No bubble gum, duct tape or pickles

Little more than a year after being told the Town of Saratoga was “in a pickle”, the Saratoga Town Council made three motions at their July 6 meeting to correct years of miscoded expenditures.

The most recent action by the governing body—at the recommendation of third-party accountant Stuart Webster—appears to conclude more than two years of questions surrounding the Town of Saratoga’s finances originally asked by Councilmember Jon Nelson.

In June 2020, those questions led to the announcement by accountant James Childress—who had previously been engaged with the Town—the Town had been overspending for years with much of it between 2010 and 2018.

Retroactive Overhead Allocations

The term retroactive overhead allocations was first used by Childress as he presented a preliminary report to the Saratoga Town Council in early 2020 which covered a 20 year period. Another term used by Childress was “implicit approval”. Used in a February 2020 email to the governing body, Childress informed the council money had been transferred from enterprise funds—specifically the water and sewer funds—to pay expenses owed by the general fund.

The first sign of rectoractive overhead allocations came in April 2020, and were heavily contested by Nelson, when noticeable changes were made to the Town’s financial statements between February and March.

Those changes included a reduction in the water fund from $1.38 million to $584,000, a reduction in the sewer fund from $713,000 to $301,000 and a reduction in the weed and pest fund from $394,000 to $146,000.

When Childress appeared before the Saratoga Town Council in May 2020, he argued while enterprise funds were technically restricted they should also have been charged an interfund overhead allocation. This, too, was contested by Nelson repeatedly and it appeared the report presented by the accountant included an estimation of what those interfund overhead allocations should have been throughout the 20 year report.

In August 2020, following the resignation of former mayor John Zeiger, Nelson requested the council direct Childress to reverse the adjusting entries made between February and March. Though the motion passed unanimously, the adjusting entries were never reversed. As 2020 came to an end, so too did the Town’s involvement with Childress.

Enter Webster

Webster, who was engaged by the Town of Saratoga in early 2021, began working as a certified public accountant in 1969. He taught for 45 years in three different universities, with the last being the University of Wyoming (UW). Webster arrived at UW in 1994 and retired in 2013.

“I’ve met multiple times with Jon (Nelson) and Creed (James) to take a look at the accounting records because they’ve been out of balance for quite some time,” said Webster. “You are engaged with another audit firm who would like to start next week, I understand, and so our task tonight is to recommend some action to take based on my analysis of the records I was provided with and to try and get us to a point where you can take action so the auditor who has been hired can begin the audit process for fiscal year ‘20 and ‘21.”

As Webster continued, it appeared there was little shock to members of the council in regards to the Town’s financial history. Though previous auditing firms—specifically Anton Collins Mitchell (ACM)—suggested adjusting entries following past audits, those entries were not made. This was information also revealed by Childress during his engagement with the Town of Saratoga.

“So, the books have been out-of-balance for some time and our purpose tonight is to try and bring that into balance,” said Webster.

Balancing Act

In a series of worksheets provided to the Saratoga Town Council and projected onto the wall of the council chambers, Webster walked the governing body through the actions he was proposing the council take to correct their books. In the first worksheet, the balances as of June 30, 2020 showed the Town of Saratoga’s finances before the reversal of Childress’s adjusted journal entries.

Those adjusted journal entries made by Childress led to certain accounts, such as the community center fund, with a balance of $173,358.81. Additionally, the airport fund had a balance of $14,570.62 and the Hobo Pool Improvement Fund had a balance of $633.41. Additionally, the general fund had a balance of $1.56 million.

The first journal entry made by Webster was to do what was requested of Childress, essentially to reverse the retroactive overhead allocations. This was referred to as Entry A.

Following this action, the general fund was at $799,546.06 while the community center was -$423,382.19, the airport was -$212,629.38 and the Hobo Pool Improvement Fund was $87,366.59. The medical clinic fund, which was at a zero balance, was taken to -$56,000 and a fund labeled “enterprise funds” went from -$63.75 to -$15,563.75.

Describing the general fund as a “shock absorber”, Webster explained the next move to bring things into line would be to approve transfers in the amount of $811,020.45 to zero out the accounts which were put into the negative by reversing Childress’ adjusting entries. This action, however, would result in a negative general fund balance of -$11,475.39. This was referred to as Entry B.

“Because the general fund has a negative balance, that wouldn’t look very good at the end of the year. So we discussed what to do,” Webster said. “The suggestion has been made to borrow $15,000 from the Weed and Pest fund, which will eliminate a negative balance in the general fund account. It slightly reduces the Weed and Pest fund but what we recognize is an increase to the cash in the general fund is offset by a liability to the Weed and Pest fund.”

This was referred to as Entry C.

Loan made, loan repaid

According to Wyoming State Statute 16-4-117 “The governing body may authorize interfund loans from one  fund to another at interest rates and terms for repayment as it may prescribe and may invest available cash in any fund as provided by law”.

Nelson stated it was his belief borrowing from the Weed and Pest fund with a plan for repayment was different from previous years in which the enterprise fund was used to pay general fund expenses. Citing Childress’ use of the term “implicit approval”, Nelson stated nobody was implying anything with fund transfers and a loan was being explicitly made and recorded.

The council member further explained such a loan was only possible due to the fact the general fund received $1.55 million in revenues in Fiscal Year 2019/2020 and projected to receive $1.3 million in revenues for Fiscal Year 2020/2021. If the revenues for both of those fiscal years were lower, according to Nelson, the loan needed from the Weed and Pest fund would likely be more. Additionally, due to the substantial revenues, the governing body could repay the loan entirely.

Motions made

Because Entry A was, technically, voted on in August 2020 it didn’t require a motion from the current council. The Saratoga Town Council voted unanimously to accept Entry B and Entry C as recommended by Webster.

The loan in Entry C was made to the general fund effective June 30, 2020. A third motion, which was later referred to as Entry D, was to repay the $15,000 to the Weed and Pest fund in full effective June 30, 2021. Even with the repayment of the loan, the general fund budget is projected to be $1.3 million for Fiscal Year 2020/2021.

The next meeting of the Saratoga Town Council will be at 6 p.m. on July 20 at Saratoga Town Hall.