Meltdown on Main: Bay City Council unable to pass FY 2016 Budget due to lack of information

And from that headline one could easily conclude last night’s meeting was a complete waste of time since the City Council had to schedule a special meeting for later this week after Mayor Fillingame was unable to answer their financial questions regarding the upcoming budget but it wasn’t for a variety of reasons.

Mayor Fillingame did announce that long time City Comptroller turned City Clerk Katherine Smith is retiring on September 30 along with his selection of Casey Favre to fill the remainder of Mike Benvenutti’s term on the Bay Waveland School Board.

I could end this post here and delete the first three words of the headline and call it a public interest journalism day easily completed so I can devote time to the major investigative project Slabbed is doing on the construction of the Jackson County jail where the stakes are so much higher as personal liberty is at issue rather than the simple squandering of tax money by a small town mayor that is in over his head.  I’m not though because last night’s meeting was not the one the public was supposed to see, at least according to the agenda of the meeting emailed to the public by Council Clerk Tilley on Friday.  This public record shows up on a variety of locally focused websites besides Slabbed so I might as well join the gang and display an agenda here on Slabbed so everyone can get a flavor of what I’m talking about:

Source: Bay St Louis City Council
Source: Bay St Louis City Council

I observed a long time ago on these pages that the City Council could do a better job running it’s meetings by curtailing the very generous public comment periods where a Citizen could get up to the mike, state their name for the record and opine (within reason) to their hearts content on issues facing the City. It made the meetings longer, unnecessarily so in some cases. I also noticed a few months back that a new policy was adopted with respect to the first public comment period that it be limited to agenda topics and the above agenda reflects that fact.

A second public comment portion at the end of the meeting was still maintained where the topic of public comments are not limited. Those people that give enough advance notice can be placed at the top of the agenda like Mssrs. Caplinger and Wells were last for yesterday’s meeting.  The policy is still very reasonable and friendlier to the public than many local governments in Mississippi which generally have one comment period that requires advance registration with the board clerk.  I like the fact the Bay St Louis City Council has such a generous policy, that was adopted when Ward 4 Councilman Compretta assumed the role of Council President a few months ago. Continue reading “Meltdown on Main: Bay City Council unable to pass FY 2016 Budget due to lack of information”

2013 Bay St Louis Municipal Audit reveals poor financial management Part 1

Here at Slabbed we’re the proverbial Johnny Come Lately to cover the long anticipated release of the 2013 Fiscal Year Single Audit Report for the City of Bay St Louis. That’s OK though because the report was very late being released, less than two months before the subsequent fiscal year end. How can an entity improve if it waits until late in the next year to correct the Significant Deficiencies that were reported in a late submitted Single Audit? The answer is simple junior, you can’t but then again many of the Significant Deficiencies noted in the report have been reported for multiple consecutive years without correction and that too is meaningful.

That said there are two things I need to address straight away as this topic, by its very nature, requires a few posts to fully paint the picture. The first thing is that somewhere in my earlier coverage of the City’s audit process, based upon what were at times inside conversations between the City Council and the Audit Firm in a public meeting, I wrote that the audit firm was within the bounds of professional discretion with their, at that point unreleased, opinion on the financial statements. Reading the report caused me to change my opinion in a nuanced way and here is why straight from Auditing Standards (Codified), Section 570:

.16 The auditor’s conclusion about the entity’s ability to continue as a going concern should be expressed through the use of the phrase “substantial doubt about its (the entity’s) ability to continue as a going concern” or similar wording that includes the terms substantial doubt and going concern. In a going-concern emphasis-of-matter paragraph, the auditor should not use conditional language in expressing a conclusion concerning the existence of substantial doubt about the entity’s ability to continue as a going concern.

So there you go, there is no middle ground in the use of the words “substantial doubt” and “going concern” but there is a trap door for the CPAs to use just in case management, for whatever reason, chooses not to share their plan to salvage the enterprise as was the case with the City of Bay St Louis:

.18 Nothing in this section precludes an auditor from disclaiming an opinion in cases involving uncertainties. When the auditor disclaims an opinion, the report should not include the going-concern emphasis-of-matter paragraph described in paragraph .15 of this section but, rather, describe the substantive reasons for the auditor’s disclaimer of opinion in the auditor’s report as required by section 705.4 The auditor should consider the adequacy of disclosure of the uncertainties and their possible effects on the financial statements as described in paragraph .12 of this section even when disclaiming an opinion.

The disclaimer based on these circumstances is just as bad as getting the going concern qualified opinion, thus the interest shown by the Office of the State Auditor in the City’s finances after the report was released last month and this brings us to the second thing that needs to be addressed in Mayor Fillingame’s assertion the 2013 Audit Report was sensationalized by the media. I think I found what he was talking about. Continue reading “2013 Bay St Louis Municipal Audit reveals poor financial management Part 1”

“A clean, good opinion”!? Which one???

I always get a charge from local press coverage of GAGAS / SIngle Audit presentations because what are seemingly simple concepts are actually mind numbingly arcane.  Luckily for the reader, my mind has previously been numbed with this bit of arcanity so along those lines I got a chuckle at Mary Perez’s rendition of the D’Iberville City Council meeting where their FYE September 30, 2012 SIngle Audit report was presented.

First things first folks as the audit submission is late (it was due on June 30, 2013) and that gives a clue as to the state of the finance department at the City.  Good, clean records are easy to audit and those entities with good, clean records typically are not late with audit submissions. In fact, my experience has been that auditees with good, clean records typically have their audits wrapped up 3 to 4 months after the fiscal year end.  In the private sector 3 months after Fiscal year end is typically considered timely for audit completion by way of comparison.

The second thing is Mary’s report quotes the CPA firm representative as saying the firm’s opinion was unqualified which in turn is a “clean, good opinion”.  My question is which opinion because there are something like 4 or 5 auditor opinion letters contained in a single audit and from the sound of things the City of D’Iberville’s operations are anything but “clean” and “good” as there is double dealing galore there beginning with DMR but not ending there as internal controls over grants and contracts appear nonexistent along with gaping holes in the cash disbursement processes.  That much was clear from Mary’s report and there is nothing good or clean about that.

And then of course there is that pesky FBI investigation into the Utility Authority, SH Anthony Construction Company along with Maxwell Walker Consulting and their curious contract with the City.  And while my experience has been that FBI agents are meticulous in their grooming, there is nothing good and clean about having the FBI about investigating government corruption. Continue reading ““A clean, good opinion”!? Which one???”

DMR Scandal Day 136: “In God we trust, all others we audit.” Not…..

In God we trust, all others we audit. ~ Former State Auditor Phil Bryant.

It was massive accounting frauds at ENRON and WorldCom that led to government regulation of large swaths of the CPA profession and deservedly so I’ll add.  For instance at ENRON there was an ossified, ineffectual Board of Directors stacked with politically connected phonies like Senator Phil Gramm’s wife Wendy, an economist that could rationalize about anything. At DMR, by their own admission we have a Board of Trustees that had no clue what was going on and who evidently did not bother to engage their jobs beyond the free boat rides, fishing trips etc.  When the people that are supposed to be running the show are asleep at the switch bad things happen as we found out at ENRON and now DMR.

ENRON used off balance sheet special purpose entities or (SPE in accounting lingo) as a major vehicle for much of the criminal activity that occurred   DMR director Bill Walker created an off books foundation that sucked all manner of tax dollars away from DMR’s  mission to support the boats Walker used to wine and dine everyone on the taxpayer dime and lord knows what else.

And speaking of what else I detailed some of it as it relates to Hancock County’s role in the CIAP disaster.  None of these schemes are particularly innovative and in fact are of the in your face variety.  When there is no oversight to begin with why bother with the bells and whistles of a complex corruption enterprise like the one Aaron Broussard created in Jefferson Parish. Lest I digress.

Governor Phil should well remember from his time as State Auditor that in 1992  the Governmental Accounting Standards Board issued GASB Statement 14, The Financial Reporting Entity under which Billy Walker’s Private Foundation certainly fell.  Yet here is Walker with his own private slush fund buying millions of dollars of fishing boats and lord knows what else and no one knew anything about it.  The question ladies and gents is what does this say about the level of oversight at these state agencies?  Simple folks, despite Governor Phil serially saying for years at speaking engagements “In God we trust, all others we audit”, nobody was auditing his coast based political cronies at DMR, or even worse if someone did audit them there is an audit failure of massive proportion. It is just that bad folks but we already know all this from months ago.

And all those days ago seeing where this would end up was too predictable:

DMR hasn’t been audited by the state in over 10 years ~ Michael Newsom Continue reading “DMR Scandal Day 136: “In God we trust, all others we audit.” Not…..”

Is there an auditor in the house part deux: Slabbed takes a quick look at West Jefferson Service Corp

We have audited the accompanying basic financial statements of West Jefferson Service Corporation (the Service Corporation), a component of the Jefferson Parish Hospital Service District No. 1, as of and for the year ended December 31, 2008. These financial statements are the responsibility of the Service Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements as of and for year ended December 31,2008 of the Service Corporation’s 50% joint venture investments in West Jefferson MRI, LLC, West Jefferson Surgery Center, LLC, and West Jefferson CT Scan, LLC which combined represents 110% of investments in joint ventures for 2008 and 119% of earnings from joint ventures for 2008.

In accordance with Government Auditing Standards, we have also issued our report dated April 17,2009 on our consideration of the Service Corporation’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Auditing step #1 (2008): Determine the financial reporting entity.
Procedures for consideration: Management inquiry, Legal Council Inquiry, Search records at Secretary of State’s Office.
Results: Possible joint venture identified per Secretary of State Search. Shown below: Continue reading “Is there an auditor in the house part deux: Slabbed takes a quick look at West Jefferson Service Corp”

Informed Sources: Another high profile resignation forthcoming in Jefferson Parish. Let’s revisit those pesky internal auditors and lay bare the BS

The banter on the predicted resignation is toward the end of the show. Glynn Boyd of WGNO-TV makes the prediction. I have uploaded the picture of who I think is the next rat to jump ship along with two links that partially explains why below the fold. I also revisit the firing of the internal audit staff one month before Tim Whitmer formed Lagnaippe Industries. Continue reading “Informed Sources: Another high profile resignation forthcoming in Jefferson Parish. Let’s revisit those pesky internal auditors and lay bare the BS”