Playing games with pooled bank accounts is nothing new or particularily innovative on the book cooking front. What gets me is the fact that the same pot of money is apparently spent over and over and over again. I’ll term it Hocus Pocus accounting and it is fairly easy to see through.
Speaking of Hocus Pocus accounting in the Bay we have a Hocus Pocus budgeting as well as. You see folks in Mississippi by law Municipalities must prepare their budget on the cash basis with one exception. What this means is revenue per the budget is recognized when actually received rather than when earned. This means with the exception of previous fiscal year claims paid within 30 days after September 30 that expenses are recognized when paid rather than when incurred. Since we’re talking governmental accounting this also means that capital expenses are shown as an expense when paid and both loan principal and interest are expensed when paid. Adjusting for claims paid 30 days after year end this also means the following equation is true. [Section 21-35-23, Miss. Code Ann. (1972)]
Beginning Cash in fund + budgeted revenues – budgeted expenses = Ending Cash in fund
Now I would encourage everyone to visit the City’s website and download the original and amended budgets for 2014-2015. Look hard for the equation I highlighted above but you can also take it from me that you won’t find it because the City did not use the correct format for its budget. Correct format??? What the heck is Handshoe talking about? I’m talking about the Mississippi Audit and Accounting Guide for Municipalities promulgated by the Mississippi State Auditor’s office, which by law has the authority to dictate the form of the budget. [Sections 21-35-7 and 21-35-29, Miss. Code Ann. (1972)] The following is what I am talking about being missing from the Bay Budget:
What does this have to do with the City’s current predicament? Let’s visit with Wes Muller’s story above:
Falgout challenged the mayor’s explanation, saying the previous administration used a separate account for police forfeitures for 22 years until former City Clerk David Kolf closed the account in 2009.
“David Kolf closed that fund in October of 2009 after you took office, and it hasn’t been back since,” Falgout said. “The city has received up to $315,000 worth of monies in the last four or five years, and we’re sitting here saying it’s $186,000. We don’t even have enough money in the general fund to cover half that.”
The formulas above is what also caused Councilman Falgout to question the Cash balance shown in the 2014 Bond Refunding Debt Service Fund as being $100,000 short. When Falgout say short he is not accusing someone stealing per se, rather, it implies he thinks a portion of the dedicated $13.00/month surcharge on everyone’s water and sewer bills is sitting in some other fund. The City, in direct violation of its debt covenants with Hancock Bank did not segregate the dedicated debt service funds from the pooled account until late this past Spring when councilman Falgout asked why there was no money in the debt service fund. It reeks folks.
These are esoteric accounting concepts but they are important because when the City Council was forced to refinance its water and sewer bonds in 2014 or default, the public was assured the new service charge added to their water bills would not be spent for any purpose other than debt service on the refunding bonds. By co-mingling the funds the Fillingame Administration did exactly what the council prohibited and now there are questions about the fund being short around $100,000.
And that is the biggest fallacy in the City’s Hocus Pocus accounting because when you add up all the little pots of money the Mayor claims the City has stashed and compare the total to the reconciled balance in the pooled bank account it comes up short, just like Chief Denardo’s Drug Asset Forfeiture Fund and this brings me to the brand spanking new Old Town Bay St Louis Trolley, which was supposedly paid for with the Seal Grant Money the only problem being the Seal Grant Money has been spent about 8 times over by now by my calcualtion. This in turn has prompted residents that would rather laugh than cry to begin circulating the parody below:
Ooops sorry folks, wrong picture. Here is the correct one:
The problem with financial houses of cards is they always come tumbling down. Next up, in light of the Statutory requirements that a Mississippi Municipality budget on the cash basis, what is the impact of sandbagged claims payable that are never recorded on the books until just before they are finally paid very late months down the line. Stay tuned.