Published: October 20, 2009 09:48 pm      

City didn’t violate finance policy

By Janet Jacobs

Daily Sun



It was City Councilman Stephen Andrews who first noticed that the city manager seemed to be violating the city’s own financial policies by transferring money between departments. Andrews got the information about the policy from the city’s own audits, and he brought it up to city council on Oct. 5.

On Tuesday, he got his answer: The auditors made a mistake.

Since 2003, the city’s audits have stated that the city manager couldn’t transfer more than $1,500 within a department, and the council had to approve any transfers from one department to another.

In Corsicana, the city manager transfers sums much larger throughout the year without council approval, and has done so for 20 years. The transfers in question are done between departments, such as the police department and the street department, to keep one area of the city from going over budget. The transfers do not affect the bottom line of a fund, pointed out Mayor C.L. “Buster” Brown.

Andrews asked at the Oct. 5 city council meeting why the city wasn’t following its policy as written in the audits, and City Attorney Terry Jacobson was asked to look into the matter.

Jacobson reported Tuesday that the city manager didn’t violate the rule because it’s not Corsicana’s policy. The limits on transfers is evidently another city’s policy that was accidentally copied from another audit and never caught, Jacobson said. The error was made and copied from year to year by the auditing firm Patillo Brown and Hill since 2003, Jacobson said.

In the 2001/2002 audit, the audit states correctly that the city manager may make the transfers. However, in the next year, the policy in the audit changed without any change in the city’s ordinances, Jacobson said.

“Patillo couldn’t tell where the language came from,” Jacobson said.

The city’s lawyer said he went back into the city’s records for at least the last 20 years and there was no change in the city’s rules about fund transfers.

The correct policy was reinforced each year as part of the budget, including the budget approved in September for 2009-2010.

“The ordinance adopting the budgets ... stated that the city manager was authorized to transfer from one line item to another line item within the same fund,” Jacobson wrote in a four-page memo to the council.

In the same memo, Jacobson stated that the auditing firm has amended its 2008 audit and is sending a correction on the policy to the city.

Allowing the city manager to make transfers within funds is normal, Jacobson said, citing Texas Municipal League attorneys, whom he also consulted on the issue.

“According to TML, that is a common practice because requiring prior city council approval for every change would be very time consuming and would turn city council meetings into substantially longer affairs.”

Following the report, Andrews expressed surprise that the city’s auditors hadn’t caught the mistake earlier, and that no one in the city had caught the error earlier.

“I just find it hard to believe they missed it for eight years,” he said.

Andrews asked the mayor for a special meeting to allow the council to discuss the city’s financial policies. Andrews said there should be a $50,000 limit of transfer by the city manager.

“I do not feel the city manager should have that much authority to move that much money without our authorization,” Andrews said.

In his conclusions, Jacobson made the following assessments: No one within the city misled the auditors about the city’s policies; the city’s ordinances allow the city manager or city finance director to make interdepartmental money transfers without city council approval and the city has always complied with its budgetary requirements.

The interdepartmental transfer policy does not refer to transfers between the bigger funds, such as the $1.3 million utility fund transfer to the general fund, a payment that the council has to sign off on each year.

The error might have been caught sooner if the city had changed its auditing firm every three years, but only Patillo bid on the audit for the last several years, forcing the city to accept the sole bid and extend the contract. The city is currently seeking another audit firm for the 2009 job, said City Manager Connie Standridge.

In other business, the council approved renting the undeveloped “industrial park” land behind Pactiv to Brian Phillips who wants to use it for agricultural purposes. He will pay the city $10 per acre per year, or just under $1,900 for the year. The money will go into the general fund.

As well, the council approved appointing Lowell Dunn to the Zoning Board of Adjustments, and Leon Allard as an alternate to the board.

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Janet Jacobs may be reached via e-mail at jacobs@corsicanadailysun.com