The Prestonsburg City Council approved its 2018 fiscal year audit during a special meeting last week, with officials reporting what were described as minor issues with the city’s financial accounting.
The audit, presented by Certified Public Accountant Artie White of White and Associates and CPA David Garrett, offered unmodified opinions for all city entities except Prestonsburg Tourism, for which the audit issued an “adverse opinion.”
“The tourism commission has not got their audits. It is a component of the city, therefore it has to be within your all’s bound audit report, but they haven’t got the information, so therefore, we do not and will not give an opinion on that tourism commission,” White told the council. “Everything else that’s presented within the audit, including the utilities commission, is in this audit report, and they have an unmodified opinion.”
The audit outline two deficiencies in internal control and there was no material noncompliances reported.
According to the audit, city management made journal entries in a fiscal year that had already been audited and made journal entries across all funds, causing financial statements to be out of balance.
“What that means in accounting terminology is basically once you audit a year, you can’t go back. Once it’s audited by an independent auditor it’s done. You can’t touch it. And so, when those beginning balances didn’t match, we had to go back and fix it,” White said.
He said auditors made adjustments so financial statements were not materially misstated.
The second material weakness concerned capital assets in Prestonsburg, something White said was caused mostly because the financial software at city hall differs from the financial software used in other areas of the city. He said the software at city hall “didn’t jive” with software used elsewhere.
The audit said that all capital asset additions and deletions were not made in the city’s financial statements, and it also noted that management was working to correct the issue.
White mentioned issues with the transfer of assets between the Prestonsburg City Utilities Commission and the Southern Water and Sewer District, which is still pending and, officials said, possibly may be unwound. The audit reports that the city obtained $1.98 million loan to finalize that purchase and has received permission from the Kentucky Association of Counties Finance Corporation to use the funds for payment of other “general capital improvements” if the transfer is not finalized.
The audit included a statement of revenue and expenses for the 2018 fiscal year that shows the city received $6.2 million in revenues and spent $6.5 million. The city had surpluses in the general fund, coal and mineral severance fund and road aid fund, the audit says, but had more expenses than revenues in the other governmental funds category, which included funding for public safety and $624,500 in debt service. The city obtained $939,000 in loans and $52,500 by selling property, recording a beginning fund balance of $2.2 million and an ending fund balance of $2.7 million, the statement says.
The audit’s statement of net fund position recorded financial losses for city entities. The financial losses totaled $594,000 at the Prestonsburg Parks board, $290,000 at the Mountain Arts Center and $553,000 at StoneCrest Golf Course, totaling a loss of about $1.45 million overall in these proprietary funds in the 2018 fiscal year.
White said the city is on its way to improving it financial accounting.
Mayor Les Stapleton asked him to clarify.
“Was there any question about the money being spent appropriately?” he asked.
White told him there were no such issues. He said all money was accounted for.
The auditors reported in a letter to the city council that material misstatements that were also detected during the audit were corrected by management, including the addition of capital assets and the deletions and retirements that were not made by management for the fiscal year.
In the management letter, the auditors noted three issues, reporting that there was no documentation to support cash receipts for the city’s Shop with a Cop program, documentation was lacking in the sampling of expenses at the Mountain Arts Center and there was no proof that the city’s 2017 fiscal year audit was published in the newspaper, as required by law.
City officials reported that the lack of documentation at the MAC concerned hiring local musicians to perform. MAC Assistant Director Shelly Crisp, who attended the meeting, said that issue has since been corrected and contracts are now available.