A presentation of the firm's findings was presented during the February meeting of the Cedartown City Commission by certified public accountant John Holden. Holden reported that the city received a "clean opinion" from the 2011 audit, though it was delayed in arrival.
The report also notes several financial statement findings that are in need of correction – including two items that were previously noted on the 2010 audit.
The report attributes the audit’s delay to problems, resulting from the city's employee turnover rate, which caused “significant delays in the completion of the city’s books for audit.”
Most governmental audits are completed within 180 days of their fiscal year end, which is Dec. 31 for the City of Cedartown.
The city was granted an extension for the 2011 audit in June of last year by the State Department of Audits and Accounts.
Cedartown City Manager Bill Fann said that the city’s finance department experienced a reduction in workforce in 2011, taking that office’s number of employees down from two to one.
"That certainly a strain in operations and contributed to the delay,” Fann said.
The audit report shows that the city has seen a positive trend in revenues over expenses since 2010, though the figure for 2011 is considerably less than it was in 2010. For 2011, the city’s revenue over expense is listed at $392,269. In 2010, that figure was topping out at $850,000.
The difference in those two years stem from changes made to water, sewer and solid waste fees.
In 2010, the city increased charges for water, sewer and solid waste, resulting in the collection of greater revenue. But in 2011, the city decreased those rates, which resulted in less revenue.
The report also lists several financial statement findings from the 2011 audit. Auditors discovered that the city’s administration department, maintenance shop, code enforcement departments and allocations to the Cedartown Civic Arts Commission had expenditures in excess of appropriations.
In simpler terms: they spent more than they should have.
According to Georgia law, local governments are required operate under an approved annual budget for the general fund, special revenue funds and for debt service funds.
The report states that the city’s failure to operate by those terms will place the city in violation of state law. Auditors recommended that the city finance director monitor all legally adopted budgets to ensure compliance.
This same issue was noted in the 2010 audit, but that time, dealt specifically with the arts commission and the cemetery, parks and recreation departments.
The city plans to remedy the audit finding by having the city’s finance director review the comparative financial statements of the departments in question to their approved budgets and recommend any necessary budget revisions to the city commission.
"This is a common finding that appears on almost all government audit reports everywhere", Fann said. "We're always going to have an issue with that, it's unavoidable. It’s unavoidable because when you are ealing with budgets, they are always changing. No budget is concrete. You’re always going to have emergencies and unplanned events. What you hope for is that you have other department budgets that you can pull from so you don’t go over."
But that apparently was not the case in 010 or 2011,” said Fann, who was appointed in September 2012 as city manager.
Rushton and Company auditor John Holden agreed with Fann.
“It is a common finding on government audits. Though they are in violation with
the overages, there are no legal repercussions,” Holden said.
Another finding pointed out in the 2011 audit, and also noted in the 2010 audit, relates to internal controls.
Internal controls are methods put in place by a company to ensure the integrity of financial and accounting information.
Auditors said that the finance clerk has access to manual checkbooks, prepares deposits, prepares all bank reconciliations and posts journal entries for the city. Those journal entries are not being approved another employee, auditors noted.
The report said that proper segregation of duties require that the duties of authorizing and recording of adjustments to the general
ledger be performed by different employees. Failure to do so, according to auditors, exposes the city to a greater risk of fraud.
In order to remedy the issue, the city manager will now review and approve all journal entries posted to the city’s general ledger.
The city manager will also review all bank statements and reconciliations.
Fann said that correction is currently in place.
All recommendations listed in the audit have been put into action, Fann said, and the city is on-target for the 2012 audit.
“Auditors were here just this past week for the 2012 audit,” Fann said. “They made a lot of progress and we will have a report by June. We will stay on track.”