Helena-West Helena Mayor Kevin Smith told lawmakers Friday he is working to correct numerous financial and reporting problems outlined in what one lawmaker called an abysmal audit of the Phillips County city for last year.
"We have done a lot since January," said Smith, a former Democratic state senator who succeeded Jay Hollowell as Helena-West Helena's mayor in January.
"I don't know we have gotten there yet, but we are on a path to get there," he said during a meeting of the Legislative Joint Auditing Committee.
Helena-West Helena -- the county seat in Phillips County -- has a history of extensive audit findings by Arkansas Legislative Audit dating back to 2006. These findings have included material misstatements in financial records, spending for noncity business purposes, violations of ethics laws, payroll overpayments and budget issues, said Tim Jones, an audit manager for Arkansas Legislative Audit.
The city has made improvements in its financial record keeping and had fewer audit findings in recent years, and these improvements resulted in fewer misstatements in financial records and better compliance with the municipal accounting law, he said.
"When I came into office in January, one of the first meetings I had was with our staff to say that we have a bad reputation in Little Rock when it comes to audits and that under my administration, at least, there would be a zero tolerance of any kind of an attitude that this is not important or significant or any kind of serious findings by the city," Smith said.
"It would be my goal before the end of my term to have no findings," he said.
Before a 2018 budget amendment was adopted on June 4, 2019, Helena-West Helena's general fund and street fund expenses had exceeded appropriations by more than $1 million and more than $92,000, respectively, Jones said.
"As a result of overspending -- that included year-end bonuses of almost $105,000 -- the general fund had a deficit balance of $480,000 at the end of 2018," he said.
Jones said various accounts payable totaling more than $1 million contributed to the deficit, including about $276,000 to the Phillips County Port Authority; about $210,000 for 2019 workers' compensation insurance premiums to the Arkansas Municipal League; about $127,000 for payroll taxes and a tax lien; about $125,000 for retirement contributions to two state retirement systems, and about $271,000 to other vendors.
Helena-West Helena remains delinquent on its share of project costs under a 1997 agreement with the U.S. Army Corps of Engineers, and the city's balance is $1.4 million as of June 2019, Jones said.
Smith said the city had paid back what it owed for items such as workers' compensation premiums, retirement contributions and the tax liens. He said the debt to the U.S. Corps of Engineers has been in existence for more than 10 years, but it hasn't appeared in the previous audits, because he doesn't believe any previous mayor pointed that out to legislative auditors like he did.
"We think we can show that we did in-kind work [for the city's share of the project costs]. We just never submitted documentation," the mayor said.
The city's general fund deficit of about $480,000 is primarily the result of the city's trend over the past 12 years of its expenses exceeding revenue, Jones, the audit manager, said. The city had received contributions totaling about $987,000 from the water and sewer departments from 2006-18, and contributions at this level may not be sustainable indefinitely, he said.
"These factors create an uncertainty about the city's ability to continue as a growing concern," he said.
In response to this situation, Helena-West Helena's mayor and City Council have implemented several corrective actions for this year, Jones said.
They have capped total spending and overtime pay, cut some administrative costs, increased landfill tipping fees and sanitation rates and merged the street and sanitation departments, he said. Other actions include forgoing employee bonuses this year, negotiating a payment plan with the Port Authority officials and discussing resolution of the debt to the U.S. Army Corps of Engineers with officials in Washington, D.C., he said.
Jones said the city paid Hollowell, the former mayor, $7,000 more than the amount approved by the City Council due to duplicate vehicle allowance payments, and that was paid back to the city on June 4.
The city also paid a fireman $3,000 more than the amount approved by the City Council BECAUSE F a bank error and that money was paid back Aug. 7, he said.
Employees in the administrative department and the district court clerk received full-time salary and benefits, but their time sheets did not reflect 80 hours worked for each pay period, he said. District court clerks earned overtime for working during lunch breaks without proper approval of their immediate supervisor, he said.
Competitive bids were not solicited for three police cars costing about $84,000, and this didn't comply with state law, Jones said.
Smith told lawmakers that the city has passed a rate increase on water, sewer and sanitation services. The rates are indexed to the consumer price index, and the sanitation part of the bill goes to the city's general fund.
"Provided that we utilize fiscal discipline, and we don't spend it unwisely and spend it on our bills, my goal is for us to be out of the deficit situation by July 1, 2020," he said.
The city hasn't had a jail in seven years, but the jail has been built, and that will cost the city about $500,000 a year, starting July 1, Smith said.
"The increase that we just experienced is going to give us a window from about September to June 30, where we are still getting that revenue before we have to pay for the jail," he said. "That will allow us to get caught up on the roughly $300,000 [debt], as long as we don't create new debt on top of that."
Metro on 11/09/2019