Finding a path forward

The Saratoga Town Council appears to be moving forward with plans to address findings from the audit of the 2018/2019 Fiscal Year following a workshop on August 13.

As was reported previously (see “What’s the plan?” on page 3 of the August 12 Saratoga Sun), the workshop had been scheduled following questions from Councilmember Jon Nelson to Mayor John Zeiger and Councilmember Judy Welton, who serves as the liaison to Town Hall, about how they believed the findings should be addressed.

The audit, which had a qualified opinion from the auditors, included three findings; misstatement of cash, segregation of duties, and noncompliance and use of restricted funds.

Zeiger was notably absent from the workshop and Councilmember Bob Keel served as mayor pro-tem in his absence. Citing previous unsuccessful workshops, Zeiger stated “this audit was from the previous administration” in an email to the rest of the council. While the Fiscal Year 2017/2018 audit performed by Anton Collins Mitchell dealt with a complete fiscal year under former mayor Ed Glode, the current audit performed by Carver Florek and James covered both Glode’s and Zeiger’s administrations.

Saratoga Town Clerk Suzie Cox and Saratoga Town Treasurer Sammy Flohr were in attendance along with Nelson, Welton, Keel and newly appointed Councilmember D’Ron Campbell.

Segregating Duties

One of the first things discussed in the workshop was that of payroll for the Town of Saratoga. In the days prior to the workshop, Nelson and Campbell had gone through the Town’s finances to discover the reason behind discrepancies between what was approved by the governing body and what was expended. In recent meetings, Nelson had brought up a difference of $181,278 between what was approved and what was disbursed in Fiscal Year 2019/2020.

In an email from Nelson to the rest of the council, the council member stated that the source of the difference appeared to come down to two transactions; an expense of $171,538.65 to Honnen Equipment and approximately $10,000 to the Internal Revenue Service. Additionally, from January 2019 to current, a number of expenses related to payroll liabilities were seemingly disbursed long after council approval.

“I spoke with Mrs. Cox about that and she agreed that it could be plausible that a lot of these things that were missed were payroll items,” said Keel.

Keel then proposed that the council be presented a monthly report at the beginning of each month that would detail the payroll items that were approved and those that would need approval. In the same email in which Nelson had presented his and Campbell’s findings, the council member had stated that the timing of the expenditures was inconsistent with their approval. 

“(We) had some back and forth emails and, Suzie you can correct me if I’m wrong, but you say, ‘Unless you have a payroll clerk that can guarantee their time is scheduled to do only payroll rather than many, many things at one time I do not see how this can be improved upon,” said Campbell.

Campbell added that she had been informed by the town clerk that there were no job descriptions for multiple positions within the Town of Saratoga and asked why the treasurer could not be the one who does payroll.

“They certainly could be, it’s just that’s not the way it’s been for 20 some years,” replied Cox.

As discussion continued, Nelson appeared to support Campbell’s proposal that Flohr take over the accounting while Cox would focus on the record keeping. While Keel stated his support for that proposal, dependent upon recommendations from the auditors and accountant James Childress, Welton stated that Cox had performed payroll due to the turnover of treasurers in Town Hall.

“If Suzie turns over whatever it is to whoever’s in that position as treasurer—and we’ve gone through a few of them—when they leave, then Suzie’s got to figure out exactly what they did and how to pick up the pieces and go forward,” said Welton.

Later in the meeting, Keel stated that if both the auditors and Childress believed Sammy doing payroll would resolve the finding related to segregation of duties, “Then we need to tell Sammy, ‘Hey, we need you to do this because this is going to fix a problem that we’re having.’”

Restricting Funds

While payroll and segregation of duties were substantial points of discussion during the workshop, the bulk of it centered on the enterprise funds and how the Town of Saratoga has treated those funds in the past. As was reported previously (see “Auditors issue qualified opinion” on page 1 of the August 5 Saratoga Sun), the auditors issue the following finding under noncompliance and use of restricted funds:

The Town’s management and accounting system did not recognize the Proprietary Fund balances as restricted funds, nor did they separate restricted funds from unrestricted funds. Restricted funds were used for purposes other than those for which they were specifically restricted, and this occurred for many years.

“I think the auditor and the accountant were both very clear—I know Mr. Nelson wanted to make this an official decision or declaration by the Town—that enterprise funds are restricted funds and I don’t see any reason why we couldn’t do that now,” said Keel. “I think those funds should only be used for the administration of those specific things.”

In April, Nelson had made a motion to declare several funds restricted and included water, sewer, and weed and pest funds (see “Questioning changes” on page 1 of the April 29 Saratoga Sun). That motion would, ultimately, fail by a vote of 1-4.

Cox, apparently seeking clarification, asked if declaring the enterprise funds restricted would mean that payments for water, sewer, and weed and pest would need to be divided into the appropriate accounts. Additionally, she asked if that money would then need to be removed from those accounts to pay for invoices related to water, sewer, and weed and pest.

“That would be my understanding, yes,” replied Keel.

Repayment Plan

While not a finding from the audit, the repayment to the enterprise funds was another topic of discussion. Keel stated his support for repayment while also expressing his concern of doing so at the cost of leaving the general fund little to no operating budget.

“If we have the money and we can do it, great,” Keel said. “But, if that makes it so we don’t have an operating budget … I think we need to adjust our timeline on how we pay that back.”

“I think that exercise of trying to repay whatever the ‘due to/due forms’ are, that’s different than what are we doing on a month-to-month, day-to-day basis in terms of how water bills and sewer bills and weed and pest bills are treated as they come in,” replied Nelson.

Keel agreed with Nelson, stating that as revenues for those funds came in they would be classified as enterprise funds and restricted. He added that, as the Town of Saratoga repaid the funds it would not be taking away from the operation budget, then it would be fine.

Reserve Accounts

While still discussing enterprise funds, Keel stated that he would be open to the town council meeting with the different boards and commissions whose funds were managed by the Town to establish a goal for reserve accounts.

“A month and a half, two months ago … we were going through budgets and we were trying to approve the budget ordinance at the end of the last fiscal year and I was pretty adamant that we transfer into the reserve accounts with excess of revenue over expenditures,” said Nelson. “That was something you did not agree with at that time. What’s changed in your understanding of how government accounting works in the last 45 days?”

Keel stated his opinion had never changed, but that the timing of when the transfers took place had changed.

“My opinion has always been that we need to put money in reserves,” replied Keel.

This led to Nelson asking if Keel would support revisiting the budget amendment for Fiscal Year 2019/2020 and transferring excess revenues over expenditures into specific reserve accounts. When Welton asked where such a transfer would leave the operating budget for the Town of Saratoga, Nelson replied, “In the black.”

Further discussion saw Keel raise the issue of interfund allocations in regards to managing enterprise funds. When he stated that he was not in support of retroactive interfund overhead allocations, Nelson asked if he would support undoing the transfers that took place between March and April.

“If they have been, yes,” responded Keel.

With an apparent plan on how to proceed, the workshop was concluded with just over an hour having elapsed. 

The Saratoga Town Council will have met at 7 p.m. on August 18 at Saratoga Town Hall. The next Saratoga Town Council meeting will be at 7 p.m. on September 1 at Saratoga Town Hall.