CHEYENNE – Although the city received a promising opinion for its fiscal year 2019 audit, there is still room for improvement when it comes to grant spending and budget reconciliations.
Amber Nuse, partner with local audit company MHP (formerly McGee, Hearne and Paiz), shared the findings for FY 19’s audit with the Cheyenne City Council Monday night and walked them through what the findings mean.
The city was given an “unmodified,” or clean opinion.
“We’re basically saying in this letter that we think the financials are fairly stated in all material respects in accordance with generally accepted accounting principles,” Nuse said.
During the yearly audit, the auditors look for material weaknesses and significant deficiencies in a city’s financial practices.
A material weakness is a deficiency in the city’s internal controls that could prevent budget mistakes from being caught and corrected. A significant deficiency is less severe than a material weakness, but is still important enough to merit attention.
For FY 19, the auditors found two significant deficiencies and outlined corrective actions for the city to take.
One deficiency is related to improper classification of grant expenditures. In spring 2018, the city received a $100,000 Mayor’s Challenge grant from Bloomberg Philanthropies to help “fight the blight” and enliven undeveloped properties. Once the challenge ended, the city still had more than half the grant money remaining.
About $23,000 from the grant was spent in a variety of ways, including on Christmas decorations, catered lunches and travel expenses. That money, along with the funds left unspent, was returned to Bloomberg.
To prevent something like this from happening again, the auditors suggested creating a point of contact in the treasurer’s office to oversee grant spending.
In Cheyenne, grants are directly used by city departments, and each department codes its own spending for where the funds should be pulled from, such as from a grant. While the treasurer’s office approves the spending, it isn’t involved in the coding process.
The spending from the Bloomberg grant was coded from the mayor’s office, but no one in the treasurer’s office knew the grant’s limitations.
Since some staff may be unfamiliar with grants, Nuse said it would be helpful for the city to have a second set of eyes on the spending.
“What we’ve learned is there’s different grants for different departments in the city where it might not be a routine grant they receive every year,” Nuse said. “It might not be someone who does that full time for their jobs.”
The treasurer’s office also implemented a grant approval form and checklist in August, and created a database to keep grant information in one place in September. These steps help loop the treasurer’s office in on grant spending.
Mayor Marian Orr said this change will be beneficial for all the departments that receive grants, and will “make sure that we’re dotting our I’s and crossing our T’s.”
“I think it’s going to help a lot,” Orr said.
In the weeks following the disclosure of the Mayor’s Challenge situation, Council President Rocky Case voiced serious concerns about what was purchased with the grant money. He originally posted a list of the grant spending on Facebook after receiving the documents through a public records request.
Case said the auditor’s findings related to the grant reflect a broader issue in the city. He said the report highlights issues they’re already aware of, but that a deeper look into elected officials’ spending is needed.
“It’s very evident that work needs to be done,” Case said.
The other deficiency found by the auditors was related to budget adjustments. When Robin Lockman took over as city treasurer less than a year ago, she discovered that necessary budget adjustments hadn’t been routinely made since spring 2017.
The auditors attributed the mistakes to turnover in the department, but Lockman said she didn’t know why the errors continued for so long.
When she learned this information, Lockman notified the auditors, and her department worked to correct most of those errors. The budget reconciliations will now be completed monthly.
“We balance everything now,” Lockman said.
Nuse said she was confident in Lockman’s abilities to continue on the right path and noted that the city had fewer adjustments under her leadership.
“The trend is moving in the right direction,” Nuse said.
For the report, the auditors also looked at how the city spends its federal funds, and the findings were positive. That part of the audit is only required for municipalities that are considered “high risk” by the federal government. To lose the high-risk rating, the city would need to pass two consecutive audits without any material weaknesses or significant deficiencies.
“I feel really positive about the results,” Orr said. “Overall, I think we’re doing really well. It’s always good to know where we can do better.”