Saturday, March 27, 2010

Skeletons emerge

Audit report preview

The long awaited report from KPMG, the auditors hired to take a comprehensive look at the county’s books and those of the school system, is almost finished. The process began last summer and was expected to take several weeks, not most of a year.

A status update that included an overview of the preliminary findings was presented to the supervisors during a March 23 workshop session. The final report will be presented to the supervisors at their May meeting and, according to County Administrator Rebecca T. Dickson, will be posted on the county website in its entirety.

It would seem that Goochland’s books were, up to the start of the current fiscal year, at best, a mess because no one in county administration had the accounting skills needed by a complex governmental organization. Years of slipshod practices condoned by the previous administrator resulted in a cumulative fiscal miasma.

Ron Churchman speaking on behalf of the auditing team reported that as of March 23, there were more than 40 separate and distinct restatements of balances in previous reports that affect every other report. No area was untouched by the restatements. That means they found more than 40 instances when amounts were misreported, put into the wrong place and so on.

Churchman cited many instances where Generally Accepted Accounting Practices (GAAP) were not used. He strongly implied that no one handling county funds had any idea what role GAAP has in public financial management or, for that matter, what it is.

Cash reconciliations were not completed in a timely manner and were as much as six months late.

Items for the TCSD and Economic Development Authority were put into the wrong account. Since the county went to semi-annual tax collection, revenues were consistently misreported, a violation of GAAP, probably simple confusion about what went where.

Perhaps the most troubling information, which is not new, is that the previous auditors used by the county worked on the accounts and audited what they had done. This is the same firm that audited the utilities department for several years and failed to notice blatant inconsistencies there.

Churchman declined to pass judgment on Robinson, Farmer Cox, the firm that handled Goochland accounts for years, something of an irregularity in itself, but said several times, at least once in reply to a question from District 3 supervisor Ned Creasey, that “you shouldn’t audit what you prepare, which was done previously.”

Even if the county’s previous auditors and financial advisors could be held accountable for their actions, it is doubtful that a majority of the supervisors would vote to explore remedies for malpractice. Indeed, they seem more eager to sweep the whole mess under the rug and move forward. The role of the previous county administrator, who must have been responsible for at least part of the mess, will never be investigated either.

Stupid apparently is not criminal. The degree to which the county was mismanaged during the 23-year tenure of the previous county administrator is a grievous breach of public trust. The cavalier attitude of the supervisors who were in office before 2008, especially Pryor, Eads and Quarles and those who control them, is morally reprehensible.

It is hard to say if these supervisors were hoodwinked by the slick persona of the previous administrator, too dumb to figure out what was going on, or full partners in the debacle. We will probably never know.

Taking the supervisors to task for their role in county mismanagement will be left to the voters in November 2011.

Churchman’s comments did not seem to indicate any wrongdoing, beyond pernicious widespread, systemic incompetence and ignorance of proper accounting procedure. Unsaid, but worse, is that no effort was made by the previous county administrator or auditing firm to improve the situation, or even admit that it existed.

The full KPMG report will be presented in May and will include suggestions of corrective action to remedy the shortcomings. One recommendation made by Churchman is that the county must take steps to ensure a much higher level of accounting expertise among financial staff. He offered to assist with employee training efforts in this area.

Why is proper accounting so important?

Accurate accounting provides a concise picture of an organization’s financial situation. This is the most important tool in effective, efficient government. The county must know what its costs and obligations are when tax rates are computed. The level of debt service obligation lets the county know if it can afford to borrow additional funds. Without a very precise picture of the financial situation, planning is a shot in the dark.

Churchman mentioned the failure to list a $9 million TCSD debt as a liability on county books, which resulted in a $4 million decline in net assets for the entity.

When the county entered into a complicated agreement with Capital One and the state in 2001 that involved credits, pass throughs and other financial arrangements, no procedures for properly recording and tracking the new kind of transactions were put in place. The folks doing the books did the best they could, or, did what they were told.

Like mouse manure in a pantry, the fiscal fiasco of the TCSD fouls everything it touches.

Goochland needs highly skilled professionals to clean up the mess and the new management team seems to be off to a good start. Taxpayers have suffered long enough at the hands incompetent employees. It still remains to be seen if the supervisors will permit full disclosure of all the shortcomings or revert to their habit of cover up and hide.


Anonymous said...

Hope they get it straight before Goochland is put in the same categories with Louisa, Fluvanna and Cumberland.

Anonymous said...

Goochland's real problem is that the board of sup's work for 3 or 4 prominent landowners in Goochland. It is a "good ol' boy" network that runs the county. The Good Ol' Boys created the TCSD and many other "arrangements" to serve themselves, not the County's interest. Time to pay the piper...