Manvel city council approved an audit of the city’s finances for the fiscal year 2012-2013 at its meeting this week. The audit is significantly late in being completed and recently held back the city’s ability to secure financing for the Hwy 6 infrastructure project. Fortunately the city has sufficient capital that council was able to approve a budget amendment at a previous meeting that transferred funds from reserve accounts so the project could begin.
Auditors gave the city a clean opinion which essentially supports the financial statements as being presented fairly in all material respects. In suggestions offered by the auditor it was disclosed to council that monthly bank reconciliations have not been performed for all of the current fiscal year. Members expressed concern that city finances are not being accurately presented to council and that the budget just accepted and approved may be based on errant numbers. The auditor explained to members that there was no evidence of impropriety and no reason to suspect malfeasance exists.
Phyllis Herbst has served as the city’s contract finance director for years and it seemed likely that she would be named the city’s full time director as provided in the just accepted budget. That appointment seems uncertain now in light of the apparent disarray exposed by city auditors. Member Maureen DelBello said, “Here we are putting somebody in that position that hasn’t reconciled a bank statement for almost a year. I think council needs answers to these questions.” Mayor Martin described it as “playing Russian roulette.”
City Manager Kyle Jung told members that outside applications would be considered for the full-time finance position. Jung apparently holds financial meetings weekly and said he assumed the reconciliations were being performed timely and was unaware of there being a problem until it was brought to his attention by auditors last week. He apologized to council and vowed to correct the situation.
Mayor Martin explained that Herbst had a prior engagement and she was not in attendance at the council meeting. The city’s bookkeeper, Brenda Derouen, was left to answer members concerns. Derouen told council that reconciliations have not been done due to a change in accounting software earlier this year that required audited numbers to transfer beginning balances from which the reconciliations could be done. She told council that reconciliations have been completed through April and that the balance of the year could be done within a day or two.
Member Maureen DelBello was vocal in her displeasure that council had been in the dark for months about the state of the city’s financial management. Commenting to Derouen she said, “You’ll have come here almost every month and nobody once has said we have an issue.” Member John Cox said he feels guilty for approving the budget and asked “how can we know these numbers we just approved are right?” Member Adrian Gaspar wondered what council’s financial information is based on: “are we pulling numbers out of the air and just putting stuff for council so they look at numbers, that is what it seems like. From what I hear we don’t have accountability on almost anything we’ve done.”
Herbst has generally been held in good regard by city administrators and council members. Attempts to contact her for comments were unsuccessful though she does apparently claim the reconciliations had been done manually; they just have not been transferred to the new software program. An objective consideration would likely render it dubious that the city manager, the mayor, the city bookkeeper, and the auditor all consider the reconciliations incomplete if indeed they have been done. If that proves to be so, evidence of poor communication among key city administrators will likely add to council’s fears of incompetence in the city’s finance department.
Recent meetings between the auditors and city staff were described as “contentious” leading to suspicions there may be more to the matter than what has heretofore been made public. Some on council have recently suggested hiring a different auditor due to cost concerns and the fact that the same auditor has performed the annual requirement for many successive years. Some feel it a good idea to perhaps get a fresh look at the city’s financial management process.
Council tabled other financial issues for the next meeting when some clarity on the city’s financial position is anticipated. Herbst will be asked to explain her inaction at that time, possibly in an executive session as it concerns a personnel matter.
In other council news, the 2015 fiscal year budget was approved which will show a lowered tax rate for citizens though still realizing higher income levels due to a larger tax roll, thanks mostly to the Lakeland development, and to increased property valuations. And city employees will now be required to contribute 7% of their pay to the Texas Municipal Retirement System, increasing from the current 5%.
Easements were granted to the Municipal Utility District (MUD) #39 that will service the new Pomona development west of Hwy 288 in the city’s ETJ. The easements will allow water and sewer lines along Croix Parkway that will feed into a water treatment plant that will be constructed in the area.
A resolution approving a financing agreement will allow the police department to acquire three new Chevy Tahoe police vehicles. City Manager Kyle Jung hopes the city can take delivery of the new vehicles in early 2015.