Legislative Joint Auditing
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Thank you.
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committee have come to order good morning to everyone thank you for being here we've got probably rather we've
got some reports this morning they're going to be made and so we're going to jump right in this morning take a motion and a second for the adoption of the minutes have a motion for senator pitch in a second all those in favor say aye all opposed no. The minutes are adopted. And then we'll move to adoption of reports of the executive and
standing committees. And I'll call on Chairman Womack for the executive committee. Thank
Representative Richard Womack
Unverified
3:41
you, Mr. Chair. The executive committee met Thursday, October 10th, 2019. Staff reported to the committee the audit, special investigative, and shortage reports scheduled to be presented to the standing committees and to the full legislative joint auditing committee this month. The committee took the following action. Approved a request to perform selected procedures for the Polk County Library System Foundation for the period January 2013 to present. In other business, the committee
approved the 2020 Legislative Joint Auditing Committee Calendar. With no additional business to discuss, the meeting was adjourned. The next meeting of the committee will be held on Thursday, November 7, 2019. Mr. Chair, I move for adoption of this report. All right. Any
questions? I have no questions. I have a motion for approval from Representative Rye and a second from Senator Cooper. All those in favor say aye. All opposed, no. Motion carries.
Moving now to Standing Committee on Counties and Municipalities, and I believe that is Senator Cooper. You're recognized, sir. Thank you, Mr. Chair. The
Senator John Cooper
Unverified
4:48
committee adopted the minutes of the September 12, 2019 meeting. The committee reviewed three previously deferred reports. Two of the reports were filed and one was deferred. Officials from two of these entities were present to discuss their repeat findings. The committee reviewed 65 current reports.
One of these was certified to the bond board. And seven were referred to prosecuting attorneys. Officials from four entities were present to address the repeat findings in their current reports. the committee filed 61 current reports and deferred four i move for adoption of this report and mr chair i have a subsequent motion at the proper time after the after that
all right members any questions and senator did you say you wanted to handle this after the adoption
yes all right with no objections then i need a motion for approval i have a motion and second All those in favor say aye. Aye. All
Senator John Cooper
Unverified
5:56
opposed, no. Senator Cooper. Mr. Chair, during the committee, there was one issue that was referred out for a subpoena, and I would like to submit a motion at this time having to do with that.
a little background on that the awashita county collector was invited to the may june september and october standing committee meetings to respond to a repeat finding regarding uncollateralized uncollateralized deposits totaling approximately for 4.2 million and has not come the standing committee approved a motion to issue a subpoena for for the collector to attend subsequent to adjournment the co-chairs discussed having staff reach
out to the collector and let him know that the stand committee standing committee voted to subpoena him and giving him a chance to document that the finding has been corrected so the motion is I move that the staff contact the collector and verify that his deposits are now collateralized before proceeding with the steps to issue the subpoena if that has been corrected then that would just make it a little bit cleaner for the staff to operate in that so that's
the motion okay senator Garner you're recognized thank you mr. chairman I saw that Washtenaw
Senator Trent Garner
Unverified
7:27
County is obviously one of the counties in my district I saw the email we received yesterday is it typical for us a subpoena subpoena people in this manner is it something we've done in the recent picture I haven't seen it Since I've been on audit, I don't know the history of it. We
have done it. Probably the most visible is when
we put a subpoena out for Martha Schaffner in the Treasury situation. There are probably others that Roger Norman could give to you.
Speaker 17
7:52
Yes, Mr. Chairman. There are others that we have subpoenaed to appear. Generally, we use that as a last resort to try to get people to attend the meetings or to try to get additional information from them. There have been several that we have subpoenaed in the past. I think that Mr. Cooper and the staff visited afterwards and we thought really all we want to do is get the information. I just wanted to know procedurally in case I'm asked
Senator Trent Garner
Unverified
8:16
about it how we typically handle this, so thank you. It sounds like this one's getting handled,
but I remember, Senator Garner, that back in that one particular issue, I believe the state police actually went to try to find her and compel her to come. And so when we do have issues that rise to a serious nature like that, the committee does have the power to take those actions. And so, Senator Cooper, anything further? No. Any other questions? Entertain a motion for the approval Senator Cooper has made. I have a motion and a second. All those in favor say aye. Aye. All opposed, no.
Thank you, Senator Cooper. Appreciate you for getting that resolved. Next, members, we'll go to educational institutions. Senator Pitch, you're recognized, sir. Thank you, Mr.
Senator Mathew Pitsch
Unverified
9:05
Chair. The committee reviewed one previously deferred audit report, seven current higher ed audit reports, 39 current school district audit reports, three current educational cooperative audit reports, and one current open enrollment charter school audit report for the year ended June 30, 2018. The committee deferred acceptance
of the current audit report of the Little Rock School District without review. The superintendent of the district will be requested to attend the next scheduled meeting of the standing committee in November. The superintendent from the Earl School District and an official from Arkansas Department of Education were present and answered questions from the committee relating to findings, some of which were repeat findings contained in the district's audit report, as well as the district's fiscal distress status. The committee deferred acceptance of the district's audit report at its September 2019 meeting
without review. The Vice President of Finance and Administration from South Arkansas Community College was was present and answered questions from the committee related to repeat findings contained in the college's audit report. The superintendent of the Augusta School District was present and answered questions from the committee related to a repeat finding and other findings in the district's audit report. The superintendent of the Lee County School District and an official from the Arkansas Department of Education were present and answered questions from the committee related to findings,
some of which were repeat findings, in the district's audit report as well as the district's fiscal distress status. The Vice President of Business of Payers from East Arkansas Community College and the Vice President of Finance from Southern Arkansas University were also present and answered questions from the committee related to each entity's respective audit report. The audit reports of the East Arkansas Community College and Little Rock School District were certified to the Governmental Bonding Board. The audit reports of the South Arkansas Community College, Southern Arkansas University and
school districts of augusta genoa central lee county and north little rock were referred to their respective prosecuting attorneys the committee filed the one previously deferred audit report and 50 of the current audit reports that were brought before it mr chairman i move for adoption of this report all right members do we
have any questions regarding the report from senator pitch seeing none i have a motion for approval for senator cooper and i have a second all those in favor say aye aye all those opposed no motion carries and now we're senator garner
Senator Trent Garner
Unverified
11:33
you're recognized sir you mr chairman point of personal privilege if you just saw earlier i had my little girl delta quinn and she
had to step out my wife but uh appreciate y'all all the kind words toward her and i'll start reading the report uh standing committee on state agencies 26 reports were on the committee's agenda yesterday six reports where the findings were presented The Department of Correction had repeat findings related to ineffective controls over inmate council funds. It was noted in the report on the Administrator Office of the Court that the trial court employees
were not properly following travel policies. Specifically, official stations were not properly determined, and the short distance from the employee's official station or resident was not used when calculating business travels. These deficiencies resulted in overpayments totaling over $14,000. The Department of Education, again, did not follow rules governing the Arkansas Better Chance program. The Department of Education had final authority over ABC rules. However, the Department of Human Services administrated the ABC program. Also, ADE and one school district paid an agency employee for training, and the employee
did not file the adequate income and financial interest disclosure statement. In addition, ADE did not maintain adequate state vehicle logs. Therefore, the extent of personal use of the state vehicles could not be determined. The Department of Finance and Administration reported two shortages at the revenue offices totaling almost $30,000. Both employees responsible for the funds are no longer employed by the state. Deficiencies were again noted in the student loan files at the Department of Higher Ed. Also, the agency did not maintain adequate state vehicle logs,
so the extent of personal use of the state vehicles could not be determined. The Department of Human Services report contained findings related to enacting controls over capital assets, enacting controls over bank accounts and related transfers, unallowable costs for the foster care federal program, and questionable charges with a fuel card as well as other undocumented fuel card purchases. Various agency staff were present to report on how the agencies intended to address the audit findings and to answer committee questions.
During the meeting, the committee adopted a motion to file the 26 concurrent reports. However, the Department of Education finding related to an employee training for a school district was deferred to the next meeting so that the committee could get additional details and situation. With that, Mr.
Chairman, I move to adopt this report. All right. Members,
any questions on the report? I did want to ask one thing, Mr. Norman, on especially the item that was held by senator garner's committee is it common practice that
employees of an agency like that are also contracting with some of the entities that they oversee they should not be no sir okay so in addition to the fact that this this was caught in the audit and that was there it wasn't really clear yesterday because i stepped in there what the full policy was so additionally you're saying that it's not even allowed no
Speaker 17
14:40
I would think it'd be unusual circumstances I think there's probably provisions in the law
for them to get some sort of waiver on that for some sort of special circumstances maybe through the DF&A but I know we do have some searches set up where we try to identify contractors that are also employees
Speaker 20
15:01
the problem you run into in that is if they're if they're some form of LLC or something else you don't know if it's some form of corporation you don't know who actually the the true parties are that on that LLC but it's very reminiscent
of me to the corrections
issue where we had corrections employees that
were also involved in non-profits that were doing business for employees and selling benefits and that sort of thing so i just want to make mention of that it's something that we need to pay attention to as we go forward one other thing that i noted on there and this my comment here has nothing to do whatsoever directly with the report on the education department the use of vehicles but it just so happens that i personally was at the gold star family monument dedication a few weeks ago and in the afternoon i was over
went by the mall with my family and noticed a state vehicle pulling out with a couple people in the front and a couple of kids seats in the back and i think it's important that and it may be even if we send out a memo to the agencies to remind them that they need to be certain that employees are not using state vehicles for personal purposes on the weekends like that and things of that nature and so that's just a editorial comment from myself and again i would
like for us to consider reminding agency heads about personal use of vehicles with that is there any other comments no sir mr chairman i have a motion for adoption senator cooper makes motion i have a second all those in favor say aye all those opposed no thank you very much and with that I believe we are now to reports or no actually Roger Norman you're recognized. Thank
Speaker 17
16:52
you Mr. Chairman at this time I'd like to ask Larry Hunter to stand. Larry has been with audit for 35 years and this is his last meeting he's
retiring we've had we've had too many of these lately but I just I just want y'all to know how much we as the staff appreciate Larry and I know that y'all do too he's been the deputy over educational institutions for several years now. He's done an outstanding job, and we have some federal deadlines that we have to meet in the CAFRs things, and Larry's always, and his group have always done that, but we're going to miss Larry, and we just want y'all to know how much we appreciate him. Thank you, sir. thank you roger we told you we
need to slow these down just a little bit we're losing a lot of good
folks but we do wish you a wonderful retirement members with that we're now to the review of reports. We have two reports to give today, and first on our list is a special report on the Arkansas State and Public School Employees Health Benefits, EBD, Employee Benefits Division, and I'd like to recognize Matt Welch. Matt is ready. Thank you, Mr. Chairman.
Speaker 43
18:20
Arkansas Code requires a legislative audit to conduct a review of the Employee Benefits division and the performance of the health and benefit plans offered to state and public school employees the primary objective of this report was to analyze the fund balances of both state and public school employees or for state and public school employee health and benefit plans at June 30 2018 the employee benefits division administers the health and benefit plans for both
state and public school employees the benefits are provided through self funding a method by which the state takes in contributions from both employee and the employer separate funds are set up for each plan to pay health and pharmacy claims and to serve as reservoirs to prevent dramatic rate increases in the future for subscribers this exhibit which is found on page two of the report shows the plan enrollment for both subscribers and members for each plan one thing i
want to point out is the term subscribers refers to both employees and retirees who are enrolled in the plans while the term members refers to not only subscribers but also their qualifying dependents who are also enrolled in the plans in fiscal year 2018 the arkansas state employee plan had 462 new subscribers along with 258 new members the public school employee plan had over 1300 new subscribers and just under 3200 new members
the first plan i'm going to present is the arkansas state employee plan as shown in the exhibit on page three of the report for fiscal year 2018 the arkansas state employee plan had over 290 million in fund revenue the state contributions provided 60 percent of the total revenue subscriber monthly premiums were 33 percent while other revenues delivered six percent the term other revenues includes performance guarantees penalties investment
income, pharmacy rebates, medical Part D subsidies, and FICA tax savings. Exhibit 3 on page 4 of the report shows how the Arkansas State Employee Fund balance was affected throughout the fiscal year. In fiscal year 2018, the state contributed $175 million and subscribers paid $96 million in monthly premiums. The reimbursement of claims expense to the providers amounted to $193 million and $79 million for health and pharmacy claims, respectively.
The administration costs to the plan remained constant at around $22 million. Additional costs to subscribers were $36.5 million to health care providers and just over $21 million to pharmacies for co-pays, co-insurance, and deductibles. this exhibit which is provided on page 5 shows the change in claims and administrative cost as well as the premiums and other revenues for the Arkansas State Arkansas State Employee Plan for the past five years excuse me
overall the Arkansas State Employee Fund balance decreased 2 million to 81 million in fiscal year 2018 the growth rate for the fund decreased by 33 percent compared to fiscal year 2017. this decline was primarily the result of a 29 million dollar increase in health and pharmacy claims the next few slides will be information regarding the public school employee plan the exhibit on page six shows the public
school employee plan had just under 317 million in fund revenue for fiscal year 2018 legislative funding provided 20 28 percent of the total contributions from school districts amounted to 32 percent subscriber monthly premiums made up 37 percent and other revenues delivered four percent exhibit four on page seven of the report shows how the public school employee fund balance was affected throughout the fiscal year in fiscal year
2018 the state contributed 88 million premiums from school districts or contributions from school districts provide a hundred million while subscribers paid 117 million in monthly premiums the reimbursement of claims expense to providers amount to 218 million and 54 million for health and pharmacy claims, respectively. The administration costs rose slightly from the prior year to $30 million. Subscribers also paid an additional $69 million to health care providers and $25.5
million to pharmacies for co-pays, co-insurance, and deductibles. This exhibit, which is provided on page 8, shows the change in claims and administrative cost as well as premiums and other revenues for the public school employee plan for the past five years. The public school employee fund balance increased by $15 million to $141 million in fiscal year 2018. The fund's growth rate declined to 12% compared to the 41% growth rate in fiscal
year 2017. Again, this decrease was primarily due to an increase in health and pharmacy claims. schedule 3 on page 12 provides a list of the individual health claims exceeding 250,000 dollars during fiscal year 2018 for both plans the Arkansas State Employee Plan had 10 members with the claim exceeding this amount tolling almost 5 million which is an increase from
fiscal year 2017 the public school employee plan had 11 members with a high claim tolling over 4 million which is a decrease from the prior year these claims were tested for accuracy and timeless and eligibility cover procedures and payment amounts no discrepancies were noted a review of members with cumulative claims exceeding $500,000 was also performed the Arkansas State Plan had eight members and the
public school employee plan had 12 members with cumulative claims exceeding 500,000. These claims were tested for accuracy and timeliness of case management services. Legislative audit identified two members each with over 500,000 combined health and pharmacy claims who are not offered case management services as is the agency's practice. In beginning in January 2019 case management services were changed and now are being provided by Health Advantage. For fiscal year 2018 the Employee Benefits Division entered
into various contracts with outside vendors to assist in providing insurance benefits for plan participants. As shown in Schedule 4 on page 13 administrative costs total almost 22 million for the Arkansas State employee participants and just over 30 million for the public school employee participants. The The schedule provided shows administrative costs by vendor for each plan as well as a brief description of the services provided. Finally, Schedule 2 on page 11 provides the monthly premiums for each plan available to
subscribers. Shown on this slide is the portion of the schedule related to the Arkansas State Employee Plan. slide is the portion of the schedule related to public school to the public school employee plan. As noted at the bottom of each section of the schedule the premium cost to subscribers increased if the members failed to receive their wellness visit. Mr. Chairman this includes my presentation I believe
agency representatives are here to answer any committee
questions. All right thank you mr. Welch why
don't we go ahead and have Chris and miss tolls if I'm pronouncing that correctly Chris Howlett and miss tolls are here with EBD members if you have any questions if you'd please just punch your button or you may not have any at all any questions whatsoever since you made the
trip over. Chris, I'd be happy for you to say a word or two about things you might want to highlight. Just both please state your names for the
Chris Howlett
Unverified
27:35
record, I guess, tell us who you represent. Good morning, Mr. Chair. Thank you and committee members. My name is Chris Howlett. I'm the Executive Director, or now Director, for the Employee Benefits Division under the
Speaker 51
27:50
Transformation and Shared Services Department. Good morning. I'm
Speaker 52
27:52
Shaleta Talos. I'm the deputy director all right thank you I think the the conclusion the conclusion
Chris Howlett
Unverified
28:01
that on page nine I believe would summarize my overall recap of the this particular fiscal year's performance of the plan we have seen since 2016 and I'm not being braggadocious, but from my arrival, we were able to put some control mechanisms in place that have been able to buy down and leverage a lot of good opportunities for the health plan
and to make some specific changes that have netted the plan the opportunity to have zero or, as of this year here, very small incremental rate increases for the populations that we serve. The trust funds are in a better place than they have been in years. Just from a historical context, the PSE fund came under EBD in 2003,
and the ASE fund has been under EBD since its inception. With modest changes, I know we go back to the 2012-2013 fiscal situation for PSE. I would say that under the present administration for the plan, with Ms. Tolles, her staff, myself, and partnership for the Insurance and Commerce Committee, both House and Senate, as well as some other input from our partners, we've been able to build up catastrophic funds for both ASE and PSE to help subvert any of those situations from happening again.
i don't have the actual numbers but i tend to recall them pretty well we're sitting with about 60 million in catastrophic reserve and that's an allocated number which still leaves us with about right at 58 59 million in net assets available on psc we're sitting with about 30 million in catastrophic funds on the state side with about, right now, about $22 million on that
respective net assets available. And, of course, that's after all the allocated funding. So I'm very pleased with where we stand and how we've tightened things up that were, in my opinion, not appropriate or a waste of money. so we've
kind of brought that in line well I
definitely remember the special session where we allocated 40 million dollars over to save that public school
teachers fund from heaven in some cases they were looking at 100% increases some of the premiums at the time and so many of us do remember that and then we had some changes that came after that that sort of bounced off of those changes were made so we thank you for being here in this report i don't see anybody scheduled in here for questions so if nobody has any further questions we appreciate you for being here and do appreciate the numbers and obviously hope that the plan continues to stay in good health yes sir i hope
as well thank you madam thank you very much anything further from staff on this report okay all right with that we'll move on to item two under e this is an audit report on the city of sulfur springs and i believe we have ms carter and lance woodworth
that will be making this it looks like ms carter will be making the presentation so you're recognized ma'am thank you mr chair this
Speaker 56
31:49
presentation covers the financial and compliance report for the city of
Sulfur Springs for the three years ended December 31st, 2018. Our procedures included evaluation of the city's compliance with state law concerning general and district court accounting, budgeting, purchasing, and investing and depositing of public funds. These procedures were not performed for the water and sewer fund. However, we did review selected water department transactions for propriety.
The city of Sulphur Springs is located in Bend County, Northwest Arkansas, with a mayor council form of government with six aldermen. It has a population of approximately 530. He noted multiple improper transactions. City Clerk Administrator Cody Bates, who was hired by the City on July 1, 2017, was responsible for all receding and depositing duties, including those for the Water Department, and was the
only employee with access to the accounting software systems used by the City. A comparison of checks to invoices revealed that Bates issued unauthorized checks to herself and her spouse, totaling over $91,000 and $8,400, respectively. Bates often inwrote these checks rather than using the electronic check printing feature of the accounting software and incorrectly coded the checks to existing vendors.
According to the mayor, it appears that several of these checks contain his Ford signature. The first checks on this slide is one issued using the city's accounting software, while the second check is one handwritten by Bates to herself. It should also be noted that Ms. Bates coded this second check to the IRS in the city accounting software system.
This slide shows a check containing the mayor's apparently forged signature along with a check containing the mayor's actual signature. A review of Bates personnel file in salary comparisons as well as interviews with the mayor revealed that Bates paid herself unauthorized salary increases in overpayments tolling over 3,100. Bates also enrolled hours worked on her time
card rather than using electronic time clock. Additionally, Water Department cash receipts tolling over $82,000 were not deposited. Including in this amount was $74,000 in water usage fees and $8,200 in water service connection fees. In summary, our review revealed undocumented disbursements, payroll discrequencies, and receipts not deposited totaling
almost $185,000. Of this amount, $145,000 was misappropriated from the Water Department and the remaining fund from the General Fund. The city terminated Bates employment on March 29 of this year. Bates and her spouse were both charged with felony charge, forgery, and theft of property in June. Arraignment for both is scheduled for October 14 next Lance Woodward will present the
Speaker 62
36:01
remaining report findings it was it was brought
Representative Aaron Pilkington
Unverified
36:18
to our attention during our engagement that at December 31st 2018 the city owed significant amounts to vendors as well as the internal revenue service as the chart on this slide shows in april of
2019 the city borrowed 150 000 and according to city personnel used the loan proceeds to pay all outstanding bills of the general and water funds with the exception of unresolved balances payable to the irs as of the report date the city owed just under 241 000 to the irs we also noted multiple areas of non-compliance with state law and repeat findings are noted on
the slides first the city was not in compliance with state budgeting laws general and street fund expenditures in 2016 exceeded budgeted appropriations by 57,000 and 23,000 respectively Street fund expenditures in 2018 exceeded budgeted appropriations by over $10,000. And in 2018, the general fund budget was adopted, but because a copy was not provided at the time of the engagement,
we could not compare disbursements to appropriations. Next, several findings relate to noncompliance with municipal accounting laws, cash receipts and disbursements journals were not properly classified and posted pre-numbered receipts were not issued for all funds receipt books were not maintained funds received were not formally receipted at the time of collection receipts were not deposited timely and receipts were not issued in sequential order
additionally invoices and supporting documentation were not maintained for all disbursements, and checks were not always issued with two authorizing signatures. Monthly bank reconciliations were not always performed, and these reconciliations were not approved by someone other than the person preparing them. Finally, the fixed asset listing was not properly maintained. Several additional findings related to noncompliance with other state laws. The
governing body did not review the prior report at the first regularly scheduled meeting following receipt of the report the city did not obtain a financial audit or agreed upon procedures report for the water and sewer system and the annual financial statement was not prepared and posted next restricted street fund revenues were not properly deposited or expended for the review period county road property taxes totaling almost ten thousand dollars were deposited into the
general fund restricted street fund monies totaling 23,600 were transferred from the general fund restricted street monies totaling 4,100 were transferred to the water fund and an improper deposit of restricted street revenue of 27,600 to the water fund bank account that we noted in our prior report was not transferred back to the street fund finally we also noted numerous payroll deficiencies the city paid twelve hundred twelve one thousand
two hundred dollars in employee bonuses that were not processed through payroll or reported on the employees w-2s IRS 941 forms were not filed tax withholdings were not remitted timely resulting in penalties and interest IRS forms and state forms were not in agreement, and total wages reported on W-2s did not agree to the W-3. In the response to the report, the current mayor, who took office in January of 2017,
indicated that the findings have been or are currently being resolved. Specifically, financial duties have been segregated, and the new office administrator is not authorized to sign checks. Another mayor's office employee oversees financial activities, but does not handle the day-to-day financial operations in the city's computer system. This concludes our presentation of the financial and compliance report for the city of Sulphur Springs. City
officials are present to respond to committee questions.
Thank you very much. Appreciate the presentation. We do have a question, so I'd like to ask for Mayor Shane Weber and Aubrey Doss, if they would please come. Mr. Chairman,
Speaker 17
41:08
if I could just make a statement beforehand, and I know that the charges have been filed against this Cody Bates, so as far as the questions, we've visited
before the prosecutors and they don't really like it when they're sworn testimony relating to those schemes or whatever on that but there's there's a lot more things that go on so I there's plenty of questions that can be asked about
Speaker 20
41:35
the compliance with laws dealing with the city but as far as a specific scheme it might not be
appropriate to ask questions about that Okay. So are you advising
Speaker 20
41:47
to waive the swearing in of the... No, sir. But what I'm saying is that we might just, as far as specific questions that relate to Cody Bates,
from our conversation with prosecutors, they get a little bit concerned when we're asking questions of people under oath that relate to a specific scheme or something that hasn't come up for trial yet. Okay. Well, members, just keep that
in mind as you're asking your questions because we certainly don't want to get in the way of justice being carried out in this situation. But I would appreciate you for coming, and if you would, we want to swear you in for your testimony here today. So if you would, raise your right hand.
And do you solemnly swear or affirm that the testimony you're about to give will be the truth, the whole truth, and nothing but the truth? All right. Thank you. if you would take your seat and since you were already standing if you would please state your name and and your position or who you represent for
Speaker 72
42:50
us today. I'm Mayor Shane Weber with City
Speaker 73
42:54
of Sulphur Springs. I'm Aubrey Dawson with the City
of Sulphur Springs Recorder Treasurer. All right thank you both for being here and
make sure to pull those down close to you so we can hear you real good and obviously we've heard great details about the report and Mayor
be happy for you if you've got anything you want to state before we get
Speaker 77
43:16
started but we do have some questions i don't have a uh opening really
written up i do have a closing so okay well with that senator garner uh if you still have a question we
Senator Trent Garner
Unverified
43:27
have you on tap here yes and just i pressed my button before you gave that caveat on the swearing in so it might not be appropriate to ask them but with the illegal activity um i guess can the staff explain in more detail how that happened
and reason i'm inquiring about is not so much that specific case but is it something that's repeatable at other city levels or something that we could add a good practices thing or is it something where this is a unique case or some dereliction of duty that produced that result i mean if that's hard to answer underneath the stipulations i understand but
that's that's my inquiry i think the staff can answer
Representative Aaron Pilkington
Unverified
44:05
that without a problem thank you miss bates there were three separate schemes the first scheme was where checks were written she was responsible for writing the
check she would write the checks to herself and then code them to like a legitimate vendor in the system the second the second piece or the second scheme was uh payroll related to payroll overpayments and then the third dealt with the water department where when cash was taking it taken in those cash receipts didn't
Speaker 82
44:29
make it to the deposit and I believe you can't answer this the city officials
Senator Trent Garner
Unverified
44:35
y'all I think I saw where y'all did corrective measures to prevent that from happening in the future is that correct can you explain that a little bit more detail
Speaker 76
44:44
yes sir that is correct we've taken several steps obviously have a whole new office staff as Mr. Woodward stated we don't have the same person that's in the computer signing checks that was a big thing so you
Senator Trent Garner
Unverified
45:03
between multiple employees now for the funding stream so that one will check the other correct
Speaker 76
45:10
and and i will say that uh my biggest downfall was uh
Speaker 77
45:14
being too trusting um and uh for that all i can do is
Speaker 88
45:20
apologize um and then make sure it doesn't happen
Senator Trent Garner
Unverified
45:23
again well not speaking on a specific case that could happen to any city or anything like that but as long as you've done corrective measures and They seem, from what we said, that I can understand
it. So thank you for indulging me, Mr. Chairman. I appreciate it. All right. Senator Cooper, or excuse me, it
Senator John Cooper
Unverified
45:40
popped up. Senator Cooper, there you are. You're recognized, sir. Thank you, Mr. Chair. This could be, I guess, for either the city or the auditors. One thing that I noticed in that presentation was it seemed like there were some funds that maybe went to wages that were paid.
outside of the electronic system maybe handwritten request for payments and that seems kind of
Speaker 91
46:06
strange to me and I'd like to know if that's a common procedure how that would work across not only this city but others mr.
Speaker 62
46:25
that so yes sir if if i may uh understanding your question correctly
Representative Aaron Pilkington
Unverified
46:31
the bonuses that were was it the bonuses that were paid yes they were they were not ran through the normal payroll cycle and reported like on
Speaker 76
46:46
the w-2s would the mayor be able to comment that's that's correct um and again i will unfortunately
Speaker 77
46:51
say I was too trusting with a lot of things in this but with this specific thing there were bonuses given out she was told how to run them through and I assumed it got done and that's that's on me so is that loophole
been closed up now it has so we have actually implemented several different things when it comes to monies both receivable and payable and bonuses Myself, I took the bonuses out. I'm leaving it up to the council whether bonuses are going to be handled or how they will be handled if they want to issue them. And then, like I said, we've got Ms. Doss here can do all this stuff from the computer. And I brought in a second person that oversees it all, and she's actually a signer, but she can't get into the computer.
Speaker 91
47:38
Does that require two signatures or approval by two levels or one? Everything is required
thank you. Thank you, Mr. Chair. I've got another question before I go to Senator Hammer. I wanted to ask staff this question. Was this all discovered by your audits, or was this something that was discovered? I don't want to ask them because they may have to end up testifying to this. So from your audit, was this something that was reported internally,
or maybe someone contacted audit about this, or did this just happen in your
Representative Aaron Pilkington
Unverified
48:18
regular audit course? Yes, sir. It was during our regular audit, so an auditor was there working and was noticing some discrepancies and went to the mayor with, like, questioning certain transactions, and that's where some of this, you know, came to the surface, and that's when we contacted the prosecutor and law enforcement was
involved. So what you're telling me is that in that situation,
obviously nobody was even there was no second look that was happening there obviously there was a tremendous amount of money that was being wasn't really changing hands I guess it was staying all on the same hands but really nobody noticed anything was amiss and how
Representative Aaron Pilkington
Unverified
49:08
many months did that go on yes miss Bates had total control she started in July of 2017 and within just a couple of months she became began you know these schemes and
through her leaving the city in the February March of 2019 that's interesting because you're saying nearly two
years or somewhere just shy of two years probably that this didn't come up
in any review of the council or anyone else this was oblivious up until your audit yes sir okay all right Senator Hammer you're recognized sir
thank you mr. chair first of all to the mayor and to the member your
Senator Kim Hammer
Unverified
49:49
staff there appreciate y'all being here in a
difficult spot I know so really appreciate you being here you don't have any of your city council members with you today though do you we do not do you have a budget committee that's part of your city council committee um that's something we've
Speaker 85
50:05
tried a couple times unfortunately i can't get uh any more than two people to show up at
Speaker 77
50:10
a time uh for like a subcommittee if you will um it's something that i keep pushing and i'm hoping with the new council that we have uh that they're going to step up to the plate okay
Senator Kim Hammer
Unverified
50:20
well i appreciate you being here and taking it on the chin but you know at the same time there's others I
think might should have picked up on this but with regards to the IRS how's your cooperation with the IRS going because you got a pretty good
Speaker 77
50:36
debt hanging out there we have an extremely large debt especially for our small city we are actually current on 19 all of our stuff for previous years and it actually goes back I think it was like 2012 where there's been issues with the IRS, and I reinstated, if you will, the same company that they used years ago to start
going over not only our IRS stuff or our water audit stuff, but then the IRS stuff, we have a separate tax attorney that we've hired for that as well to take care of anything in the past and try to figure it out. We'll get anywhere from 10 to 15 letters in one day from them, and they all have different amounts on them. It's very confusing, to say the least, which is why the council decided to go with an attorney to sort through all of it. So your IRS problems began back in 2012, which was prior to you taking office?
That was prior to me even
Senator Kim Hammer
Unverified
51:33
living in the state, yes, sir. Okay, and who was overseeing the IRS amounts from 2012 to 2017? Did you have outside help on
Speaker 77
51:44
that, or was that a staff member of the city, too? In that time period, there was three different mayors from 2012 to 2017. One of them just took over because the previous one had left. And I would be willing to bet if we dug even further, it probably went back further than 2012.
And it had been remedied at some point in time. and then it went downhill again. Okay, but to some
Senator Kim Hammer
Unverified
52:15
degree you inherited the part that's associated with the IRS, you inherited when you became mayor then? I will say up until 2017. From 17
Speaker 85
52:22
forward, that rests on my shoulders, sir. Okay, well, appreciate your manhood. Thank you. All right. Senator
Chesterfield, you're recognized. Thank you, Mr. Chair, and good morning. Good morning. one of
Senator Linda Chesterfield
Unverified
52:38
the most difficult things I see as we look at smaller cities
is the ability to segregate the duties so
that you have individuals who are overseeing other individuals. Have you managed since taking office to engage more in the segregation of duties as well as having checks and balances so that you don't get into this kind of difficulty again? Yes, ma'am. Thank
Speaker 77
53:04
you for that. Since 2017, when I took over for the Mayor Barber that had medical issues, he stepped out.
I will tell you, first off, I am not a politician. I am not a... When you run, you are. I'm a retired law enforcement officer, which I don't know that that helps a whole lot in this case. But we have done several checks and balances as far as the office staff goes. as far as specific duties both the council as well as myself as a total volunteer position literally I was handed the keys and said 10 to 15 hours a week and you'll be fine I spend more time than that on the phone we have a
very small workforce if you will I have two people in the office myself we have four law enforcement officers and one of those is part-time and one is the chief volunteer fire department and two water employees are you members of the municipal league we
Senator Linda Chesterfield
Unverified
54:07
are had they come in and have you asked them to come in and help you with with some of the issues that you're
Speaker 77
54:16
dealing with yes I've talked to several of them matter of fact we were just down at a financial class a
few weeks ago down here and got to talk with some more people one of the things that I'm that I have implemented is to my office staff is going to go to any and all financial trainings that we can get I'm including myself and I'm really pushing the council especially at least half of them are retired and so they have a little bit more flexible schedule I'm pushing them to become more involved I took a poll at our last special council meeting to see how many of them that are currently on the on the board or on the council have been to our water
plant there was one out of six so it's a big task but like I said we've taken a lot of steps and we're gonna continue learning and growing from this this whole thing has been a giant learning experience and the only thing I can do is strive to make it better my goal at the end for whenever I leave is to have a syllabus if you will for the next person that comes in the next office staff so they have rules and regulations which weren't provided to me and I'd be
willing to bet they weren't provided the previous one and it's a small town people just kind of figure that they're not gonna get looked
Senator Linda Chesterfield
Unverified
55:34
at that's obvious thank you all for coming and thank you mr. chair
thank you all right members I don't have anyone else in the queue is there any other questions mayor I believe you said you had some closing comments you're well recognized to deliver those now. Thank you, Mr.
Speaker 77
55:51
Chair. I have to try to word this correctly so we don't get in
trouble as far as the case goes, if you will. But the amount of money that's been misappropriated, I'll just leave it at that for now, is no less shocking today than the day of our exit interview. And I spent our career being able to read people and detect deception looking back on it now I will say that there were signs that I missed most definitely and in hindsight it's always 2020 well a portion of it was my lack of knowledge of the job and I'll say a big portion of
that a big part of it was also trusting someone way too much in my career in law enforcement we don't trust a whole lot you know if you're not wearing a badge and so it was totally out of my wheelhouse if you will to put as much trust as I did but every time I had a question there was an answer and it made sense they were cover-ups but they were answers I didn't know they were cover-ups at the time at this point I'm extremely happy that all this was caught
because it was only going to get worse and again like I said earlier this is has been a giant schooling if you will and unfortunately it was an expensive expensive lesson for this city and even more so what upsets me is it's for the taxpayers it's their money I now have an office administrator that is doing a
phenomenal job we've put in the checks and balances so we don't have this issue again and a big part of it again me trusting her when she said our bank doesn't have online banking that was laziness on me as well I think all banks have online banking nowadays which I now have in my office by the way and I check all the accounts several times a week if not at least a couple times a day and if there's anything that flags my suspicion I go directly to miss Doss
or the other lady in the office as you're
Speaker 85
58:26
aware the former office administrator has misappropriated multiple thousands of
Speaker 77
58:31
dollars from the city and his citizens as you're also aware employment was terminated with City of Silver Springs on March 29th and was actually preceded by a suspension there was a lot of information which actually Miss Carter brought to my
attention so I started digging in 2019 stuff and found more there which has been remedied I get very upset when I talk about this because it's not my nature to trust as much as I did and so I feel like this lays on my shoulders I miss Dawson the other staff they'll disagree with me and I appreciate that
but ultimately I was a captain of the ship and while some of it was before I was in that position two out of those three years that were just audited it was under my command if you will the current office staff is working diligently on the accounting system we've brought in a new point of a POS system for tracking so everything goes on a correct line item it's all split we've done a lot of stuff to make sure that this doesn't happen again a little
bit on water audits which was in here but not found out they haven't been done since 2013 well we brought those people back and they now have or almost done with 13 and have most of 14 my original goal was to be through 15 this year as well but it's proved a monumental task finding paperwork because as you can imagine with the audit like this paperwork wasn't an order either we are
working on this and we continue to make improvements and I vow that this will not happen again on the next one I think we had two years for that one so I've got two years to make sure that everything's squared away and I thank you all for your time for having us down here I
wish I had better answers yeah thank you I've got a couple members that have have pushed their buttons I don't know if that's
intentional or by accident but Senator Hammer did you come back in sir
question for staff please okay go ahead did we catch this in
Senator Kim Hammer
Unverified
1:01:02
the first cycle of auditing after the new employee took place or did it take the second cycling of audit before we caught it yes sir it was the first cycle okay so you caught it as soon as you possibly could have as far as auditors looking at the books is that correct yes
sir okay thank you that's all mr. chair thank you I have a member it's in
senator Caldwell's senator sample I believe I did senator sample
Senator Bill Sample
Unverified
1:01:32
Thank you. And just a quick question. Mayor, what's the population of Silver Springs? I hadn't been up there in a long time, but I knew it was just a hole in the road the last time I was there. We're just over 500, sir. Just over 500. And you're just what, a couple miles from Missouri? Yes, sir. Okay. Have you
Speaker 112
1:01:53
ever thought about dissolving your charter? I have not. It's not something I'm willing
to do under my watch. Okay. Thank you. Thank
you, Senator Sample. that probably is a question other folks were thinking about at the time members
any other questions on this matter seeing none anything further mayor we do appreciate you coming down and actually being accountable and helping people get some understanding on this obviously there's probably a lot of questions that folks would like to ask but in deference to the case that's pending and litig in possible outcome of that we're not asking them so thank you very much for being here members and you're dismissed thank you coming members there any new
business that you'd like to bring before the committee Center Chesterfield you recognized
Senator Linda Chesterfield
Unverified
1:02:47
yes thank you mr. chair ladies and gentlemen of the committee
it's my great honor to invite you to Philander Smith College for their annual legislative appreciation day which is the 17th that's next thursday we would appreciate it if you would come to philanders campus and enjoy the spirit and goodwill of the institution thank you thank you very
much members the next meeting of the legislative joint auditing committee will
be november the 7th and 8th uh 2019 so if you put that on your calendars anything else before we we adjourn. Seeing nothing further, we are adjourned. Thank you for coming.
Agenda
A. Call to Order by Chairman
B. Adoption of Minutes
C. Reports of Executive and Standing Committees:
D. Remarks by Roger Norman, Legislative Auditor
E. Review of Reports:
F. Other Business: The next meetings of the Legislative Joint Auditing Committee will be held on November 7 and 8, 2019, or at the call of the Chairs.
G. New Business
H. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING, Oct 11, 2019 | Agenda | 1 | Official source ↗ |
Speakers
Senator Jason Rapert Chair
Unverified
Representative Richard Womack
Unverified
Senator John Cooper
Unverified
Senator Trent Garner
Unverified
Speaker 17
Senator Mathew Pitsch
Unverified
Speaker 20
Speaker 43
Chris Howlett
Unverified
Speaker 51
Speaker 52
Speaker 56
Speaker 62
Representative Aaron Pilkington
Unverified
Speaker 72
Speaker 73
Speaker 77
Speaker 82
Speaker 76
Speaker 88
Speaker 91
Speaker 30
Senator Kim Hammer
Unverified
Speaker 85
Senator Linda Chesterfield
Unverified
Senator Bill Sample
Unverified
Speaker 112