Auditor suggests tighter watch over city boards

RANDOLPH – The Randolph City Council is working on improving its oversight of various city boards and their financial reporting.

Council members approved the city’s 2020-21 fiscal year audit of financial statements on April 6 after hearing a phone presentation on it by Kyle Overturf, a certified public accountant and personal financial specialist for Grand Island-based AMGL CPAs & Advisors.

The 79-page audit – which covered the 12-month period that ended on Sept. 30, 2021 – noted one material weakness, one significant deficiency and two instances of noncompliance in relation to the city’s financial statements.

The audit explained the material weakness as the following: The council failed to properly review and oversee the financial reporting of quasi-independent boards, including but not limited to the golf, library, rescue and summer recreation boards.

Nebraska state statutes require council approval of all claims prior to issuance and require accountability and oversight over all public funds that are listed in or utilizing the city’s employer identification number.

“The quasi-independent boards operate autonomously and provide limited or no accounting data outside of bank statements that the city can obtain,” according to the audit. “The minimal oversight over these quasi-independent boards has created an opportunity for individuals to commit fraud or misuse public funds.”

According to the audit, no issues of fraud or misuse of public funds were found.

AMGL recommended the city oversee all financial accounting transactions, approve all claims in accordance with state statutes and maintain supporting documentation, while still allowing the boards to make fiscally responsible financial decisions with the assistance, oversight and support of the council.

Randolph City Administrator/Clerk Ben Benton said city officials are working with the boards to obtain proper accounting records, disbursement listings and supporting documents in order to provide adequate oversight, ensure compliance with state statutes on claim approval and prevent unauthorized spending of public funds.

“The rescue department, they already have all this information,” he said during a followup interview. “It’s just a matter of sending me a report.”

Benton recalled the Lied Randolph Public Library Board received a copy of QuickBooks, an accounting software package, last fall from city officials. “They’re already entering in their information and providing us the detailed information we need,” he said.

Benton is the appointed treasurer for the Randolph Community Golf Course Board and welcomes a council member to come in and double-check the work he has been doing.

The other city board the audit referenced was for summer recreation.

“The wild card is summer recreation,” Benton said. “I’ve already talked to the summer youth coordinator and she’s all onboard. We’ll be issuing her a license for QuickBooks.” One instance of noncompliance is related

One instance of noncompliance is related to the material weakness: The council failed to properly review and approve all claims as required by state statutes.

“Quasi-independent boards operate autonomously and provide limited or no accounting data,” according to the audit. “The minimal financial information has caused the city to be in violation of state statutes.”

AMGL recommended the city oversee all financial accounting transactions and approve all claims in accordance with state statutes.

Benton said city officials are working with the boards to obtain proper accounting records in order to ensure compliance with state statutes on claim approval.

“I had the minutes of every one of those board meetings in their packets for review, but I didn’t actually have it as a motion on the agenda for the council to review the minutes and approve,” he said. “But once I added that process – I think this was probably January of this year – they were approving the minutes of the different boards.”

Benton did not realize the council approving the meeting minutes for each city board was not enough, but that the claims for each board had to be approved as well.

“Now they are approving all of the claims as well as the minutes of every board meeting that occurs every month,” he said. “It’s four or five boards, so it’s four or five more sets of claims, sets of vendors to flip through and read and try to digest and ultimately approve.

“These boards, they have their meetings,” he said. “They approve their claims. Because it came up as an issue with the audit, it’ll be a regular agenda item for the foreseeable future until the council gets used to what we’re doing.”

The significant deficiency for Randolph was that there is not a sufficient separation of responsibilities in the city office building.

“Adequate segregation of duties should be in place to ensure internal control over cash receipts, disbursements and recording of transactions,” according to the audit.

However, the city has a limited number of accounting personnel: Benton and Randolph City Treasurer Josh Rayford.

“Because of the lack of segregation, the same employees may participate in multiple facets of a transaction,” according to the audit.

AMGL recommended Benton and Rayford should remain aware of this lack of separation of responsibilities and continue to be diligent in the oversight and review of transactions.

Benton explained it is impractical to further segregate duties due to the limited number of accounting personnel.

“The staffing level of the city is just Josh and I here in the city offices,” he said. “Although they haven’t been able to find any actual deficiencies in our internal controls or any sort of material weakness, they still would like an additional oversight.”

Benton noted that he and Rayford will keep being thorough in the oversight and review of transactions.

They also will have council member Janelle Biernbaum double-check their work to ensure there is nothing wrong with it.

“Council member Biernbaum was very quick to volunteer her services to assist,” Benton said.

The other instance of noncompliance occurred when the city deposits exceeded Federal Deposit Insurance Corporation and pledged collateral by $322,432 as of Sept. 30, 2021.

“Nebraska state statutes require all deposits be collateralized,” according to the audit. “The city did not properly monitor pledged securities. The city’s deposits are not collateralized in accordance with Nebraska statutes.”

AMGL recommended working with First State Bank of Randolph to obtain pledged securities or additional collateral to cover 102 percent of non-FDIC deposits in accordance with state statutes.

Benton noted the city will work with the bank in order to ensure all deposits are properly collateralized. “As soon as we figured out that

“As soon as we figured out that we had made more deposits than the bank had pledged, they fixed it that same day, so it was a nonissue,” he said. “It’s actually a very good problem to have – that your deposits are more than you expected.”

If people would like to read the 2020-21 fiscal year audit of the city of Randolph for themselves, they may visit auditors.nebraska.gov/Audits_ Filed/2021/Randolph_FY2021.pdf.

Special Council Meeting:

The Randolph City Council will hold a special meeting at 6 p.m. Wednesday, April 13, at the Randolph Community Golf Course clubhouse.

Benton noted that the purpose of the meeting is for members of the council and the golf board to discuss the costs – such as employee wages and health insurance – the city has been covering for the nine-hole golf course.

He said the council wants to give the golf board a heads-up that “either the golf board is going to need to start paying more of their expenses and be less reliant on the city or the city’s going to have to obviously provide additional oversight to dial in what those expenses are to ultimately mitigate risk, mitigate costs, drive efficiencies.”