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Examination of city filed by State Board of Accounts

Tuesday, November 20, 2007

The City of Brazil has received its examination report from the Indiana State Board of Accounts, and it's not pretty.

"Needless to say, it's a mess," Brazil mayor Ann Bradshaw said.

The report, which was officially filed by State Board of Accounts Field Examiner Sharon Cooprider on Nov. 5, analyzed the city's deposits, recordkeeping, errors and numerous other areas regarding financial records from Jan. 1-Dec. 31, 2006.

One of the highlighted items in the report regarded city ordinances and resolutions on utility usage in the city.

The section states, "The City is not being billed for water and wastewater usage for all locations." While usage meters are being read at City hall and the city golf course, bills for these locations are not being prepared. At other locations, such as the city swimming pool, water treatment plant and wastewater treatment plant, there are no meters present to monitor usage.

According to the current report, this has been noted in prior reports and City Ordinances 8-1993 and 9-1996 established usage charges for the Water and Wastewater Utilities.

"We are working to get meters up in the locations because we need to keep track of the usage for our own records," Brazil Water Superintendent Jake Raubuch said. "As for why we're not charging the other areas, all we would be doing is charging ourselves and using city money to our own city bills. No new money would be coming in by charging ourselves."

The majority of the remainder of the report focused in on accounts handled by the Brazil Clerk/Treasurer's Office.

For the condition of the city's records, the report states that due to numerous conditions, which had also been reported in two prior examinations, the State Board of Accounts was unable to provide an opinion on Cooprider's report for the financial statements.

Some of the conditions included:

* Deposit reconciliations of the fund balances to the bank account balances were incorrect in three separate accounts, including the City Payroll Account, as of Dec. 31, 2006,

* Other deposit reconciliations, including those for the Law Enforcement Fund and Fire Equipment Fund accounts, were not prepared or presented for the examination,

* Of the 36 checks listed as outstanding, as of Dec. 31, 2006, 26 were found to have cleared the bank prior to that date and were imprinted with a different check number to that on the list of outstanding checks, and

* Numerous errors were noted while testing for proper posting of the 2006 local tax distributions, including that an amount of $908,832 in local tax distributions were deposited to the bank on Dec. 22, 2006, but was not posted until Jan. 11, 2007, causing year-end fund balances to be understated. Also, on numerous occasions, tax distributions were erroneously posted into incorrect funds.

Brazil Clerk/Treasurer Tracy Webster and Deputy Clerk/Treasurer Karen McQueen chalk up the majority of the errors to flaws in their accounting software, but to human error as well.

"We have had problems with our software, InCode, ever since it was installed a few years ago," Webster said. "There has been a time where the city paid to have the company come here to fix things, but they made it worse and they actually sent us a refund check for the service costs we paid. However, I am human, and I do make mistakes as well, but the system has caused us a lot of problems."

McQueen agreed the software has been a problem, but other factors led to the current condition of the accounts.

"Prior administration set up the fund numbers wrong, which is why the tax distributions were going into the wrong funds," she said. "However, the allocated money is still being used for what it is intended for."

The report also found, in numerous instances, receipts were deposited to the bank later than the next business day, and all claims either did not have board approval or did not have supporting documentation attached.

"There are days where there is only $20 or so available to be deposits, so it wasn't always necessary to go everyday, but we immediately go to the bank whenever we have a large deposit to make," Webster said. "Also, we have had direct payable situations for individuals who do work for the city, which did not need board approval. However, we have changed policy to where everything now must be approved by the board."

Also included in the report was that the records presented indicated the city had spent more than $330,000 in budget appropriations.

"The city has been in the red for many years," Webster said.

McQueen said finding all the mistakes, in a way, is a good thing.

"With everything moving to computers and technology getting better, it becomes easier to find mistakes," McQueen said. "Sharon (Cooprider) did a very good and thorough job examining our records so we can correct everything that needs to be fixed."

Last week, the city decided to hire Indianapolis firm Umbaugh and Associates, a certified public accounting advisor to local governments, to help fix the problems.

"I'm glad to see steps are being taken to rectify the situation," Webster said. "I truly want to see Ann and Karen start off strong with everything straightened out."

Bradshaw is also looking forward to having the account and fund inaccuracies corrected.

"It all ended up being just poor bookkeeping," she said. "The important thing is we get this fixed before the new clerk goes in and keep it that way. On the other hand though, you still have to realize that people can make mistakes."

Residents interested in viewing the Examination Report for the City of Brazil can visit the Indiana State Board of Accounts web site at http://www.in.gov/sboa/. The file is in a PDF format under the section titled "Report Filings." To go straight to the report, visit http://www.in.gov/sboa/WebReports/B30983....



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