Iola’s money matters took center stage Monday for city council members, as they inched closer to decisions on year-end budget amendments; whether to provide automatic cost of living pay increases for employees in 2012; the city’s purchasing policies; and whether to conduct a special audit.
But work remains before final decisions can be made in all four areas, council members decided, following spirited debate in each.
Council members were unanimous in rejecting bids from three accounting firms that would have conducted full-scale examinations of the city’s finances from 2007 through 2010.
The city received three such bids, ranging from $11,000 to $56,000 for the work.
Such work is not considered an audit, City Administrator Carl Slaugh explained, because it does not offer an opinion on the city’s finances, but is better described as an “agreed upon procedures” process or a forensic examination of the city’s finances.
SCOT LOYD, with Swindoll, Janzen, Hawk and Lloyd of McPherson, one of the accounting firms that made a bid, said the wide variance in the bid prices is attributed to the wide scope the city asked for in submitting its bid requests.
He suggested the city narrow its focus to one or two years, perhaps targeting specific funds, to determine if further investigation is necessary.
Councilman Kendall Callahan said a special review is necessary, referring to the city’s budget discussions earlier this year that played a role in the dismissal of former city administrator Judy Brigham three weeks before she was to retire.
Councilmen cited numerous errors in the proposed budget, initially rejecting the 2012 spending plan, before accepting a similar plan weeks later after it was resubmitted using a different software system and revised balance sheets.
“There’s a misconception that we’ve had special audits like this already done,” Callahan said. Rather, the annual audits should be counted more as “spot checks,” Callahan said. And even then, those found a number of violations in 2010, including cash fund deficiencies that ultimately played a role in the city’s credit being downgraded by Standard and Poors last week to a BBB rating.
“We would be shirking our duty to not have this auditing done,” Callahan said.
Those opposed to seeing the special audit conducted, Callahan said, tended to speak from emotion rather than fact.
Callahan also said he would like to see the city set a special policy that triggers a special audit each time the city undergoes a change in management, such as this year with a new city administrator, mayor and city council.
Councilmen Steve French, Ken Rowe, Beverly Franklin and Jim Kilby agreed.
“I wouldn’t buy a business without a complete audit,” French said. Nor should council members make long-term decisions on the city’s future without a clearer grasp of its fund balances and spending practices, he said.
French also recommended the council provide the public a compiled list of irregularities rather than the “piecemeal” revelations that have been featured in the Register as the budget was taking shape.
“I don’t want to spend $56,000 either,” Kilby said. “But we’ve been given a lot of numbers that don’t match.”
COUNCIL members Joel Wicoff, Don Becker and Scott Stewart remained opposed.
“Nobody has proven to me that this is value-added for the taxpayer,” Wicoff said. “I encourage everyone on the council to think about this from the big picture. If we spend $11,000 to $56,000, what are we going to gain? The city has been here for more than 150 years.
“People are against the use of these funds,” Wicoff continued. “I dare say we don’t have an issue that’s as large as what’s been portrayed here.”
Becker asked how much each council member would consider appropriate for spending for the special audit. He then wondered if the council members would reimburse the city from their own pockets if the report came back clean.
Stewart said he received 18 e-mails from Iolans about the issue. Fourteen of the 18 were opposed to the city spending any money on such an audit.
“I don’t want to spend anything,” Stewart declared.
After rejecting the three bids, Councilman Ken Rowe proposed, then rescinded, a motion to hire Swindoll, Janzen, Hawk and Lloyd.
A subsequent motion directing Slaugh to revise the scope of the finance study before submitting such a proposal passed 5-3, with Wicoff, Becker and Stewart opposed.
COUNCIL members also deferred decisions on year-end budget amendments.
A transfer of $500,000 from the city’s electric fund is necessary to fund some of the city’s other functions, Slaugh said, pushing the total from $825,000 to $1,325,000.
Callahan referred to the year-end deficiencies and subsequent credit downgrading from S&P, which could prove costly for Iolans as the city refinances its loans to pay for the water plant.
“Frankly, I’m embarrassed” at Iola’s BBB rating, Callahan said.
Slaugh said he directed department superintendents to freeze all spending except for the bare necessities this month, while three employee vacancies have remained unfilled.
Slaugh said delaying a decision on transfers until the council’s Dec. 12 meeting will give him and other city planners a clearer picture of just how much is needed to keep some fund balances flush by year’s end.
COUNCIL MEMBERS also delayed a decision on whether to automatically increase all city employees’ pay by 3.6 percent on Jan. 1 to stay in line with the Consumer Price Index for the upcoming year. For the past few years, the city has tied cost of living adjustments with the CPI, although there has been no increase over the past two years because the CPI remained flat.
Slaugh estimated a 3.6 increase would cost the city an extra $154,821 if the city uses its 2010 payroll figures as a baseline. A 2.5 percent hike would be about $107,000.
Council members asked for further clarification, such as whether those numbers accounted for overtime.
Callahan, meanwhile, noted that while there was no cost of living adjustments the past two years, pay has risen each year through merit increases. He suggested initially that the city delay until February any such pay increase, before proposing the city debate the matter further in December.
“I don’t want this to sound as if I’m against this or I’m anti-employee,” Callahan said. “I’m not. I just don’t know where we are financially.”
THE COUNCIL also rejected, 5-3, a proposed spending policy that essentially puts to paper the city’s spending practices in the past.
Wicoff, Becker and Stewart were in favor.
The other council members were opposed, citing potential loopholes in the policy that would allow purchases to continue without proper oversight.
“I cannot support a policy we are not going to enforce,” Callahan said.
