December 6, 2012
Audit faults Marathon village budgeting
Comptroller finds $172,000 water fund deficit, lack of spending safeguards
MARATHON — An audit of the village by the state Comptroller’s Office uncovered poor financial oversight, a $172,000 deficit in the water fund and a lack of safeguards with spending and computerized data.
The audit reviewed the village’s finances from June 1, 2010, to Feb. 3, 2012, and was expanded to include June
1, 2007, through Feb. 29, 2012.
It also reviewed the 2012-13 budget to assess trends.
The audit said Mayor John Pitman and Village Board members failed to adequately manage the water fund. Auditors said the $172,000 deficit at the end of the 2011 budget year was a result of overspending and poor budgeting.
The water fund had operating deficits for the years 2007-08 through 2009-10, according to the audit. As a result, the village borrowed money from its electric fund to pay deficits in the water fund.
“To date, the water fund has borrowed more than $158,000 from the electric fund,” the report states. “Unless the financial condition of the water fund improves significantly, these advances will not be repaid timely and may not be repaid at all. If this interfund activity increases, the financial condition of lending funds will deteriorate.”
The current water fund deficit stands at about $150,000.
In a written response to the audit, the board stated that the majority of the water fund deficit was from emergency spending to cover the cost of abandoning four contaminated village water wells before the audit period.
The audit also states that the village has taken steps to remedy the water fund’s shortfall.
“Over the last three fiscal years, the board has begun to address the financial condition (of) the water fund by increasing water rates and adopting budgets that do not have unfunded budget gaps,” the audit states.
The water fund budget is expected to have a nearly $10,000 surplus this year.
Pitman said that the auditors were displeased that the water fund was not balanced on a paper budget, but that the budget is just a projection, and the village saved money throughout the year to match revenues to expenses.
A lack of mayoral and board oversight of the village spending made by its joint Clerk-Treasurer Sylvia Boice was another issue.
“The mayor allowed the clerk-treasurer to perform almost all aspects of the disbursement process including recording disbursements, preparing disbursement checks, signing the checks, mailing the checks, producing reports for the board and preparing bank reconciliations,” the audit report said.
The audit noted that Pitman reviewed bank statements and no “material discrepancies” were found by the auditors in their review of the village books.
But the report also said the mayor should spilt up the disbursement duties if possible or review canceled check images to ensure the checks were made out to the right payee and compare bank statements to board authorized spending abstracts.
In its response to the audit, the board wrote, “The report fails to give credit for the deputy clerk’s involvement in the disbursement process. She prepares abstracts; records check numbers and mails payments.”
The village also noted Pitman reviews abstracts and signs some checks.
The state Comptroller’s Office responded that the deputy clerk only processed information provided by the clerk-treasurer and did not provide any oversight, while an abstract review would not catch inappropriate checks if they weren’t listed on the abstract.
Pitman said that in the future he will review five random checks from each account at the auditors’ suggestion.
“That’s just a good little safety net,” Pitman said.
Auditors also found that the village’s computerized information and assets were not safeguarded enough.
Their report said the village’s information technology consultant had access to village data without signing a security agreement, there was no offsite backup files and no disaster recovery plan existed.
In its response, the Village Board wrote that the information technology consultant was a village resident with a high level of security clearance from his work as a federal contractor, leading the board to consider him trustworthy.
“The board should have a written agreement with any vendor regardless of that vendor’s qualifications,” according to the auditors.
In its corrective action plan, the board said it would enter into a contract with its consultant, purchase 2 USB flash drives for data backup and rotate them offsite and develop a disaster recovery plan.
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