Leader Blues

Saturday, February 16, 2008

TOP STORY > >State audit finds fault with Cabot

By JOAN MCCOY
Leader staff writer

The state audit of Cabot’s city books for 2006 has been deemed the worst in the city’s history.

There is no allegation that money is missing, only that the books are incomprehensible. Marva Verkler, city clerk-treasurer, on Tuesday told a budget committee made up of city aldermen that the financial statements for that year were so inaccurate the auditor had been unable to verify them.

“The books are just terribly out of balance,” Verkler said.
The committee agreed that the audit should be on the agenda for the March council meeting so it can be discussed with all council members and the mayor present.

Alderman Ken Williams, a lawyer and the former city attorney, was the first to address the audit during the meeting. Williams said he had looked at a lot of audits and all are difficult to understand because they are written in “legislative audit speak.”

But even with the difficult language, it was clear that Cabot’s 2006 audit was bad, the worst he had ever seen.
“It’s pretty rough,” Williams said.

Verkler agreed. “It’s the worst the city has ever had,” she said.

These are some of the findings of the 2006 audit: “Arkansas code requires city management to maintain financial records. The financial records contained omissions/errors that are considered material as enumerated below:

“The city converted to a new accounting system in July 2006. The beginning general fund account balances reported in the new accounting system were different from the ending balances reported in the previous accounting system, and these differences in the financial records were not reconciled.

“Also, the General Fund financial records omitted cash and investments in the amounts of $82,112 and $205,863, respectively, receipts and disbursements in the amounts of $301,699 and $278,064, respectively, due to the failure of the city to record investment and loan activity.

“The other funds in the aggregate financial records contained misstatements for cash and investments in the amounts of $19,528 and $30,379, respectively, primarily due to the lack of record-keeping for investments. The other funds in the aggregate financial records also contained misstatements for receipts and disbursements in the amounts of $220,807 and $2,164,236, respectively, due to the city not recording receipt and disbursement activity in the debt service construction funds.”

The $220,807 and $2,164,236 were bond money overseen by an independent administrator, Verkler and City Attorney Jim Taylor told the committee. The oversight was in not having those records included in the city books.

The audit report continued, “The effect of these omissions and misstatements constitutes a significant control deficiency in the process of preparing financial records. City management should implement procedures to ensure that all assets and fund balances are properly accounted for and that receipts and disbursements are properly recorded.”

Verkler told the committee that she has implemented procedures to ensure that records will be correct from now on. But she said the bad report had nothing to do with her. Although Verkler is the elected official responsible for city records, in 2006, Dale Walker was over finances and the problems for that year were his, she said.

The city council stripped Verkler of most of her financial duties in 2003 after Stubby Stumbaugh became mayor and gave them to Walker.

Alderman Terri Miessner pointed out during the meeting that both Verkler and Walker said they worked together in 2006, after three years of being at odds.

Alluding to the bad relationship between Verkler and Stumbaugh and eventually between Stumbaugh and Walker, Miessner reminded Verkler that she and Walker “worked undercover” in 2006. Verkler would not accept any of the blame for the poor record keeping.

“I helped Dale with a lot of things, but I didn’t keep the books,” she told Miessner.

Although Walker was given most of Verkler’s duties in 2003, the council gave them back in 2007 and made Walker the budget manager.

Walker said Friday that he switched from cash to accrual accounting in 2005 and then at the city council’s request from accrual to cash in 2006. He was fired in June 2007 during budget cuts before he had time to get the books in order from the transition. “Verkler should have made sure the books were in order before the audit because she was the one in control,” Walker said.

“I was relieved of my duties effective Jan. 1, 2007,” he said. “I was no longer the finance director. I was a budget manager. That falls right back on Marva.”

Contacted later, Verkler responded to Walker’s criticisms: “I was not in charge of the books in 2006; he was,” Verkler said. “He should have had the books in order before he left. He had six months.”