Salisbury Audit Shines Light On ‘Challenging Year’

SALISBURY -- Dormant bank accounts, a re-examination of the city’s employee “sick bank,” and management of the mayor’s credit card were some of the issues turned up during the annual independent audit of Salisbury.

Auditor Pam Baker of Barbacane, Thorton and Co. told the City Council that the majority of the audit was positive, but that several of the issues currently troubling the city were brought up last year as well.

“This was a challenging year,” said Baker.

In her report, Baker drew attention to a number of concerns that the audit turned up. She warned that each of the points could be bad for the city if left unchecked. For example, at the time of the audit, Salisbury had a number of “dormant” bank accounts that, if left in limbo, could be abused. While the accounts all reported a balance of zero, Baker explained that they still presented a risk and should

Another point of concern found by the audit is the use of the mayor’s credit card by people other than Mayor Jim Ireton. Baker also told the council that card activity is not being approved by internal services. It should be noted that last year’s audit had similar findings. This year, Baker repeated the suggestion of the prior audit that only Ireton use the card and that all statements be sent to and approved by internal services. Finally, she stressed the need to faithfully provide receipts for every transaction.

The administration has responded by pointing out that the city only has the mayor’s credit card to use for things like online purchases, which necessitates the card occasionally being used by someone other than Ireton, at least until a new solution is found.

Council Vice President Debbie Campbell said that she was troubled by others using the card.
“I think this is fairly serious when you talk about accountability,” she said.

Campbell suggested that the city look to meet Baker’s suggestions and do everything possible to track purchases in detail.

“Then we should have a middle of the road solution which is doing what the auditor had said and having credit cards for those individuals, department heads, whoever they are, that require them so that we can keep track of the expenses and receipts that is satisfactory to our auditors while we pursue a bigger picture solution,” Campbell said.

The city’s “sick bank” was another area where Baker felt improvements need to be made. The sick bank operates by allowing an employee to forfeit one of their sick days to join the bank. Once they’ve joined, if an emergency or accident requires them to miss more work than they have sick days for they can draw the remainder from the bank.

Baker pointed out that the system had one major flaw in that it didn’t differentiate between higher pay rate employee hours and lower pay rate. For example, if a higher rate employee contributed a day to the bank it would have a higher overall value to the city than a day from a lower rate.

The under-collateralization of one city bank account also raised some eyebrows during the audit.

“You had one financial institution that came back and confirmed to us that you were under-collateralized by $302,000,” said Baker.

However, in this case the city finance department explained to the council that there were inconsistences in the reports received from the bank, since they were told that the account had $2.1 million in collateral but the auditors were told that it only had $1.7 million. The details of the mix-up are unknown, though there was speculation that the $2.1 million figure was given before accounting for shifts in the market.  

Whatever the case, Salisbury’s Director of Internal Services Keith Cordrey informed the council that this particular misunderstanding has been a catalyst for the financial institution to reform.

“They cited that as an example of why they’re discontinuing their program,” he said.

One final issue that Baker advised the council keep an eye on is how they use pooled cash to support funds that lack the cash flow to cover their expenses. She said that the practice has resulted in large credit or overdraft balances and suggested the city come up with a “corrective action plan” and better manage cash transfers.

Despite the few trouble spots, Baker revealed that Salisbury has a lot of strong points highlighted by the audit. Creative debt re-funding, which Baker compared to re-financing, allowed the city to establish better rates due to a favorable market.

As far as equity is concerned, Baker added that Salisbury is stronger this year than last year. Additionally, the general fund was close to breaking even with revenue versus expenditures.

While the city still continues to struggle with some compliance issues, Baker concluded that all are fixable over the next few years if the city follows audit suggestions.