Banks, Finley, and White, an accounting firm hired by the City of Marion to conduct an audit of its financial records, has released audits of three years of the city’s finances this week. The firm was hired only to get the city’s books in order, “but not for the purpose of expressing an opinion on the effectiveness of the city’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control,” according to the 2020 report.
The firm has released audits for the years 2020, 2019, and 2018. The Perry County Herald will continue to report on the information contained in those audits over the coming weeks. One of the most significant passages of the 2020 audit, though, follows that language about not expressing an opinion on the city’s system: “We did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.”
The firm said in its 2020 audit report that it was unable to express an opinion on the financial statements of the city “because of a lack of sufficient financial and accounting documentation, related to capital assets, customer accounts receivable, and accounts payable.”
“The city does not maintain an inventory of its capital assets,” the report goes on, estimating Marion’s capital assets at around $34 million, including buildings, building improvements, furniture and fixtures, vehicles, and equipment. “Additionally, the City does not record annual depreciation expense on these assets. Records identifying the historical cost and values of these assets, along with there [sic] location within the City are not maintained and the value of the capital assets are not recorded in the general ledger.” This, the firm notes, does not comply with government accounting principles.
“Water and sewer customer receivables totaling more than $835,000 are not recorded in the general ledger,” the report continues. “A review of the subsidiary ledger revealed that more than 50% of the customer balances are more than 90 days past due.”
The firm recommended that the city adhere more firmly to government accounting principles to rectify the above weaknesses. The report also went on to identify problems with the city’s monthly accounting procedures.
“The City has more than fifteen bank accounts with two local banks. The financial activity for these accounts is not recorded in the general ledger, except for the General Fund operating account, the Water Utility Fund operating account, and the Water Utility Fund payroll account. Cash deposits for the General Fund operating account, the Water Utility Fund operating account, and Water Utility Fund payroll account are not recorded…consequently, there is no reconciliation of the bank accounts performed at the conclusion of each month.”
“The cash deposits and check payments on the majority of the City’s remaining bank accounts are never recorded. Accordingly, the special revenue, capital projects and debt service type funds are not being used as required by governmental accounting principles,” the report added.
Finally, “The City had debt service reserve accounts with a combined balance of more than $195,000, which had not been recorded in the proper accounting fund.”
Again, the firm recommended that the city continue to engage an accounting firm to handle its books until such time as it determined it had the resources to handle the accounting tasks on its own.
