Clark: Financial Woes Loom Without Accounting Fixes

Clark: Financial woes loom without accounting fixes
By Paul Nielsen The Daily Advance Staff Writer Dec 16, 2021

Interim City Manager Ralph Clark told City Council this week that Elizabeth City could be facing serious financial problems if the city does not improve its accounting practices.

The Local Government Commission placed Elizabeth City on its Unit Assistance list in September after the city filed its 2019-20 financial statements over six months past the Jan. 31, 2021 deadline.

A recent review by the N.C. League of Municipalities of the city’s financial practices also found several major deficiencies.

“The most critical of the correspondence has been from the LGC,” Clark told councilors Monday. “Based on the tone of these, the city could be headed into serious financial problems without some corrective action immediately. The situation is not good here.”

Perry James, a certified public accountant with the N.C. League of Municipalities, identified several issues in his review of the city’s finance department, including its failure to perform bank reconciliations for “approximately” the last year. He cited the high turnover of the finance director position as one cause for the deficiencies.

Perry also found the city delinquent on its year-end audit and said it has not been able to close out the 2020-21 fiscal year. He also said the city needs to hire an experienced finance director; the position has been vacant since last fall.

“In a fairly short period, the city has gone from a city generally recognized for consistent financial management and reporting to one that isn’t maintaining reliable and timely accounting records,” Perry wrote to Clark.

Clark presented City Council a plan to fix the problems that would be in place until the next city manager is hired.

“At that time, the new city manager will be able to determine if these are to remain or other action is needed, particularly the statement about hiring an experienced finance director,” Clark said.

A major part of the plan is to continue using a Raleigh-based CPA firm to help the city file its financial statements on time with the state.

City Council agreed in October to hire Greg Isley CPA to help with its financial statements. The city is paying the Isley firm $100 an hour for its help.

Hiring the Isley firm is part of the corrective action plan the city filed with the state Local Government Commission after the city was placed on the LGC’s placed Unit Assistance list.

Clark told council that he sees a future trend among municipalities using outside accounting help because of a shortage of qualified people.

“I see more and more smaller communities, especially rural communities, struggling to get finance people,” Clark said. “All this can be done electronically, the only difference is it is offsite rather than onsite.”

Clark also plans to reorganize the city Finance Department so that responsibilities are more defined. Part of that move includes changing the title of the current administrative assistant to the finance director to coordinator of accounting activities.

Clark also plans to increase the salary of three department workers — the reclassified position and two accounting technicians — by 5%. Clark said the salary adjustments and the contracted cost of using Isley will be covered from the salary of the vacant finance director’s position.

“Some additional duties have been added to the accounting staff,” Clark said. “There are ample funds to pay these.”

Clark agreed with Perry’s assessment that turnover in the finance department and in the city manager’s office has contributed to the city’s problems.

Since former manager Rich Olson left 17 months ago, the city has had one permanent manager and three different interim managers — former city Public Safety director Eddie Buffaloe twice and now Clark.

Former Finance Director Suzanne Tungate resigned in October 2020 and was replaced by assistant director Evelyn Benton, who retired this past fall.

Clark called that a revolving door.

“Stability hasn’t been one of your highlights,” Clark told council.

Clark, who started as the city’s interim manager two months ago, said Isley has made progress bringing bank reconciliations up to date.

“When I came here your bank accounts had not been reconciled for 15 or 16 months,” Clark said. “We are up through April 2021. We are working to get those updated.”

But Clark said that progress is not “near enough” to satisfy any of the requirements of the LGC.

“It is critical that something be done immediately so we can get the audit process moving, getting all the accounting functions up to date,” Clark told council about his plan.

Clark said Thursday he is meeting with Isley Friday to “finalize” the firm’s role in assisting the city.