An independent financial audit confirms Mayor Hal Wing's suspicion that Springville has operated its budget like dollars in a lotto drum.
"There currently is no accountability, and individuals other than department heads are making budget decisions affecting various departments," wrote senior auditor Michael Beach of Salt Lake CPA firm Pinnock, Robbins, Posey & Richins.The audit, which Wing authorized soon after taking office in January, was completed Monday. Beach worked in con-junc-tion with Springville CPA J. Niel Strong to identify problems in Springville's financial picture.
Auditors concluded that the city shuffled public funds so much during the past few years that it's now difficult to tell where money came from and where it went. Because of the mishandling of funds, Springville "is currently experiencing severe struggles with cash flow," Beach said.
In the wake of the auditors' findings, there may be significant changes in who handles Springville's money and how they do it.
"There's always the possibility of personnel changes," Wing said, although he did not name city employees who might be relieved of their duties.
Wing said he is "pretty sure" he will pursue changing some employees' job descriptions or replacing them. The decision will be based not just on findings of the audit but on an overall assessment of the city's financial situation, he said.
Beach's review of Springville's books took more than two months and cost the city about $10,000. It was in addition to an annual audit required by law, and Beach reiterated that the city has failed to correct problems Strong has been talking about for several years.
Auditors aren't pointing fingers at specific city employees, but Beach did recommend that the city hire a full-time administrator as well as a finance director. He also recommended that the positions of city recorder and administrator be held by two different people. Currently, Doug Bird performs some responsibilities of both positions.
Apparently, Wing's investigation into the city's books is causing some discomfort among longtime city officials. Strong told Wing Monday that he no longer wanted to conduct Springville's annual audit.
"I think the pressure of people bringing up the past is uncomfortable for him," Wing said.
Former Mayor Delora Bertelsen defended the practice of her administration, saying she was never told by the state or city auditors that there was a problem.
"The state would have come down on us," she said. "For the eight years I was mayor we received clean bills of health."
But both Strong and Beach found the city had illegally spent revenues that should have been held in trust accounts. City officials spent utility customers' deposits, construction bonds, some impact fees, golf improvement revenues and cemetery trust revenues for general operation of the city, Strong said.
The city should have hundreds of thousands of dollars in those reserve accounts that it doesn't have, Strong said. By state law, the monies can only be spent for a specific purpose after City Council approval.
"The city's utilized the money, which probably shouldn't have been done, but it won't all come to a head," Strong said. "It's important that we not push the panic button."
Auditors recommended that Springville consider short-term loans to recoup some of the funds it should have in reserve accounts. Otherwise, auditors said, the city can try to replace the money over the next several years. But that will require a substantial amount of belt-tightening.
Strong told an ad hoc budget committee last week that as of Feb. 28, Springville's outstanding bills were $615,000 in excess of its available revenues.
Strong also said transfers from one city fund to another weren't properly documented. Some city departments borrowed money from others without drawing up loan agreements and payback schedules, he said. In all, Strong estimated that the city mishandled about $2.8 million.
"There's a flaw there," Wing said. "We've been robbing Peter to pay Paul until Peter's broke."
Over the years, Strong said, he was never asked to explain his find-ings or methodology.
"It was never pointed out as being necessary," Bertelsen said. "It was not an essential part of his (Strong's) job."
Councilman Chris Sorensen said he does not remember meeting with Strong other than at audit presentations. "I assumed we were doing a pretty good job," Sorensen said. "I am very glad that the city is undergoing this audit."
Wing said there are several projects that need to be done using the money which should be in trust funds. The golf course needs sprinklers on nine of its holes, and the fire department needs a new engine, he said. Those projects can't be done because the money was spent on other things.
Wing, who imposed a moratorium on capital spending last month, said the audit results validate his concerns about the city's finances. If the problems hadn't been identified or corrected, the city would be in dire straits in just a couple more years, he said.
"This town is too big for five or eight people to come down and run it on Tuesday night twice a month," Wing said. "We've got to run it professionally."