By Marian Galbraith, Staff Writer
The City of Manchester recently received an audit report from certified public accountants Bean, Rhoton & Kelley, PLLC, of Winchester that contains several adverse findings, including what the firm describes as “material weaknesses” and “significant deficiencies.”
According to a cover letter to the Manchester Mayor and Board of Alderman dated March 26, the firm found a “fundamental lack of internal control over assets,” particularly those acquired as donations from the U.S. Department of Defense (DOD) surplus program, as well as unrecorded bank accounts held by the police and fire departments, which contained insufficient documentation to determine how the majority of the funds were spent or where they came from.
According to finding 12-01, regarding the “lack of control over assets received from the DOD,” the auditors confirmed that while over $600,000 in assets had been received, they seemed unable to fully confirm the existence or whereabouts of these assets within city government.
“While we were able to physically observe and trace some of the assets received,” the finding states, “we were unable to completely reconcile assets received, as per confirmations with the Department of Defense, to the asset activity recorded on the City’s fixed asset listing and other financial information.”
Finding 12-02 summarizes the unrecorded bank accounts found in the police and fire departments, described as “funds held by the police and fire departments which were not previously recorded with other City financial information.”
The police department was found to have an unrecorded savings account with a balance of over $8,000 for the fiscal year ending June 30, 2012.
While deposits of $23,325 had been made to the account during the fiscal year, auditors were unable to determine the source of these funds except for $2,600, which was determined to come from “payroll deductions.”
Withdrawals of $20,376 were also said to have been made by authorized signors on the account, but at the time of the audit, no documentation was available to determine how the funds were spent.
“Therefore,” the section stated, “we were unable to determine if the activities recorded were legitimate police department activities.”
While a similar problem of unrecorded bank accounts and poor reconciliation was found in the fire department, the dollar amounts were slightly smaller and the check registers associated with the account suggested the activity pertained to calendar sales, a chili cook-off, other public activities and donations, and purchases of Christmas gifts.
Out of the $13,739 deposited into the fire department account, $3,800 was determined to be from payroll deductions, but the source of the remaining funds was unconfirmed, along with how the checks of over $10,000 were spent.
In section 12-03, the firm found evidence that certain fundraisers had been held in the City’s name, but their proceeds were not identifiable in any deposits recorded in City accounts.
One such fundraiser included a raffle which auditors found advertised in a promotional flyer that was determined to be illegal since the City had not obtained prior approval from the Tennessee Division of Charitable Solicitations.
Finally, finding 11-02, regarding violations of the Three-Day Banking Law, stated that deposits were not always being made within three days of receipts, including cash seized by police during arrests.
While some of the smaller findings had already been corrected by the city as of June 30, 2012, most of those listed above were still unresolved at that time, according to the report.
Mayor Lonnie Norman had no comment on the findings as of Friday, but has scheduled a press conference at Manchester City Hall at 10:00 a.m. Thursday to address questions about the audit.
“I’d rather not make any comments until I can have everyone together at the same time,” he said.
Marian Galbraith can be reached via email at firstname.lastname@example.org