City Administrator Tommy Turney attempting to locate money from 3 CDs totaling $360,000.

City Administrator looks for $360,000 in cashed city CDs

At the city council meeting on November 5th the subject of 3 cashed out CDs was brought up as well as the city's poor credit rating and lack of reserves. City councilman Bob McDaniel brought up the CDs a few minutes into the council meeting, “I'm concerned about leakage and overspending. There was a CD in excess of $125,000 that was cashed in without council approval.”
By the end of the meeting the total was, in fact, 3 CDs totaling $360,000, cashed out in 2015. “I want to know why we're in the financial status we're currently in, to find out where the money has gone. It really concerns me that our credit rating has dropped so much,” councilman Jason Gore said as he addressed the council.
The financial woes weren't limited to just the CDs and thepoor credit rating, there are also issues with a loan for the police department. Ballinger police chief Stan Maresch was asked about three PD loans, “Technically we have 3 loans out. I only know about 2 of them. There other one that is supposedly on the books I was here for. I know that we paid for it out-of-pocket because we had the money for it.” Maresch's answer only heightened anxiety regarding the city finances. McDaniel wants the financial questions investigated by new city administrator Tommy Turney, “I want you to start off with a clean slate.” Turney said that he would investigate the finances all the way back to 2014.
Councilman Rick Morrish spoke up as well, “I want to know where the $125,000 went.” That brought up more questions when Gore asked the council if there was more than 1 CD cashed. City secretary Bonita Shields said that there were a total of 3 CDs cashed out. Morrish, visibly unhappy, asked, “Who had the authority to do that.” It was not immediately clear to anyone who actually had the authority to cash out those CDs nor how many signatures were required. Morrish continued, “It boils down to a lot of the time the council is not being informed of what is going on in the city. We need to be informed.”
Since the CDs were cashed out back in 2015 Gore said that the city's spending should be investigated, “I want to know the cash difference between previous city administrators and the current situation.” One difference between Ballinger council meetings and some others in the area is that Ballinger does not receive a full financial report at every council meeting. Having cash reserves is essential and has a direct impact on the city's credit score. Without any cash reserves the credit rating tumbles. Turney said that he and Shields would investigate the spending all the way back to 2014.
The investigation by Turney and Shields into the missing funds may only bring up more questions. Gore, Morrish and McDaniel want a detailed audit and perhaps even a forensic audit. The cost for a forensic audit could easily run into the tens of thousands of dollars but might be necessary for Turney and the council to fully understand what has happened to the finances and why the city is basically living payday-to-payday with paying their bills and covering payroll.
An auditor who performed the last city audit wrote a report that I was able to obtain. CPA Gayla Fullerton found red flags during her audit. The report was dated July 23rd, 2018. The issues are glaring and it's hard to understand how the city operated under previous city administrators with such poignant issues. One of the recommendations was; “The City did not have a master list of assets and values. We recommend the city create an accurate list of all assets, the date acquired, purchase price and location/use.” The city not having a master list of assets and values is unfathomable. With problems like this it's easy to understand how the city could find itself in the current situation. A seeming culture of fiscal irresponsibility and poor accounting practices was created and allowed to exist, either intentionally or just by pure apathy.
Other recommendations from the auditor were:
• The balance of customer deposits being held by the City water department is not current. We recommend these holdings be adjusted accordingly.
• There are old outstanding checks in bank accounts. We recommend all checks outstanding over one year be voided and reissued if needed.
• The water and sewer department has many old outstanding accounts receivable. We recommend the water department write off all outstanding accounts receivable more than two years old and make an effort to collect outstanding accounts quarterly.
• In the opinion of the Auditor, it is imperative that the city staff be cross- trained in financial management including payroll, cash balancing, general ledger entries and monthly balancing of bank accounts.
According to the recommendations apparently the city was not collecting on accounts, did not know how much money they had in the bank, didn't balance their books and didn't even know what checks they had out.
The quarterly tourism report regarding the Chamber of Commerce wasn't clear. The travel balance showed what the 3rd quarter began and ended with. Gore asked Chamber president Tammie Virden, “There is an itemized list of expenditures was operating salaries, payroll and payroll expenses, what is the difference?” Virden addressed the question, “When I cut a payroll checks, one of my payroll checks comes out of tourism, one comes out of operating. But the payroll expenses are actually paid out of operating, all of them. So it shows this so that is why I attached the check detail on the back because it will shows the salaries and the payroll and break down the payroll expenses but the payroll expenses aren't actually paid out of the tourism account, they're paid out of the operating. Gore asked what the operating salaries were, “What caught my attention is salaries. Operating salaries is $6,900.” Virden offered some clarification, “Any report that I pull up out of the tourism account will break down the payroll and the payroll expenses but the payroll expenses do not actually come out of the tourism account.” Virden continued with more explanations of other expenses and acknowledged that the reports could be difficult to comprehend, “Is that clear as mud?”
The city finances obviously need some serious attention as the current state is continuing to deteriorate. There has been no accountability thus far and it remains to be seen as to how the previous administration managed the budget, or failed to manage the budget.
Turney began his investigation the following day, looking in to the previous spending and accounting failures of the city. I received documents at the newspaper from a source familiar with the investigation. It should be noted that there have been no accusations of theft or misappropriation. The missing $360,000 could simply have been spent without the expenditures being noted, as seems to be the case with most every accounting aspect in the recent past. One of the most confusing documents is a CD that was closed on 9/22/2015 for 105,852.09. The note says, “City Mgr Brian Grimes came in and said city was in cash flow bind due to State Ag Dept delaying reimbursement of $225,000 for sewer plant upgrade. They had city pay for improvement up front then would fund Grant $. Been waiting since July? Brian requested to cash 3CDs pledged on notes, pay them off and use rest to operate until $225,000 been open in new CD.”
The total amount of CDs cashed in on that Sept 22nd is $360,037.23.
Gore is taking the situation seriously and like the rest of the council wants some answers, “My opinion on the matter is that our yearly financial audits aren't satisfactory if they don't inform us of our actual financial state. We were given a report with basically no findings in the summer, only to find out last month that our credit rating is so poor that we can't even get a loan for a fire truck that the VFD needed. So far during my tenure the books have never really been opened to the council members. Yes, we vote on a budget, but we never see actual financial statements. We sit up there and are tasked to place our votes in regards to financial decisions, but have no real disclosures in regard to actual finances. I expect this to change going forward. I've made this a high priority, especially after learning about the amounts involved in the past years of CDs cashed in to “pay bills”. I'd like to dig into this to find out why we had to go to our reserves to “pay bills.”
Turney has tackled the challenge and has the support of the city council, “It's the city manager's job and the city secretary's job to investigate this and work on making the needed changes. The council is asking questions just like they are supposed to and doing their job well.”
One question brought up by Gore was regarding the notes on the CDs that were cashed in, “I hope Tommy can find where all of that money went and if 225k was to pay forward a grant until we got the grant money, where did the 225k go that we got back?”
Newly elected council member Kristi Brundige-Goetz, who is due to be sworn in at the council meeting on November 19, is hitting the ground running, “It was stated at the last council meeting that 3 CDs, totaling over $300,000 had been cashed in by a former city manager to “pay bills” in 2015. It is our responsibility to track how those funds were spent. If the CDs were used to pay bills, then we need to know why we unable to pay our bills, so that in the future we can make changes and better manager our funds. $300,000+ is not a number to be taken lightly.”
We'll continue to follow the story and update it throughout the upcoming weeks as more information becomes available.