April 5, 2013 11:26:18 AM
Carl Smith - [email protected]
Watkins, Ward and Stafford's Fiscal Year 2013 audit of the Starkville Parks Commission revealed three major budgeting anomalies Thursday, including the fact SPC Commissioner Dan Moreland issued an unauthorized cashier's check for $35,000 to help pay the department's J.L. King Splash Pad construction bill.
The firm issued a clean, unqualified opinion - the numbers added up - but CPA Randy Scrivner said findings indicate serious issues involving inadequate policies and procedures to monitor internal budgets of capital projects, the issuance of payments without commission approval and budget overages on numerous SPC line items.
Scrivner said all finances were accounted for, and no money was missing from the budget.
Two of the findings dealt with the development of the splash pad at J.L. King Park, which is one of the first major capital projects by SPC while operating with autonomy from the city.
According to documents obtained by the Dispatch through a Freedom of Information Act request, SPC was to designate $210,000 -- $120,000 from the two-percent food and beverage tax end fund balance, $50,000 from a Coca-Cola donation and $40,000 from the FY 2013 two-percent fund - for the project. A $10,000 soil construction deduction, according to the SPC document, brought that total down to $200,000.
That same public records request shows Couvillion Design+Build, a Starkville-based firm, presented the lowest project bid of $217,750. Notes associated with the document provided by SPC shows the group planned to cut some of the proposal back to save money.
After Thursday's meeting, Starkville Parks Commissioner Dan Moreland said the project was scaled back to a projected $190,000. Moreland is the sole Republican candidate for this year's Starkville mayoral race.
The audit found the commission issued a $35,000 cashier's check on Oct. 17, 2012 to a vendor related to the construction of the Splash Pad. A copy of the check was obtained by the Dispatch and shows it was made payable to Couvillion.
Moreland confirmed Thursday he and a SPC administrative assistant provided the two signatures for the check - the one restriction needed to obtain the money.
Moreland's actions came without SPC Board approval, the audit stated. Parks Commissioner and incoming Ward 5 Alderman Scott Maynard said Thursday was the first he had heard of the action.
The money was used to pay Couvillion, Moreland said, after the business demanded money owed to it.
"It was when we got the bill ... Taylor (Adams, Starkville city clerk) had just started up there; Herman (Peters, Starkville Parks director) had just started down here. We were supposed to get our money (from the city) Oct. 1. They came to us," Moreland said. "We called the city every day. They had not released the funds, and they said they couldn't release the funds for a certain time.
"Couvillion came back to me and said they can't pay their employees this week unless I get some money. I said, 'How much money do you need?' He said, 'If I had $35,000, I could pay my people, and I could hold out until the city released the money," Moreland added.
Moreland said he then told Peters to get a cashier's check for $35,000 out of a Coca-Cola donation so SPC could pay Couvillion that day. The administrative assistant who signed the check, Moreland said, told Couvillion to deduct the amount from its bill, but she was told they could not.
"At that time we figured the simplest thing to do was for Herman to get a check from the city for the entire amount and call Couvillion to get a $35,000 check ready," Moreland said. "Herman swapped checks with them, brought that check back and put the $35,000 back in the bank where it came from.
"Subcontractors sometimes get in a bind," Moreland added. "We did what we thought was right. Had the city been able to pay that invoice when it first came out, we wouldn't have gotten into this problem."
SPC Commissioner Pete Melby said Moreland's actions "were logical" during board discussion on the matter. The audit report said there is no state statute giving Moreland the authority to do so without board approval.
The Dispatch-obtained check copy is dated Oct. 17 and was originally procured from BankFirst Financial Services.
Splash pad work invoices obtained by the Dispatch show numerous pay requests were presented to the City of Starkville by Couvillion in 2012, but an invoice received by the city Sept. 27 and paid three days later marked the end of $120,000 budgeted from two-percent taxes set aside by the Starkville Board of Aldermen for the project.
That Sept. 27 invoice requested a $31,600 payment for the installation of a covered seating area, a mechanical room/pump house, splash heads and the surface of the J.L. King project. SPC paid $22,248.69 of the balance before it hit the $120,000 limit. A $9,351.31 balance remained and was paid Oct. 3 - the start of FY 2013 - for using two-percent tax funding and another SPC stream, the document states.
The $22,248.69 payment was originally posted in SPC's FY 2012 park improvements/capital projects fund, a yearly recurring allotment of approximately $180,000, but was later voided because that account was fully expended and placed in the $120,000, single-allotment splash pad budget, documents show. No other splash pad-related charges were made to the recurring FY 2012 improvements/capital projects fund.
No other Couvillion claims were filed by SPC to the city until Oct. 18 and Oct. 31; however, Couvillion itself submitted its own invoices to SPC on Oct. 10 and Oct. 30. SPC then submitted it its own required invoices associated with both claims along with Couvillion's on Oct. 31. The Starkville Board of Aldermen held its regular monthly meetings according to its schedule - the first and third Tuesday of each month - on Oct. 2 and 16. Filing dates by SPC prevented the claims from being placed on the city claims docket until November, and both were paid Nov. 7.
An email dated July 18, 2012 obtained by the Dispatch shows Couvillion was made aware to quickly present invoices to the city if payment for services was needed immediately.
"City Hall is now telling us that we need to submit invoices to them and it will be placed on their financial report for approval. So, the process would be that you submit your invoice to us, then we will submit it to the city clerk's office to be placed on their docket for approval and then they will mail you a check the day after it approves," former Parks Director Matthew Rye wrote to Joe Couvillion in July. "The board of aldermen meets every first and third Tuesday of every month, so if you need to get paid fairly quickly, please remember to submit the invoice to us the Tuesday or no later than the Wednesday before the board meets so they can get it processed."
Those two requests - a $66,800 work request and a $51,793.03 final balance payment - were both filed under FY 2013 of SPC's yearly $180,000 sales tax allotment for park improvements. Documents show those two expenses and numerous others filed have already used $175,954.62 of that specific fund as of Friday.
"The manner in which these claims were handled gives the appearance of the Park Commission having made an advance to the vendor. We can find no statutory authority for the making of such an advance even in the case of delinquent claims," the audit's recommendation on the cashier's check finding states. "Parks Commission management should establish procedures with the City of Starkville for the processing of vendor claims in a timely manner so as to insure that claims do not become delinquent."
State statute requires municipal invoices be paid within 45 days, Scrivner said.
"Our recommendation is to adopt policies (for payments)," Scrivner told commissioners. "You don't see a train wreck before it happens, and that's what happened here. The right way to have done this would be to have him resubmit a partial invoice to the city less the $35,000 payment from the Parks Commission.
"The more concerning thing for me as an auditor is the fact the bank would issue a $35,000 cashier's check without a board resolution," he added. "Restrictions need to be on municipal accounts. I don't care who you are - the chairman, Herman or anybody can't go up and pull $35,000 cash out of a bank account. I would have assumed those restrictions were on the account, but obviously they're not."
Moreland said the donations account is handled differently than those containing taxpayer funds but agreed restrictions should still be applied.
"It's still a municipal account that should have some sort of restrictions," Scrivner replied.
As for the splash pad exceeding budgeted amounts, the audit's finding state the commission's board minutes do not reflect amendments for the overage. While expenditures are allowable under the two-percent tax ordinance, those two-percent expenditures exceeded its budget.
"When bills were submitted over to the city, (they) were submitted at $36,000 more of two-percent money than what you, as a commission, had approved or what the city had approved in (its) minutes. They had to wait until the new budget, the fiscal year 2013 budget, to pay...because you didn't have enough money available in the two-percent budgets for ...2012," he said. "That's where that came in. We didn't budget enough money to cover the cost of the project because the money wasn't there in the budget."
Moreland said the city promised in-kind services to tear apart and remove J.L. King Park's former pool but was unable to complete the task due to a lack of capable equipment.
"They didn't have the equipment to do it, so we had to spend money. That's where we got over budget," he said. "If the city had the equipment to finish that, we wouldn't have been over budget."
City invoices show an $8,000 claim was filed with the city by SPC and The Dirt Company on Aug. 15, 2012, for the "demolition of all concrete at J.L. King" Park. Documents obtained by the Dispatch also show two invoices for RSC Equipment Rental totaling approximately $6,000 were filed in May and June for hydraulic breaker and backhoe rentals, but it is unclear if that equipment was used in the demolition project.
The Dirt Company and RSC claims were all deducted from the 2012 splash pad allotment of $120,000.
The city did approve in-kind services for pool demolition and concrete removal with its April 17, 2012 consent agenda. According to a report from City Engineer Edward Kemp, the job would have utilized a four-person labor crew and equipment for $8,559.19.
A Couvillion memo dated June 11 stated demolition would be "handled by others" and also designated the installation of fill material in the former pool area to an outside group.
An invoice paid Aug. 22 by the city contradicts the call for an outside group to fill the pool area. It shows Couvillion charged $20,965.31 -- $13.75 plus tax per yard - for 1,425 yards of material to fill in the pool.
Scrivner told Moreland that no matter how the project went over budget, the SPC Board should have reflected the change in its minutes.
"As far as an auditor, the only way the Parks Commission speaks is through its minutes. That's always important to understand. If it's not in this piece of paper you sign, it didn't happen," he said. "As soon as that happens, you have to approve a budget amendment, and the city has to be presented with that information.
"I emphasize, these are legitimate, appropriate two-percent expenditures," Scrivner added. "That's what keeps it from being a statutory violation and allows it to be an internal control weakness. Had you adopted a change order and the budget, there wouldn't be any problems."
Scrivner again highlighted the need for timely preparation and submission of budget amendments when discussing the third audit find: SPC's numerous line items which went over budget.
"While sufficient funds were available to cover the overages, the appropriate amendments were not recorded in the commission minutes as having been presented to or approved by the commission," the finding stated.
"Throughout the year, you don't amend your budget to closely reflect what you're spending. Herman and I talked about this in great detail, and we're going to help him get this done so we...adopt a realistic budget," Scrivner said. "At least quarterly...a budget amendment needs to come to the Park Commission so you can compare what's spent and what's budgeted."
This finding would have been an oral comment, he said, but the other two splash pad-related findings elevated the matter's severity.
"Our main problem with money...is utilities. This last budget when Matthew (Rye) did it...he did not put enough money in there for utilities," Moreland said. "The more you use (Parks facilities), the more the utilities bill is going to be. Herman, that's something we need to do every year, increase that utility bill (budget) as long as the sports are increasing and the usage of the parks is increasing."
Scrivner suggested quarterly reports because SPC utilities usage varies along with seasonal sports and activities.
Moreland said SPC would work with Peters to develop this and other policies recommended by the audit. Later Thursday, Moreland said SPC purchased a voice recorder in order to better document its meetings.
Audit findings will be reported to the city at its April 16 meeting, Scrivner said, since the findings deal with how taxpayer money is spent.
"Based on what our external auditor presents and recommends, the city will need to determine its role in the processes that need to be implemented. Clearly, the range of action the board could take varies greatly," Ward 2 Alderman Sandra Sistrunk said. "As always, our interest is being open and transparent with the public and protecting our taxpayer dollars from even the appearance of impropriety. The important part of accounting information is the story it tells you about an organization's operations."
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch