality service for a reasonable price. It insults me for people to go out there and say that spending is out of control when every day we try to find ways to be more efficient and save money."
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If you automatically accept the statement in this front-page "news" article that 2001 expenditures were $14.8 Million without any checking or verification, then you would think that county spending increased by only $700,000 (5.8%) between 1997-2001.
But if instead you decide to check and verify the 2001 expenditures by actually looking at the 2001 audit, you will find that the total of 2001 audited expenditures for those four funds is approximately $16.5 million (not $14.8 million as reported).
I put out this information with a cautionary note: Questions about the difference in the 2001 reported spending and the 2001 actual spending have been asked and ignored. A citizen told the entire commission that she had asked County Mayor David Purkey to tell her what the true total of 2001 audited spending really was in the four funds. No response other than a threat to sue her.
My expenditure total of $16.5 Million is based on the total of expenditures for each of the four funds as found in the 2001 audit. (The expenditure total as shown in the audit would be even higher, but I deducted the amount used to pay back tax anticipation notes at the end of the year).
After you review the audit, everything that was said and reported to commissioners and to the public changes significantly.
County spending appears to have increased by $2.4 million (not $700,000 as reported).
County spending appears to have increased by 17% (twice the rate of inflation and not the 5.8% increase that was reported) jumping from $14.1 Million to $16.5 Million.
"Trust but verify" applies everywhere.
Nowhere is verification more important than in situations where the government or government officials are providing the facts and figures and have a vested interest in what is reported and how and when.
Political spin ---taking actual facts and actual figures about 2001 county spending and "spinning" them to present the best possible appearance--is one thing. That's a bit like the expected "huffing and puffing" by a car dealer in describing the vehicle he has for sale.
But why are incorrect facts and figures about 2001 county spending put out publicly to the commission, to the press, and to the citizens of Hamblen County nine months after the 2001 fiscal year had ended?
What is the correct figure? Is it $16.5 million? Or is there something that doesn't show in the audit?
Everyone makes mistakes. Small ones are usually ignored. I have certainly made my share of mistakes.
But what exactly was going on in 2001 in connection with Hamblen County finances?
Surely at some point truthfulness about the county's finances is important. Was the audit wrong? Is there an accurate record anywhere of the county's expenditures in 2001?
The next post will be about the 2002 audit, the last audit by the local, private auditors. At the end of fiscal year 2002 on 6/30/02, the county showed its largest spending deficit since 1992 as the county spent $923,000 more than it took in.
And isn't it ironic that this huge $923,000 deficit came on 6/30/02 ----- just 10 weeks after Tribune headlines trumpeted that county spending was "within bounds"!
This is the text of an article that appeared in the Citizen-Tribune on April 16, 2002.
The 2002 primary elections were about 3 weeks away.
The article refers to and compares county spending in 1997 and in 2001 (the year that the audit of county spending showed hundreds of end-of-year adjustments).
The headline is shown in red.
------------------------------------------------------------------------------------
Purkey: County Spending within Bounds
BY ROBERT MOORE
Tribune Staff Writer
Political candidates and interested bystanders who say Hamblen County government spending is out of control are wrong, county officials say.
Between 1997 and 2001, expenditures on county government-- not counting the school system-- grew at a slower rate than the rate of inflation, Hamblen County Executive David Purkey reported Monday afternoon.
During that five-year period, county government grew by 5.8%. In the same period, the inflation rate was 8.5%, according to statistics compiled by Trustee Bill Brittain.
"The answer is the management of money," Purkey said. "It's very simple. I get real upset when I hear people in the community and candidates who are running against us wail and gnash their teeth about spending being out of control. That's not true. We do a lot of things here in the courthouse and in county government to share duties. Employees are being shared."
The audited numbers indicate that the 1997 non-school budget was $14.1 million. The non-school budget in 2001 was $14.8 million. Purkey's comments came at a county commission work session Monday afternoon.
The school system's budget is not included in the report because it has its own board that decides how money should be spent. Also, once the county commission allocates money to the school system, the county commission has not spending oversight function.
The numbers take into account general-fund expenditures, garbage and highway funds and debt service, including the initial debt service on the $34.7 million school spending program, according to Brittain.
"They tell me that spending in county government is out of control as the accusations have been made," the trustee said. "We're providing quality service for a reasonable price. It insults me for people to go out there and say that spending is out of control when every day we try to find ways to be more efficient and save money."
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If you automatically accept the statement in this front-page "news" article that 2001 expenditures were $14.8 Million without any checking or verification, then you would think that county spending increased by only $700,000 (5.8%) between 1997-2001.
But if instead you decide to check and verify the 2001 expenditures by actually looking at the 2001 audit, you will find that the total of 2001 audited expenditures for those four funds is approximately $16.5 million (not $14.8 million as reported).
I put out this information with a cautionary note: Questions about the difference in the 2001 reported spending and the 2001 actual spending have been asked and ignored. A citizen told the entire commission that she had asked County Mayor David Purkey to tell her what the true total of 2001 audited spending really was in the four funds. No response other than a threat to sue her.
My expenditure total of $16.5 Million is based on the total of expenditures for each of the four funds as found in the 2001 audit. (The expenditure total as shown in the audit would be even higher, but I deducted the amount used to pay back tax anticipation notes at the end of the year).
After you review the audit, everything that was said and reported to commissioners and to the public changes significantly.
County spending appears to have increased by $2.4 million (not $700,000 as reported).
County spending appears to have increased by 17% (twice the rate of inflation and not the 5.8% increase that was reported) jumping from $14.1 Million to $16.5 Million.
"Trust but verify" applies everywhere.
Nowhere is verification more important than in situations where the government or government officials are providing the facts and figures and have a vested interest in what is reported and how and when.
Political spin ---taking actual facts and actual figures about 2001 county spending and "spinning" them to present the best possible appearance--is one thing. That's a bit like the expected "huffing and puffing" by a car dealer in describing the vehicle he has for sale.
But why are incorrect facts and figures about 2001 county spending put out publicly to the commission, to the press, and to the citizens of Hamblen County nine months after the 2001 fiscal year had ended?
What is the correct figure? Is it $16.5 million? Or is there something that doesn't show in the audit?
Everyone makes mistakes. Small ones are usually ignored. I have certainly made my share of mistakes.
But what exactly was going on in 2001 in connection with Hamblen County finances?
Surely at some point truthfulness about the county's finances is important. Was the audit wrong? Is there an accurate record anywhere of the county's expenditures in 2001?
The next post will be about the 2002 audit, the last audit by the local, private auditors. At the end of fiscal year 2002 on 6/30/02, the county showed its largest spending deficit since 1992 as the county spent $923,000 more than it took in.
And isn't it ironic that this huge $923,000 deficit came on 6/30/02 ----- just 10 weeks after Tribune headlines trumpeted that county spending was "within bounds"!
January 22, 2006 The 2001 Audit--An Official-looking Stamp of Approval to Altered Records of County Spending
Recent posts (Jan. 4th and Jan. 20th) have discussed the 2001 Hamblen County audit with its unbelievably high number of end-of-year alterations and adjustments to county spending records and the odd way these "adjustments" made total spending on numerous items appear like it was exactly what had been budgeted.
The taxpayers paid $28,000 for this audit and in return got a financial report that gave an official-looking stamp of approval to a meaningless and extensively altered record of county expenditures.
Detailed audit information and examples of how expenditure numbers were altered and manipulated in 2001 are already outlined in January 4th and January 20th posts.
Certain statements will be made by various officials and others about these posts. Probably the statements will be that this is no big deal or that making changes at year's end just so it will look like exactly $35,000 was spent on electricity or exactly $72,000 was spent on insurance is standard operating procedure for the county or for the auditors.
Well, what happened in the manipulation of county spending records in 2001 was not standard operating procedure for the county or for the auditors. There are some year-end adjusting entries for all years, but not adjustment after adjustment after adjustment to add or deduct an amount just to make the expenditures seem exact (and meaningless).
I took 7 categories/departments at random for 2001 and found approximately 90 end-of-year adjusting entries. I looked at those same 7 categories/departments in 2002 and found not one end-of-year adjusting entry.
The county's record of expenditures should not be contrived records that have been altered by hundreds of end-of-year adjustments that simply pull out a number ($11,289.42) and add it to spending here or pull out a number ($41,455.21) and subtract it from spending there-- all apparently to make certain departments look better and to shift expenses from the department or category where they were incurred to some other department or category.
A financial record should provide, at a minimum, at least a close record of actual expenditures for each department and for each line item within the department.
Because all the alterations in the 2001 audit seemed to make it a meaningless, but expensive ($28,000), record of county finances, I asked an individual who was involved in the audit process why there were huge numbers of adjusting entries in 2001 that made the expenditures come out even time after time after time. I also asked this same individual in the county finance department whether the expenditures shown in the 2001 audit provided an accurate record of actual spending in 2001.
I was told that this person did not want to answer either of those questions because the answers to those questions might reflect "badly" on someone.
Well, sometimes the answer you don't get reveals just as much or more than the answer you do get.
If you are afraid to answer the question 'Does the 2001 audit provide an accurate record of actual spending in 2001?', then your refusal answers that question loudly and clearly.
And what was being said by county officials about 2001 spending at the time? That will be the subject of the next blog post quoting an article that appeared in the Citizen-Tribune.
The taxpayers paid $28,000 for this audit and in return got a financial report that gave an official-looking stamp of approval to a meaningless and extensively altered record of county expenditures.
Detailed audit information and examples of how expenditure numbers were altered and manipulated in 2001 are already outlined in January 4th and January 20th posts.
Certain statements will be made by various officials and others about these posts. Probably the statements will be that this is no big deal or that making changes at year's end just so it will look like exactly $35,000 was spent on electricity or exactly $72,000 was spent on insurance is standard operating procedure for the county or for the auditors.
Well, what happened in the manipulation of county spending records in 2001 was not standard operating procedure for the county or for the auditors. There are some year-end adjusting entries for all years, but not adjustment after adjustment after adjustment to add or deduct an amount just to make the expenditures seem exact (and meaningless).
I took 7 categories/departments at random for 2001 and found approximately 90 end-of-year adjusting entries. I looked at those same 7 categories/departments in 2002 and found not one end-of-year adjusting entry.
The county's record of expenditures should not be contrived records that have been altered by hundreds of end-of-year adjustments that simply pull out a number ($11,289.42) and add it to spending here or pull out a number ($41,455.21) and subtract it from spending there-- all apparently to make certain departments look better and to shift expenses from the department or category where they were incurred to some other department or category.
A financial record should provide, at a minimum, at least a close record of actual expenditures for each department and for each line item within the department.
Because all the alterations in the 2001 audit seemed to make it a meaningless, but expensive ($28,000), record of county finances, I asked an individual who was involved in the audit process why there were huge numbers of adjusting entries in 2001 that made the expenditures come out even time after time after time. I also asked this same individual in the county finance department whether the expenditures shown in the 2001 audit provided an accurate record of actual spending in 2001.
I was told that this person did not want to answer either of those questions because the answers to those questions might reflect "badly" on someone.
Well, sometimes the answer you don't get reveals just as much or more than the answer you do get.
If you are afraid to answer the question 'Does the 2001 audit provide an accurate record of actual spending in 2001?', then your refusal answers that question loudly and clearly.
And what was being said by county officials about 2001 spending at the time? That will be the subject of the next blog post quoting an article that appeared in the Citizen-Tribune.
January 20, 2006 Some thoughts on local politics and conflicts of interest
Local politics, laced with rumors and the occasional factual comment, is like a long-running TV soap opera.
To get elected:
Talk conservative money management... Then tax and spend or borrow and spend after the election.
Talk about controlling spending... Then vote for every additional spending proposal that comes around after the election.
Talk about conflicts of interest, ethics, openness, and restoring citizen confidence in government... Then proclaim, after the election, that there are no ethical conflicts of interest in voting on funding issues where your wife, husband, son, daughter, brother, or sister is involved.
The plot line of this political soap opera is always the same---get power, get money, get control of tax dollars, and then spend, spend, spend as you dole out favors and jobs to friends, family, and the well-connected to build your political kingdom and your political security.
Oftentimes, large segments of the voting public are not even aware of all the interconnected power relationships--both business and family--that affect how the people's money is spent.
There are a lot of conflicts of interest in the local political world, and they are being discussed.
Thankfully, the emphasis on ethics at the state level appears to have increased concern and awareness of ethical conflicts of interest at the local level.
People are starting to notice and to talk more openly about conflicts of interest and the way these conflicts seem to affect hiring decisions, appointments, and votes.
The "conflict-of-interest" issue was brought up at a county commission meeting on October 20th when a gentleman asked Chairman Joe Spoone and commissioners Herbert Harville and Ricky Bruce to refrain from voting on a school issue because of their close family and economic ties to the school system.
The most serious conflict-of-interest allegation involved Commission Chairman Joe Spoone. Commissioner Joe Spoone is the brother of School Board Chairman Carolyn Spoone Holt.
In fact, School Board Chairman Carolyn Spoone Holt had appeared before commission (and before her brother Joe) prior to October 20th to ask for additional money from the county to start a new International School for Hamblen County students who don't speak English or who have limited English ability.
Carolyn Spoone Holt's public plea to her brother Joe Spoone for more public money is just the tip of Joe's many conflicts.
Joe Spoone actually has three financial and ethical conflicts of interest when school funding issues come before the commission.
Ethical conflict #1 is that Joe Spoone's sister (Carolyn Spoone Holt) is a member of the school board and current school board chairman.
Ethical conflict #2 is that Joe Spoone's brother (James Spoone) is employed by the school system as a bus driver.
Ethical conflict #3 raises the most significant concern about Joe voting on school issues. Joe Spoone's wife (Charlene Spoone) is employed by the school system as a technology assistant.
Since James Spoone and Charlene Spoone are not teachers, they do not have the protection of tenure in their employment. They can be fired or their positions can be eliminated.
Now if Charlene Spoone is concerned about her employment with the school board, her pay, or her benefits--all of which benefit Joe as well--would she mention these concerns to her husband Joe Spoone in discussions at the dinner table, at family gatherings, and around the home?
On October 20th, a citizen asked Joe to refrain from voting on the International School and on all school funding issues because of Joe's ethical and financial conflicts of interest.
Joe denied the obvious ethical conflict of interest and voted in favor of using county dollars to help start an "International School" just like his sister had asked.
Many people spoke at the October 20th meeting and made a simple request that county funding of the International School be put on a public referendum during the already scheduled May 2006 primary elections.
The voice of the people in regard to the International School, however, will not be heard in a referendum.
Joe Spoone, despite his financial and ethical conflicts of interest where school issues are concerned, cast the 8th and deciding vote ensuring that the International School will become a reality next year.
This reality also means that significant future costs will be incurred by Hamblen County taxpayers in continuing and maintaining this new school instead of using existing classroom space to serve these students.
To get elected:
Talk conservative money management... Then tax and spend or borrow and spend after the election.
Talk about controlling spending... Then vote for every additional spending proposal that comes around after the election.
Talk about conflicts of interest, ethics, openness, and restoring citizen confidence in government... Then proclaim, after the election, that there are no ethical conflicts of interest in voting on funding issues where your wife, husband, son, daughter, brother, or sister is involved.
The plot line of this political soap opera is always the same---get power, get money, get control of tax dollars, and then spend, spend, spend as you dole out favors and jobs to friends, family, and the well-connected to build your political kingdom and your political security.
Oftentimes, large segments of the voting public are not even aware of all the interconnected power relationships--both business and family--that affect how the people's money is spent.
There are a lot of conflicts of interest in the local political world, and they are being discussed.
Thankfully, the emphasis on ethics at the state level appears to have increased concern and awareness of ethical conflicts of interest at the local level.
People are starting to notice and to talk more openly about conflicts of interest and the way these conflicts seem to affect hiring decisions, appointments, and votes.
The "conflict-of-interest" issue was brought up at a county commission meeting on October 20th when a gentleman asked Chairman Joe Spoone and commissioners Herbert Harville and Ricky Bruce to refrain from voting on a school issue because of their close family and economic ties to the school system.
The most serious conflict-of-interest allegation involved Commission Chairman Joe Spoone. Commissioner Joe Spoone is the brother of School Board Chairman Carolyn Spoone Holt.
In fact, School Board Chairman Carolyn Spoone Holt had appeared before commission (and before her brother Joe) prior to October 20th to ask for additional money from the county to start a new International School for Hamblen County students who don't speak English or who have limited English ability.
Carolyn Spoone Holt's public plea to her brother Joe Spoone for more public money is just the tip of Joe's many conflicts.
Joe Spoone actually has three financial and ethical conflicts of interest when school funding issues come before the commission.
Ethical conflict #1 is that Joe Spoone's sister (Carolyn Spoone Holt) is a member of the school board and current school board chairman.
Ethical conflict #2 is that Joe Spoone's brother (James Spoone) is employed by the school system as a bus driver.
Ethical conflict #3 raises the most significant concern about Joe voting on school issues. Joe Spoone's wife (Charlene Spoone) is employed by the school system as a technology assistant.
Since James Spoone and Charlene Spoone are not teachers, they do not have the protection of tenure in their employment. They can be fired or their positions can be eliminated.
Now if Charlene Spoone is concerned about her employment with the school board, her pay, or her benefits--all of which benefit Joe as well--would she mention these concerns to her husband Joe Spoone in discussions at the dinner table, at family gatherings, and around the home?
On October 20th, a citizen asked Joe to refrain from voting on the International School and on all school funding issues because of Joe's ethical and financial conflicts of interest.
Joe denied the obvious ethical conflict of interest and voted in favor of using county dollars to help start an "International School" just like his sister had asked.
Many people spoke at the October 20th meeting and made a simple request that county funding of the International School be put on a public referendum during the already scheduled May 2006 primary elections.
The voice of the people in regard to the International School, however, will not be heard in a referendum.
Joe Spoone, despite his financial and ethical conflicts of interest where school issues are concerned, cast the 8th and deciding vote ensuring that the International School will become a reality next year.
This reality also means that significant future costs will be incurred by Hamblen County taxpayers in continuing and maintaining this new school instead of using existing classroom space to serve these students.
January 20, 2006 The 2001 Audit: Unbelievable! (Part II)
My January 4th post discussed numerous oddities in Hamblen County's 2001 audit.
Before I move on to other audit issues, I want to pose some questions that may arise and add a few additional comments to clarify why the 2001 audit is so odd and useless as a record of county spending.
Question #1: Was it perhaps the practice of the auditors to make adjustments to spending figures at year end in order to create exact spending amounts like those reported in the 2001 audit?
NO. The 2000 and the 2002 Hamblen County audits do not show exact spending amounts anywhere close to the number found in the 2001 audit.
Question #2: Does it really matter whether the actual spending reported in the audit is in the right line item or department?
YES.
Why does it matter?
(1) Because the previous year's spending for a department is typically used to prepare the next year's budget for that department. If you don't have accurate spending amounts for the previous year, then you are trying to draw up a budget with useless information. (Garbage in/ garbage out)
(2) Because the state requires that spending be broken down into departments, categories, and account codes (communication, insurance, salaries, repairs, etc.) in accord with the Comptroller's accounting guidelines and to ensure greater accountability in spending of tax dollars.
(3) Finally, because state law and common sense do not allow commission to pass a lump sum budget appropriation for, say, $10,527,800 and then hand it all over to the County Mayor and his Finance Department to spend as they see fit on the departments of their choosing.
There would be serious weaknesses and a lack of checks and balances in any type of lump-sum budgeting. Standard accounting practices and state requirements provide for at least some level of checks and balances in the process of budgeting and spending county funds.
Appropriations are made by the county commission to departments so it is clear who is spending the money. Each department then has to have a line item budget so it is clear where the money is being spent.
These are basic requirements that promote accountability in spending of taxpayer dollars.
If the line item and department spending amounts are altered at year's end (as was done in 2001) so that they do not accurately reflect the true spending amounts, then the audit report and the spending reports themselves are useless because they are inaccurate.
And what does this mean?
The county wasted $28,000 on an audit that reported inaccurate and altered spending amounts as though they were the true and actual spending amounts for county offices and departments.
As always, if anyone has a comment or question, please send your comment of question by snail mail or e-mail me at noe4accountability@yahoo.com. Include your name, address, and phone number. If you have a concern about political, economic, or any other type of retaliation, you may leave your name off or simply ask that your information and comments be kept confidential.
Before I move on to other audit issues, I want to pose some questions that may arise and add a few additional comments to clarify why the 2001 audit is so odd and useless as a record of county spending.
Question #1: Was it perhaps the practice of the auditors to make adjustments to spending figures at year end in order to create exact spending amounts like those reported in the 2001 audit?
NO. The 2000 and the 2002 Hamblen County audits do not show exact spending amounts anywhere close to the number found in the 2001 audit.
Question #2: Does it really matter whether the actual spending reported in the audit is in the right line item or department?
YES.
Why does it matter?
(1) Because the previous year's spending for a department is typically used to prepare the next year's budget for that department. If you don't have accurate spending amounts for the previous year, then you are trying to draw up a budget with useless information. (Garbage in/ garbage out)
(2) Because the state requires that spending be broken down into departments, categories, and account codes (communication, insurance, salaries, repairs, etc.) in accord with the Comptroller's accounting guidelines and to ensure greater accountability in spending of tax dollars.
(3) Finally, because state law and common sense do not allow commission to pass a lump sum budget appropriation for, say, $10,527,800 and then hand it all over to the County Mayor and his Finance Department to spend as they see fit on the departments of their choosing.
There would be serious weaknesses and a lack of checks and balances in any type of lump-sum budgeting. Standard accounting practices and state requirements provide for at least some level of checks and balances in the process of budgeting and spending county funds.
Appropriations are made by the county commission to departments so it is clear who is spending the money. Each department then has to have a line item budget so it is clear where the money is being spent.
These are basic requirements that promote accountability in spending of taxpayer dollars.
If the line item and department spending amounts are altered at year's end (as was done in 2001) so that they do not accurately reflect the true spending amounts, then the audit report and the spending reports themselves are useless because they are inaccurate.
And what does this mean?
The county wasted $28,000 on an audit that reported inaccurate and altered spending amounts as though they were the true and actual spending amounts for county offices and departments.
As always, if anyone has a comment or question, please send your comment of question by snail mail or e-mail me at noe4accountability@yahoo.com. Include your name, address, and phone number. If you have a concern about political, economic, or any other type of retaliation, you may leave your name off or simply ask that your information and comments be kept confidential.
Wednesday, January 04, 2006
January 4, 2006 The 2001 Hamblen County Audit: Unbelievable!
Hamblen County, like all counties in the state of Tennessee, is required to have a financial audit performed each year.
I have discussed audits periodically. Now it’s time to look at our recent county audits—starting with the 2001 Hamblen County audit.
If you have attended commission meetings or watched them on cable TV, you may have heard County Mayor David Purkey label the county audit as our “financial Bible” as though it is the final and accurate source of information about county finances.
In light of what I will present here about the 2001 county audit, it is unlikely that anyone could or should ever consider Hamblen County’s audit as a financial Bible or as an accurate source of information.
With Enron, Worldcom, and other auditing scandals, it is unlikely that the general public (or even auditors themselves) would make a sweeping claim of financial accuracy and infallibility when they know that a financial audit, such as the one performed for the county, is only a review of a small sampling of transactions along with a review of some county commission minutes and a review of compliance with a number of state laws and regulations.
Financial audits, as the Comptroller of the State of Tennessee has stated, are limited in scope and are not intended to detect fraud, waste, or abuse. (See my post of November 2, 2005, quoting the State Comptroller’s Office).
NOTE: While auditors do not look for fraud, waste, or abuse, it is possible that a financial audit, if it just happens to review a questionable transaction among its regular small audit sampling, might make a report of that transaction for further review and additional audit work.
There are a number of people who have been told and who perhaps believe that surely an audit at least provides accurate income and spending records for departments and agencies of county government.
County audits have a function, but the State Comptroller has noted that the function is very limited.
Accounting scandals involving huge companies that were "audited" by top-notch auditing firms indicate that financial audits are only as good and thorough as the auditor, only as complete as the number of transactions that are reviewed, and only as accurate as the information that is provided to the auditor by the county government.
If you take even a brief look at the 2001 county audit (for which taxpayers paid about $28,000 to the previous local private auditors), you will see that the auditor either ignored or encouraged the presentation of useless and false “spending records.”
The spending records provided by the County Mayor, as the county’s chief financial officer, to the auditor in 2001 have been manipulated and altered through multiple adjustments at the end of the year, and the use of these records in preparation of the official county audit of actual spending makes a mockery of the concept of financial accountability.
The 2001 audit is full of spending records that have been purposely altered and adjusted and manipulated at year end apparently for two reasons: (1) to make it appear to the Commission and to the public that numerous spending totals as of 6/30/01 were exactly the same as the perfectly even spending amounts that had been budgeted; and (2) to shift spending amounts around to control spending amounts that were reported for various departments.
Certain year-end audit adjustments are normal--such as when one finds that gasoline has mistakenly been paid out of an insurance line item.
However, what are termed “adjusting entries” in the 2001 audit are more appropriately termed “audit manipulations” in my opinion. The manipulation of line item after line item with these adjustments at the end of 2001 fiscal year (6/30/01) led to the presentation of false and misleading records and reports of county spending within departments.
Here are just a few of the approximately 80 examples of exact spending amounts from the 2001 audit:
Election Commission:
Exactly $1,500 budgeted for travel; exactly $1,500 spent.
Exactly $1,500 budgeted for office equipment; exactly $1,500 spent.
Planning Commission:
Exactly $2,000 budgeted for gasoline; exactly $2,000 spent.
Exactly $7,900 budgeted for office equipment; exactly $7,900 spent.
County Courthouse (buildings):
Exactly $35,000 budgeted for electricity; exactly $35,000 spent.
Property Reappraisals:
Exactly $4,000 budgeted for legal services; exactly $4,000 spent.
Exactly $3,500 budgeted for postal charges; exactly $3,500 spent.
Juvenile Court:
Exactly $3,500 budgeted for evaluation and testing; exactly $3,500 spent.
Exactly $1,000 budgeted for travel; exactly $1,000 spent.
Exactly $2,800 budgeted for office equipment; exactly $2,800 spent.
Sheriff’s Department:
Exactly $70,500 budgeted for health insurance; exactly $70,500 spent.
Exactly $4,000 budgeted for other equipment; exactly $4,000 spent.
Jail:
Exactly $15,000 budgeted for overtime pay; exactly $15,000 spent.
Exactly $72,000 budgeted for health insurance; exactly $72,000 spent.
Exactly $5,000 budgeted for other supplies/mtls; exactly $5,000 spent.
Exactly $6,500 budgeted for other charges; exactly $6,500 spent.
I could go on and on, but anyone with common sense can see what’s up. If anyone thinks that you can budget to the penny and then end up with exact spending totals with absolute, to-the-penny accuracy as shown in the above sampling of audit entries, then I have lots and lots of swamp land in Arizona to sell you.
Just how did the county end up with these "perfect spending” numbers? Through end-of-year manipulation of spending records—manipulations that were given the name “audit adjustments” or "adjusting entries."
Here are two examples of "adjusting entries" that were made at the end of the fiscal year (6/30/01) by the Finance Department in the Office of the County Mayor to make spending amounts appear exact (but inaccurate) in the 2001 audit:
Jail Insurance was $104,284.42 as of 5/25/01.
Then on 6/30/01 there are two entries. One is an adjusting credit entry of $43,573.84. The other is a debit entry of $11,289.42.
$104,284.42 – 43,573.84 + 11,289.42 = exactly $72,000.00 reported as jail insurance costs in the 2001 audit
County Courthouse (buildings) Electricity was $41,455.21 as of 6/8/01.
On 6/30/01, there is an adjusting credit entry of $6,455.21.
$41,455.21 – 6,455.21 = exactly $35,000.00 reported by the auditor as electricity costs in the 2001 audit
When have your household electricity, insurance, travel, or gasoline costs ended up exactly $1,500, exactly $2,000, exactly $6,500, and on and on?
Now about that 2001 Financial "Bible"?
Who manipulated the actual spending records for the General Fund at the end of the year and why? Who gave the financial information to the local, private auditors to report in the audit?
How could an auditor accept and report these obviously manipulated spending numbers as the "actual" record of department spending?
What did each department really spend on these line items and what was the real total of spending for each department?
No wonder the county had deficit spending in 8 of the 12 years from 1992-2003. Apparently, no one was told and no one ever knew what had really been spent in the previous year! And no one asked!
And the County Mayor tells the public that the Hamblen County audit is the source of accurate financial information about the county's finances?
And the County Mayor tells the public that the audit is the county's financial Bible?
More on 2001 tomorrow.
It has not been a pleasant experience in finding out what has been going on. It is very difficult to put this information out. I used to have a great deal of trust in people, and I thought that elected leaders always had the interests of the public and taxpayers foremost in their thoughts.
Now I know that you should continue to have a level of trust in people, but you better verify everything just to be sure that you are not surprised down the road.
As I start on this series, I am prepared for the personal attacks that are inevitable whenever the truth is told about county finances.
I just hope that those who always explode with anger and pent-up rage and personal attacks will count to 35,000 (exactly the number of dollars reported as spent on electricity in the 2001 audit) before they explode.
Hamblen County is in difficult financial times. Our financial problems can be solved, but our ability to find solutions is limited unless we face the truth of what has happened and face our problems with that knowledge.
A willingness by all parties to co-operate in measures that promote accountability and that control spending would be a good first step. A willingness to provide accurate financial information to the county commission and to the public would be an excellent second step. And a willingness to address and deal with facts and not personalities, while avoiding rants, would be a nice idea, too.
I have discussed audits periodically. Now it’s time to look at our recent county audits—starting with the 2001 Hamblen County audit.
If you have attended commission meetings or watched them on cable TV, you may have heard County Mayor David Purkey label the county audit as our “financial Bible” as though it is the final and accurate source of information about county finances.
In light of what I will present here about the 2001 county audit, it is unlikely that anyone could or should ever consider Hamblen County’s audit as a financial Bible or as an accurate source of information.
With Enron, Worldcom, and other auditing scandals, it is unlikely that the general public (or even auditors themselves) would make a sweeping claim of financial accuracy and infallibility when they know that a financial audit, such as the one performed for the county, is only a review of a small sampling of transactions along with a review of some county commission minutes and a review of compliance with a number of state laws and regulations.
Financial audits, as the Comptroller of the State of Tennessee has stated, are limited in scope and are not intended to detect fraud, waste, or abuse. (See my post of November 2, 2005, quoting the State Comptroller’s Office).
NOTE: While auditors do not look for fraud, waste, or abuse, it is possible that a financial audit, if it just happens to review a questionable transaction among its regular small audit sampling, might make a report of that transaction for further review and additional audit work.
There are a number of people who have been told and who perhaps believe that surely an audit at least provides accurate income and spending records for departments and agencies of county government.
County audits have a function, but the State Comptroller has noted that the function is very limited.
Accounting scandals involving huge companies that were "audited" by top-notch auditing firms indicate that financial audits are only as good and thorough as the auditor, only as complete as the number of transactions that are reviewed, and only as accurate as the information that is provided to the auditor by the county government.
If you take even a brief look at the 2001 county audit (for which taxpayers paid about $28,000 to the previous local private auditors), you will see that the auditor either ignored or encouraged the presentation of useless and false “spending records.”
The spending records provided by the County Mayor, as the county’s chief financial officer, to the auditor in 2001 have been manipulated and altered through multiple adjustments at the end of the year, and the use of these records in preparation of the official county audit of actual spending makes a mockery of the concept of financial accountability.
The 2001 audit is full of spending records that have been purposely altered and adjusted and manipulated at year end apparently for two reasons: (1) to make it appear to the Commission and to the public that numerous spending totals as of 6/30/01 were exactly the same as the perfectly even spending amounts that had been budgeted; and (2) to shift spending amounts around to control spending amounts that were reported for various departments.
Certain year-end audit adjustments are normal--such as when one finds that gasoline has mistakenly been paid out of an insurance line item.
However, what are termed “adjusting entries” in the 2001 audit are more appropriately termed “audit manipulations” in my opinion. The manipulation of line item after line item with these adjustments at the end of 2001 fiscal year (6/30/01) led to the presentation of false and misleading records and reports of county spending within departments.
Here are just a few of the approximately 80 examples of exact spending amounts from the 2001 audit:
Election Commission:
Exactly $1,500 budgeted for travel; exactly $1,500 spent.
Exactly $1,500 budgeted for office equipment; exactly $1,500 spent.
Planning Commission:
Exactly $2,000 budgeted for gasoline; exactly $2,000 spent.
Exactly $7,900 budgeted for office equipment; exactly $7,900 spent.
County Courthouse (buildings):
Exactly $35,000 budgeted for electricity; exactly $35,000 spent.
Property Reappraisals:
Exactly $4,000 budgeted for legal services; exactly $4,000 spent.
Exactly $3,500 budgeted for postal charges; exactly $3,500 spent.
Juvenile Court:
Exactly $3,500 budgeted for evaluation and testing; exactly $3,500 spent.
Exactly $1,000 budgeted for travel; exactly $1,000 spent.
Exactly $2,800 budgeted for office equipment; exactly $2,800 spent.
Sheriff’s Department:
Exactly $70,500 budgeted for health insurance; exactly $70,500 spent.
Exactly $4,000 budgeted for other equipment; exactly $4,000 spent.
Jail:
Exactly $15,000 budgeted for overtime pay; exactly $15,000 spent.
Exactly $72,000 budgeted for health insurance; exactly $72,000 spent.
Exactly $5,000 budgeted for other supplies/mtls; exactly $5,000 spent.
Exactly $6,500 budgeted for other charges; exactly $6,500 spent.
I could go on and on, but anyone with common sense can see what’s up. If anyone thinks that you can budget to the penny and then end up with exact spending totals with absolute, to-the-penny accuracy as shown in the above sampling of audit entries, then I have lots and lots of swamp land in Arizona to sell you.
Just how did the county end up with these "perfect spending” numbers? Through end-of-year manipulation of spending records—manipulations that were given the name “audit adjustments” or "adjusting entries."
Here are two examples of "adjusting entries" that were made at the end of the fiscal year (6/30/01) by the Finance Department in the Office of the County Mayor to make spending amounts appear exact (but inaccurate) in the 2001 audit:
Jail Insurance was $104,284.42 as of 5/25/01.
Then on 6/30/01 there are two entries. One is an adjusting credit entry of $43,573.84. The other is a debit entry of $11,289.42.
$104,284.42 – 43,573.84 + 11,289.42 = exactly $72,000.00 reported as jail insurance costs in the 2001 audit
County Courthouse (buildings) Electricity was $41,455.21 as of 6/8/01.
On 6/30/01, there is an adjusting credit entry of $6,455.21.
$41,455.21 – 6,455.21 = exactly $35,000.00 reported by the auditor as electricity costs in the 2001 audit
When have your household electricity, insurance, travel, or gasoline costs ended up exactly $1,500, exactly $2,000, exactly $6,500, and on and on?
Now about that 2001 Financial "Bible"?
Who manipulated the actual spending records for the General Fund at the end of the year and why? Who gave the financial information to the local, private auditors to report in the audit?
How could an auditor accept and report these obviously manipulated spending numbers as the "actual" record of department spending?
What did each department really spend on these line items and what was the real total of spending for each department?
No wonder the county had deficit spending in 8 of the 12 years from 1992-2003. Apparently, no one was told and no one ever knew what had really been spent in the previous year! And no one asked!
And the County Mayor tells the public that the Hamblen County audit is the source of accurate financial information about the county's finances?
And the County Mayor tells the public that the audit is the county's financial Bible?
More on 2001 tomorrow.
It has not been a pleasant experience in finding out what has been going on. It is very difficult to put this information out. I used to have a great deal of trust in people, and I thought that elected leaders always had the interests of the public and taxpayers foremost in their thoughts.
Now I know that you should continue to have a level of trust in people, but you better verify everything just to be sure that you are not surprised down the road.
As I start on this series, I am prepared for the personal attacks that are inevitable whenever the truth is told about county finances.
I just hope that those who always explode with anger and pent-up rage and personal attacks will count to 35,000 (exactly the number of dollars reported as spent on electricity in the 2001 audit) before they explode.
Hamblen County is in difficult financial times. Our financial problems can be solved, but our ability to find solutions is limited unless we face the truth of what has happened and face our problems with that knowledge.
A willingness by all parties to co-operate in measures that promote accountability and that control spending would be a good first step. A willingness to provide accurate financial information to the county commission and to the public would be an excellent second step. And a willingness to address and deal with facts and not personalities, while avoiding rants, would be a nice idea, too.
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