Auditors Say Roswell Financial Report is In Violation of State Policies

During the Roswell City's Council Meeting on April 23, 2012, the results of last year's Comprehensive Annual Report were released.

It must be noted that this report was released some 10 and a half months after the 2011 fiscal year ended.

This financial report received a scathing evaluation by the outside financial auditing firm of Mauldin & Jenkins to include the fact that "The City failed to operate under an annual balanced budget, which has resulted in a compliance violation with State law." (Bottom of page 130 of the CAFR.)

And even far more disconcerting, "the City had approximately $1,745,000 in deposits that were not properly collateralized." (Top of page 129 of the CAFR.)

"Deposits with a financial institution exceeded the limit for federal depository insurance coverage and were not sufficiently collateralized in accordance with State of Georgia law." (Middle of page 129 of the CAFR.)

The auditor’s report went on to explain the possible effect of this violation of State law.

"The failure of a financial institution to fully insure or collateralize the deposits could result in a financial loss to the City, should the financial institution fail." (Middle of page 129 of the CAFR.)

The auditors also found the financial report delinquent in several other areas:

• “The City was unable to report timely, accurate financial information for several months throughout the year.” (Top of page 125 of the CAFR.)
• "Audit adjustments totaling approximately $670,000 were needed to correctly report the City’s cash balances as of June 30, 2011." (Top of page 125 of the CAFR.)
• "An adjustment for approximately $686,000 was required to properly record a transfer of a construction project from governmental activities’ capital assets to the Water and Sewer Fund." (Middle of page 126 of the CAFR.)
• "The year-end calculation of the accrued sewer fee liability as calculated by the City did not include June 2011 collections which were unremitted as of June 30, 2011." (Middle of page 127 of the CAFR.)
• "An audit adjustment for approximately $87,000 was needed to correctly report accrued liabilities." (Middle of page 127 of the CAFR.)
• "An adjustment for approximately $72,000 was needed to correctly report revenues and deferred revenues in the American Stimulus Recovery Fund." (Middle of page 128 of the CAFR.)
• "The City adopted budgets to utilize fund balance reserves to fund current period expenditures in the amount of $1,581,000 in the Federal Grants Fund and $1,800,000 in the American Stimulus Recovery Fund. Additionally, the City did not amend the original budget in either fund in amounts sufficient to ensure the City was operating under an annual balanced budget." (Bottom of page 130 of the CAFR.)
• "Internal controls and cash reporting procedures were not sufficient to facilitate the accurate and timely reporting of the City’s overall cash position and results of operations for several months throughout the year ended June 30, 2011" (Top of page 124 of the CAFR.)
• "Management had not accurately posted general ledger adjustments associated with reconciling bank statements to the City’s general ledger accounts prior to providing us with the detailed information for our testing." (Middle of page 124 of the CAFR.)

And "The City cash bank reconciliations for June 2011 were not provided to us [Mauldin & Jenkins] until November 2011." Which, conveniently was after the last election.

"The delay in cash reporting procedures caused the City’s year-end closing process, and, therefore, the audit, to be significantly delayed."

The auditors emphasized that the cause for these irregularities was: "the bank reconciliation process was assigned to personnel within the Finance Department that did not have the experience to properly prepare these reconciliations, along with a lack of oversight and supervision by the Finance Director." (Middle of page 124 of the CAFR.)