BERNE – The Bern City Council has failed to live up to its fiscal responsibilities to taxpayers, according to the State Comptroller’s Office in a recently released audit report that details serious financial mismanagement.
The report concluded that city council “overstepped its authority” by allowing supervisor Sean Lyons to pay bills without city council review from January 2020 – when GOP-backed candidates took control of the council – and that the financial records were woefully inaccurate. as a result of this and other problems.
Additionally, the report found that poor credit card management resulted in late fees and interest charges totaling $ 468 – the sum of the city’s total financial loss.
Overall, the audit found no cases of diversion.
The audit period formally extended from January 1, 2020 to December 31, 2020, although the auditors also reviewed the documents from December 2019. It was triggered by a “combination of information received from various sources, such as complaints from taxpayers, as well as carrying out a risk assessment, ”according to Tania Lopez, deputy press secretary of the State Comptroller’s Office.
The company reported that an audit was underway last September, after City Councilor Joel Willsey, the only Democrat on city council, filed complaints with the Comptroller’s Office over how the city’s 2020 budget was built. However, the audit did not address these concerns.
Instead, he focused on city council oversight and analyzed financial records for September 2020 – selected “to capture a month in the year,” the report says – as well as December 2019 and December. 2020, which were selected for year-end reports. .
The audit found that the city’s senior bookkeeper Andrea Borst, who is referred to in the document as an accountant, failed to perform bank reconciliations because she “worked from home and multitasking”, according to the report. The report. Borst is paid $ 28,255 per year, according to the city’s 2021 budget.
“As a result, the accountant had to perform several months of bank reconciliations to catch up when we requested the bank reconciliations for September 2020,” the report said. “However, without accurate and timely reconciliations, the Board cannot be sure that all transactions are properly recorded.”
The auditors recalculated the figures in the book “to include unrecorded interest earned, deposits and withdrawals for each month examined” and found that as of December 31, there were discrepancies between the reported figures and the actual funds, with an additional account of $ 135,840 for the operation of the general fund. , Underestimated Payroll Compensation of $ 8,736 and Underestimated Health Insurance Trust of $ 31,659.
“Based on our reconciliations, these differences were likely caused by transactions not recorded in the accounting system, which resulted in an overestimation of the accounting balance,” the report says.
The report states that assistant supervisor Dennis Palow signed four bank reconciliations without adequately reviewing them, explaining that Palow told auditors that “he only looked at the bank statements and did not review and trace the information. from bank reconciliation sheets to balance sheets or general ledger reports. . “
“The assistant began reviewing bank reconciliations in December 2020 when the accountant provided him with all bank reconciliations prepared for the year,” the report said. “However, the assistant did not perform a proper review of the bank reconciliations to ensure that the adjusted bank balances matched the general ledger reports so that the accountant could resolve the differences.
“The accountant and supervisor said they were not aware of the benefits of independent review of bank reconciliations,” he says.
Palow received a salary increase of $ 1,500 in the 2021 budget to fulfill his responsibility of signing documents in place of the supervisor.
The audit also looked at expense claims made between February and August 2020, which accounted for $ 166,792 out of 170 claims, none of which, the report said, had been audited by the full board.
“The 170 claims were listed on six summaries, but only three summaries (showing 161 claims totaling $ 150,731) were recorded in council minutes,” the report said. “Of these 161 claims, 144 with payments totaling $ 148,200 were cleared through the City’s bank account prior to the monthly Council meeting.
The report says late fees and interest charges on credit card payments were the result of inappropriate treatment and lack of review by the board. In addition to the $ 468 paid in interest charges, Borst allegedly made an erroneous double payment of $ 540 on the credit card balance, although this is technically not a monetary loss as the amount has been credited, Lyons told The Enterprise this week.
“While not all forgetting is not in favor, $ 468 over a 2-year period where millions of dollars were displaced [is] not what I would consider a huge loss to the city, ”Lyons wrote in an email responding to questions from Enterprise. “It wasn’t exactly an accounting problem, but rather a lack of a credit card usage and payment policy (the council approved a new city credit card policy a few months ago). We have also worked with creditors and moved the “due dates” after our monthly meetings.
The audit also found that city council “did not audit or have audited annually the records of the supervisor, city clerk, tax collector or code enforcement officer.” Lyons reportedly told listeners he was “unaware” of this requirement.
Official response from the city
In a written response to the findings included in the audit report, Lyons said, “I cannot argue that the board did not provide adequate oversight of financial transactions based on the summary of your audit and of the letter of the law, but I would assert that the City’s financial operations have benefited from more than adequate monitoring of claims and financial records during my 3+ years as a supervisor with 7 members of the different boards for many reasons.
Lyons went on to say that requests were available for council to review and that summaries were emailed to city council along with the supervisor’s monthly report prior to meetings.
“At every board meeting, the board is asked if it has reviewed budget transfers, summaries of each request, and bills to pay for the month, and then the board is asked if it has any questions. , comments or concerns about the Budget transfers, summaries of each request and bills to pay for the month, ”Lyons wrote, ending with an acknowledgment that all of these documents are approved by a vote.
He also said the city’s annual update document has been accepted by the state comptroller every year of his tenure and the audit found no cases of hijacking.
“As we all know,” he wrote in his response, “2020 has been marked by the covid pandemic which has made the normal operations of the city’s business almost normal, which has led to a number of new challenges to accomplish simple tasks such as timely bank reconciliations. way, added to the fact that the post of account clerk in charge of these functions has been vacant since July 2018.
“As of 8/11/2021, the Administrative Assistant / Account Clerk position has been filled and immediately assigned to the task of bank reconciliations that must be provided to the board after the reconciliation each month,” Lyons continued. “… The supervisor would also like to point out that the accounts clerk had 67% of complete bank statements and 74% were accurate and properly prepared. ”
Lyons also challenged the Comptroller’s Office’s rationale for focusing on the selected months, writing that he believed they were chosen because of “the information provided by audit requesters such as [redacted] has repeatedly called these months deficient reporting.
Lyons told The Enterprise this week: “It seems strange that auditors are choosing separate months for board reports and bank reconciliations, almost as reported by those who requested the audit, former board members. . [Dawn Jordan and Karen Schimmer] and Mr. Willsey.
Jordan and Schimmer are both Democrats who stepped down in late 2019.
Lopez told The Enterprise that the correlation between the Comptroller’s goal and that of the Democratic board members was a “coincidence.”
Lyons also said it is “important to note that this audit period covers two majorities of the board,” both the 2019 Democrat-controlled board and the current board. controlled by the GOP, which was ushered in at the same meeting where the motion to allow supervisor to pay bills without review was passed. Several other illegal but unrelated motions were also presented at this meeting.
Willsey had abstained from that vote, as he frequently does, while the GOP-backed board members all voted in favor.
“[The audit report] explains pretty clearly why I always abstain from spending votes, ”Willsey told The Enterprise this week.
Lyons told The Enterprise that the city’s attorney at the time, William Conboy III, considered the motion. He also said the town’s current attorney, Javid Afzali of Harris Beach, had not commented on the matter after he was hired by the town in April 2020.
The same motion was presented at the January 2021 reorganization meeting and passed along the same lines, although Willsey voted against instead of abstaining.
The city council has since canceled this motion.
The city now has just under 90 days to come up with a corrective action procedure, which Lyons says will be carried out after the budget season but before the December 16 deadline.