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Serving Northern St. Louis County, Minnesota

Audit questions

Tower’s auditors should explain their accounting of city funds

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The release last week of the EMSRB’s rural ambulance assessment for the Tower Area Ambulance Service, raises some interesting questions— some of which we’d like to see the city’s long-time auditor, Walker, Giroux & Hahne, provide answers to.
For the past several years, the city’s auditor has maintained a kind of running tally of what one city fund owes to another. Since, for years, the actual cash for these funds was all run through the same general fund checking account, it really wasn’t possible to show where any dollar that paid a city bill actually came from.
So, at the end of the year, (as we understand it), the auditors would take a look at the apparent bottom line for each city fund, including the ambulance fund, and make some kind of adjustment accordingly. If the ambulance fund showed it made a profit, the auditors concluded that the excess revenues must have gone somewhere, so they would debit some other fund that had spent more than it took in as owing the ambulance fund. The most recent audit concluded that the ambulance fund was owed $737,648 from other city funds, an amount that has accumulated over a number of years. A few folks have tried to make a political issue out of it, claiming that the city is “robbing” from the ambulance service. It might be a salient issue if it were possible to argue that the ambulance service was lacking basic necessities, but that really isn’t the case. The city council has generally been very willing to make investments in the ambulance service whenever it’s been asked. In fact, as the EMSRB pointed out, the city is spending far more on its ambulance service than it should.
The bigger question, however, is whether or not the $737,648 figure is a real number. Keep in mind, to our knowledge, the auditors can’t identify any actual flow of dollars from one fund to another since all the money flowed through one bank account up until recently. Again, as we understand it, they relied on end-of-the-year “profits” or “deficits” to assign a presumed flow of money from one fund to another. Yet, what if the “profit” that shows up in one of the funds at the end of the year is the result of incomplete tracking or accounting of expenses? That may not be just hypothetical. Indeed, the financial consultant, who reviewed the Tower Area Ambulance Service’s finances for the EMSRB, notes that the service has not accounted for expenses in a typical business-like fashion in the past. Indeed, major expenses tracked by most businesses, such as depreciation, were never even accounted for by the TAAS.
The depreciation expense alone, as calculated by the EMSRB’s financial consultant, comes to over $72,000 a year. That’s just slightly less than the average annual Tower ambulance service profit from about 2010-2017. In other words, had the ambulance service simply accounted for depreciation, most of the presumed “profit” from the ambulance service over the past decade goes poof. There are other overhead expenses, as well, such as the services provided to the ambulance service by the clerk-treasurer’s office, that are substantial and not well documented. The bottom line: if the ambulance service’s expense tracking was incomplete, the accountants may well have been crediting largely imaginary profits to the service when it made its year-end adjustments between funds. Which could help to explain the so-called missing profits— as in much of it never existed at all.
Again, we don’t claim to be accountants, which is why we outlined this same line of reasoning in a detailed email to the city’s auditors last month, along with a number of related questions, hoping they could better explain it to us. It’s possible there’s a legitimate explanation but, so far, we’ve yet to get even an acknowledgement, much less a response to our inquiry.
We’re not the only ones with concerns. Members of the city council have had similar questions about how the auditors went about making their calculations on this and other subjects and they’ve yet to get satisfactory answers. The problem is that auditors show their results, but they don’t often show their work, so when questions arise, the auditors have an obligation to provide an explanation. That’s especially so when the auditors’ conclusions have raised concerns with some in the community and stirred resentment among some in the ambulance service.
Government auditing is supposed to help provide some level of accountability and transparency in government. That’s a good thing. And the same principles of transparency should apply to the auditors themselves.

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Lee Peterson

It sounds like the Timberjay wants Walker, Giroux & Hahne to do all of the bookkeeping, record keeping and check writing for the City. I'm sure the firm would do all of the City's financial work, for a price. Maybe maybe that's the solution for keeping track of money here.

The accounting firm sent one of their accountants to the July 12 City Council meeting to present the 2020 Audit and answer any questions. I didn't hear any questions about the 2020 Audit statement which says on page 39 that the Ambulance fund is "Due From Other Funds $737,648".

At the August 23 meeting, the Council voted to pay $25,720 for the 2020 Audit. There were no questions raised about the Audit. How many people, in their regular lives, would pay a bill like that if they thought there was a problem with the product?

It's time for the City to begin taking financial responsibility for its expensive projects. Shooting the messenger is ridiculous. The tail needs to quit trying to wag the dog. It's gone on way too long.

Saturday, September 4