By BRADEN LAMMERS
Braden.Lammers@newsandtribune.com
CLARK COUNTY — Clark County has been overspending for the past two years and a string of errors may have worsened the county’s financial situation.
A recently released State Board of Accounts audit covering 2008 cited deficiencies in accounting practices and oversight of the accounting process, which could be mitigating factors in why the county was unaware it overspent by nearly $14 million.
The three major players in determining the county’s finances are the auditor’s office, the county council — the county’s fiscal body that appropriates money — and the county commissioners, which is the county’s executive body and responsible for office oversight.
In this, part one of two stories examining the county’s financial situation — one that has led to about 20 county employees getting laid off — problems outlined in the auditor’s office and factors that may have been outside of the control of the county will be examined.
Coupled with the economic downturn that has caused nearly every governmental body to struggle in bringing in revenue, the county likely will face a major budget shortfall in 2010.
So who, if anyone, is to blame?
AUDITOR
According to the State Board of Accounts report, multiple problems were outlined in the paperwork filed by the auditor’s office.
Issues include how disbursements are being recorded, internal controls on transactions and reporting, the county’s financial accounting system and issues with vendor payments and statements.
However, because the report covered problems outlined during 2008, several issues already have been corrected. One problem that was outlined and subsequently addressed is the way in which disbursements and payments were being recorded.
A procedural change several years ago switched a detailed report into a one-line item report.
“That’s been fixed,” said auditor’s Deputy Tracy Boettcher. “In 2009, we went back to the old process of everything having its own particular line item.”
Also completed were updates to the county’s computer accounting system, Boettcher said.
But several issues remain, and the auditor’s office may have to wait until it has its exit conference with the State Board of Accounts and the Department of Local Government Finance before the problems can be fully addressed.
Another issue with the county is how it has been recording fund transfers.
“Transfers between funds were not properly recorded and identified in the financial records,” the report said. “As a result of improper financial reporting, audit adjustments of approximately $2.4 million were made to the financial statements.”
The adjustments may be the result of the way in which balances were being carried from year-to-year, with beginning fund balances being shown as receipts.
“State Board of Accounts felt like we weren’t identifying those properly as a transfer of funds,” Boettcher said. “We were doing it the only way we kind of knew how, but maybe it wasn’t being recorded in the computer to look like the way they wanted it to look.
“We were showing it mainly as a disbursement and a receipt. They wanted it to look more like a transfer of funds.”
Yet another concern listed is how payments have been made to the county.
“There were no procedures in place to ensure that all of the departments submitted the accounts payable voucher to the county auditor for payment at the same time to ensure that the final amount was proper,” the report said.
An incorrect amount paid could have slipped through as a result of not having the proper procedure in place and if an amount was not paid in full, there was no description recorded as to why that payment was short.
The problem with payments are not solely the responsibility of the auditor’s office, as claims are sent from each government office.
“This is dealing with the entire county government — this isn’t just this office,” said Auditor Keith Groth.
The problem extended into vendor statements not being submitted with the invoices and accounts payable vouchers. A number of checks — totaling $150,000 — were voided and receipted back to the records because the invoice had already been paid.
The report cited that some of the duplicate checks issued were caught by the auditor’s office, while others were returned by the vendors that had already received payment.
“Five percent of the disbursements tested did not have adequate documentation to identify what was purchased and to establish if the disbursements were for legitimate governmental business,” the report said.
The report submitted by the State Board of Accounts is not a final report and supplemental information may be issued soon to clear up the discrepancy in funds.
“We’re working with the council in my office, and with DLGF and the State Board of Accounts internal controls so this never reoccurs,” Groth said.
UNAVOIDABLE PROBLEMS?
Although the State Board of Accounts said the county has been overspending, some of the issues may have been unavoidable and out of the county’s control.
The origins of the county’s money problems go back to when Indiana changed the way it assessed property values. The reassessment process resulted in a delay on tax bills and delayed distributions, including in 2004 and 2007 when tax bills were not sent out until the next year.
“It’s been a cumulative effect magnified in 2008; we didn’t get a budget order until the end of October,” Groth said.
Additional appropriations were not made until November and December in that year, as well as the sheriff’s department budget being underfunded by $500,000.
“It’s kind of been a shot-in-the-dark, so to speak sometimes, as far as determining an adequate and fundable budget,” Groth said.
But the county was still responsible for estimating and submitting a budget to the state, even if it didn’t know exactly how much tax money it was getting from Indiana via property tax payments
“When we set the 2008 and 2009 budgets, we did not have budget orders so we could set those budgets,” said Council President Jack Coffman. “We did not have a very clear view of what we could even set our budgets at. That’s probably a big factor in this problem that’s occurred.
“We still have to set our budgets whether we get our budget orders back from the DLGF or not.”
In October, the council authorized covering an anticipated budget shortfall for 2009 of about $750,000 out of the county’s rainy-day fund.
Immediately following addressing the shortfall, the council hired Dan Eggermann, a consultant and former DLGF employee, to help the county ensure it would be on the right track for spending in the upcoming year.
“His calculations [were] we could support a $12.9 million 2010 budget,” Groth said.
“We received a complete report from him, as far as a fiscal analysis for [20]09 up until 2011, and that was not incorporated in that report,” Groth said of the alleged overspending. “Nor had we ever received a notice or contact from DLGF about any concerns that they may have that we’re spending beyond our appropriations.”
However, why the educated guess on the budget was so far off in 2009 — the council adopted a budget of $22.1 million and a certified budget came back at $14.7 million — was an obvious concern.
The council took the previous year’s budget and tried to make up the shortfalls in the commissioners and sheriff’s budgets as well as any additional appropriations that were made. The total equaled $22 million and is why the budget was set so high, Boettcher said.
“You have to try to work off projected revenues and that’s the hardest thing,” Coffman said. “And when your projected revenues are at best a guess, then its even more difficult, and that’s really what’s occurred.”
In addition to the estimated revenues being off, the property tax cap implemented — 1 percent for personal property — added to the troubles the county has had being able to raise additional revenue.
“No one in the state had a clue as to how much that would affect county governments in the end,” Coffman said of the tax caps. “They all had an estimate and they all had a good guess, but nobody really could tell you exactly.
“That’s probably one of the biggest challenges that all counties have had to look at this year.”
Still more issues compounded an already serious problem. The costs to maintain the Clark County Government Building were rolled into the county’s budget when it had previously been the responsibility of the Clark County Building Authority. It takes a little more than $1 million per year to operate the building and the change could not have come at a worse time, Groth and Coffman said. Also, in trying to determine proper assessment values, the county assessor had to address more than 18,000 parcels that were not recorded properly, Groth said. The assessor’s office, through the county’s new GIS system, corrected the problem and won’t have to repeat the reassessments in the future. Beyond the issues counting and estimating the revenues that should come into the county, officials have also had to deal with people not paying what the county expects to receive. “When you have 83.5 percent tax collections for county ... when we’re anticipating normally 96 to 97 percent, that’s a hit,” Groth said. “But that’s where we’re at and we have to prepare for that.” Groth attributed the lower collection percentages to the ailing economy, and the county is not alone. “The state of Indiana, they’ve got the most brilliant CPAs and the best fiscal analysis that anyone could wish for and they’re $900 million short in their budget thus far,” Groth said. “And it’s been down for 17 straight months.”