This post covers the presentation of the preliminary audit to the Finance Committee of the Jackson City Council. The actual audit will be covered in a later post.
The preliminary audit for Jackson's 2021 fiscal year states water/sewer services operated at a $27 million loss while garbage services suffered a $5.2 million loss as well. Scott Hodges of Tann Brown and Russ, CPA presented the preliminary 2021 Comprehensive Annual Financial Report to the Finance Committee of the Jackson City Council on March 6.
Only Council members Ashby Foote, Aaron Banks, and Vernon Hartley attended the presentation. Mayor Chokwe Antar Lumumba and Chief of Staff Dr. Safiya Omari were absent.
Ward 6 Councilman Aaron Banks opened the discussion with a quiz on why the audit was completed at such a late date. Mr. Hodges said the city has thirteen months to produce an audit. Mississippi Code Section 21-35-31 states:
(1) The governing authority of every municipality in the state shall have the municipal books audited annually, before the close of the next succeeding fiscal year, in accordance with procedures and reporting requirements prescribed by the State Auditor. The municipality shall pay for the audit or report out of its general fund....
However, the law provides a loophole even the most mismanaged of cities can drive through:
If upon examination the State Auditor determines that a municipality has not initiated efforts to comply with the requirements of subsection (1),
The "initiated efforts" standard is quite vague. What constitutes "initiated efforts"? Hiring an auditor? Reviewing the books? Although the Mississippi Code sets a deadline for completing Jackson's audit, the law has few teeth for enforcement as is the case of so many laws in Mississippi.
Highlights of the preliminary findings are:
* The discussion moved almost immediately into public works after the compliance quiz concluded. The cash flow from operating activities was -$1.4 million. Non-cash financing activities were $2.2 million. The change in cash was -$17.6 million. Huge losses in water and sewer services were expected. However, garbage collection operated at a record $3.8 million deficit. The previous record was the $2.5 million deficit in 2020. Both deficits took place while the city held a moratorium on termination of services for non-payment.
However, those were the cash-flow statements. Mr. Hodges did not mention the operating losses. Such losses were worse, much worse than the cash flow statements. Water and sewer services operated at a $27 million loss (see below) with no Siemen's settlement windfall left to plug the dykes as occurred in 2020. Sanitation services operated at a loss of $5.2 million - more than double the 2020 $2.2 million deficit. Water and sewer services operated at a $10 million loss in 2020. Unfortunately, actually horrifically for Jackson, water revenue shrank by $14.6 million from 2020 to 2021 while operating expenses increased $3 million, proving the moratoriums were indeed a disaster for Jackson finances. Keep in mind depreciation expense was $17 million so if depreciation expense is removed, the operating loss is only $10 million.
* Ward 6 Councilman Aaron Banks noticed the Lumumba Administration transferred millions of dollars to shore up various enterprise funds such as sanitation and garbage and sewer. The Councilman asked Deputy City Attorney Terry Williamson if the Finance Department asked his office if the transfers were legal without Council approval. Mr. Williamson said he would have to investigate the matter. Deputy Director of Administration Sharon of the Clan of Thames said some transfers were submitted to the Council. She said "we don't know what some moves are until the end of the year. The transfers are posted below.
Ward 1 Councilman Ashby Foote inquired about the transfer of $6.5 million from the general fund to non-major special ervnue funds. The transfers included $4.8 million for the Jackson Zoo. (KF: The city probably had to spend a large sum of money bringing the zoo up to USDA standards as it applied for a license. All those years of shorting zoo budget requests and deferred maintenance caught up with Jackson.).
* The city is apparently lousy at financial housekeeping. Mr. Hodges said there were numerous adjustments between the end of the fiscal year and the issuance of the audit. The reconciliation of bank accounts took place "well after the end of the year. There was no arruance what you are looking at is accurate," said the auditor. Investment accounts and accounts receivables were not properly and timely reconciled as well. The estimated uncollectible portion of accounts receivables was not adjusted during the year to a reasonable amount.
Mr. Foote asked why there was an issue in reconciling payroll. Mr. Hodges said the main issue was adjusting the liabilities account. He said employees were properly paid but the payroll liabilities were not properly tracked. "If you're not performing procedures in a timely manner, you're not detecting errors and don't catch it until the audit is complete," he said. (Note 7)
* The lack of financial accountability extended to the police department. Seized and forfeited assets were neither reconciled nor were they tracked to court cases. There was no record of whether cash should be returned to the owner or provided to the police. $2.7 million was not tracked. The city is probably missing revenue due to the lack of tracking. The auditor made the same finding in the 2020 report yet apparently the city did not address the issue. (Note 8)
* The auditor complained tower leases and their expiration were not tracked in 2020 and were not tracked again in 2021. Chief Financial Officer Fidelis Malembeka, Jr said his department was working with the IT department to create such a tracking system. (Note 10)
* The failure to track invoices and bills led to embarrassing moments such as the repossession of desperately needed sewer bypass pumps. Bills of "significant amounts" were not paid until well after the end of the year. The discussion quickly evolved into one covering the failure of the city to timely pay vendors across the board. Even Mr. Hodges admitted under questioning from Mr. Hartley that he was not paid within 45 days "but I'm getting paid." He said he sometimes had to call up the Finance department to get paid.
Mr. Malembeka said the invoices were supposed to be tracked in public works. Mr. Banks asked when the City Attorney became aware invoices were not paid. Ms. Martin said she does not get a notice when a bill is past due until the vendor is ready to sue and notifies her office. Upon such notice, she contracts the appropriate department to get paid (50:00).
Ms. Thames said the administration is training departments on how to track invoices. Public Works received the first such training several weeks ago. Training is scheduled for the other departments.
The audit (note 12) says the city did not obtain competitive bids for the pumps and their use continued well past the "initial emergencies." The city's emergency purchase procedures do not specify a time-limit for the exception to the purchasing laws.
* One JPD officer was paid for working 21 hours a day, obviously a physical impossibility.
* Unclaimed funds and paychecks were not properly handled. 1,500 old checks were not transferred to the State Treasurer as required by law.
* Minutes were not probably approved and transmitted to the public. The failure to approve minutes was the subject of a lawsuit filed by the Mayor last year.
* The city did not bid out its bank accounts every two years as required by law. Banks paid little or no interest on several accounts, below the contract interest rate.
The discussion returned to the subject of accountability. Mr. Hodges said he could not start working on the audit because the Jackson Municipal Airport Authority, Jackson Redevelopment Authority, and Convention Center did not submit their audits until after September 2022, a full year after the close of the 2021 fiscal year. The Convention Center did not submit its audit until last December. He said his firm should have received the first draft of the audit in December 2021 instead of a year later.
The city provided statements to the auditor that were frequently in error as page after page drowned in the red ink of corrections. A frustrated auditor lectured the Council: "We should not have to tell the city you have to do this. We should not be having to change 2/3 of the numbers on every page as we do. I can assure you you'd be appalled at the number of corrections."
The subject of changing auditors arose as Mr. Banks placed issuing an RFP for an audit firm on the agenda. Mr. Hodges said "you can change auditors every year but all it's going ot do is make your bill go up. The first year is always the worst. You're already behind and that's going to put you several more months behind."
49 comments:
This is not a problem, just bill each citizen living in Jackson for their pro rata share. Where did the money come from that was obviously overspent? Surely the workers at water/sewer and trash pick up were paid.
“The city is apparently lousy at financial housekeeping.” Yes, and everything else a city is supposed to do for its citizens!
The City "let's get new auditors"
What a nightmare-
None of this is surprising. Jackson is a sinking ship. The rats are eating all they can before they have to jump overboard.
Wow...all that red ink. It will take a decade to recover from the Lumumba incompetence.
The state is going to have to take it over
Pretend leaders pretending to have a pretend government staffed with pretend employees.
What do you expect with a McDonald's executive Malembeka and Allegedly high school GED Sharon Thames running things?
And the Mayor will get re-elected with 75% of the vote.
A million dollars here, a million dollars there, and pretty soon we are talking real money, right?
@ 12:53 It will take a long time before a recovery effort can start. Chokwe will get re-elected with 70% of the vote. It doesn't matter how bad it gets as long as they are in charge.
Why isn't the City Council raising hell about this? They are elected officials representing their constituents. The audit is an indictment of every City responsibility. If the State Auditor doesn't have authority to investigate, who does? There is no end to this shit-show other than bankruptcy.
The vendors had to get paid, the employees obviously got paid. Where did the money come from for these payments? I do not understand “voodoo” economics. Here is an idea, Quit paying the mayor and members of his family. Quit paying the council members. Run an audit on each of these people.
And yet the COJ is still wiping the past due accounts off; except if you are an honest taxpayer struggling on fixed income, working 2-3 jobs then you must pay for the others. Mayor has the nerve to start SOS with only RDI as he stated in a press release. I am so over this & donated many times to the people needing water. Never again as long as they support this mayor. Fool me once shame on you, fool me twice shame on me. Our mothers told us this. Good luck Jackson the ball is in your court Ted! March, protest& get on every news show He wants as MS people have his number & are through!
And the Mayor will get re-elected with 75% of the vote.
Nope.
So rather than face the hard work of solving the many, many problems the audit revealed, Mr. Banks wants to hire a different auditor.
You don't like the message? Kill the messenger.
Tann Brown & Russ is a solid accounting firm. Maybe Mr. Banks doesn't like their color.
Wow, Banks' solution to the ineptness of the City employing people lacking the skills to make very basic accounting entries is to change the audit firm? I never realized he was that damn ignorant.
@1:39 Thoughts and prayers to that audit team... they couldn't pay me enough to work on that engagement! I can only imagine what the first draft of those financials looked like... the City should be thankful that TB&R is willing to put up with their nonsense instead of complaining about the fees or self-inflicted delays.
Free the funds!
Free the land! Free the water! Free the garbage! Free the ledgers! Free at last, free at last!
Banks is really woke-
This is great news. Total financial collapse is our best bet at getting the incompetent morons out and a receiver taking over.
Audit Finding: "The City of Jackson is insolvent."
Once the city elects a mayor that will hire competent staff, how long will it take to clean up this mess?
STOKES FOR MAYOR !! ! ! !
They you read that there is a leak at the old Colonial Country Club spewing 5 MILLION gallons of treated water a day, and they've known about it since 2016. But it's "racism."
That was the year Hillary was preparing to board her private campaign jet to fly to Jackson to campaign on a false report of "lead" in water, a la the Flint MI 400,000,000 dollars ambulance chaser settlement, again, blaming this incompetence on white folks.
There is another leak spewing water 30 feet in the air, with over a million gallons a day gone.
That's 1/3 the need of Jackson and they've blown this off for 6 years, after 25 years of black leadership. But, the Biden EPA says it's "racism."
No, it's incompetence at basic government, or fraud. Yet, we have ongoing lawsuit by black plaintiff's attorneys over "lead' but not over incompetence and neglect. It's black racism and race card playing, while their own people suffer needlessly.
"Mayor Chokwe Antar Lumumba and Chief of Staff Dr. Safiya Omari were absent."
Also known as willful blindness. They don't need to listen to a bunch of racist math.
The people who are supposed to run the city kick everyone in the teeth who tries to help. Avoiding criticism seems to be the only thing that matters.
The people deserve better, and should demand better from their leaders. Until they do so, nothing will change for the better.
The Council and Mayor deserve each other.
@12:57 wins. He/she is 100% correct.
This is deeply discouraging. And what’s equally as bad are the people solely blaming city leadership. Sure city leadership deserves the bulk of the blame but in 2021, the city of Jackson reported a whopping 17% voter turnout. That’s 19,000 votes of 111,000 registered voters.
Kingfish: It's high time you put all this Jackson shit to rest and move on to things of interest to your readers. Who wants to watch two or three years of a failed city circling the toilet bowl?
This repetitive crap about water, floating turds, garbage, marches and incompetence is boring, discouraging, depressing, maddening, upsetting and embarrassing for those of us who grew up loving and valuing our capital city.
You are accomplishing nothing, nada, zero by harping on this crap day in and day out.
If I were that firm, I'd be sending a Client Termination letters stat. The fees they charge for that engagement isn't worth that headache.
At what point is blatant incompetence considered criminal if you can’t/won’t do your job? No mention of embezzlement, but is that part of the problem? Jackson seems to be in the red in every area.
Stokes wants to die proud of his efforts for Jackson. He will not support Lil Choke for mayor. We should push him to help select next mayor.
Hope his wife recovers quickly.
I have no words. Seriously. Tantamount to watching a loved one die in a hospital bed with no chance of recovery.
All these memories are dissolving. Shame on all the racists who perpetuated this.
This just goes to show there's not a single competent person working at city hall. Others have said as much, but it bears repeating.
Attn family people, we still have property for sale in the city of Madison and in Ridgeland north west of the interstate and north of I 55 of the interstate. If you still choose to live in “Northeast Jackson”, don’t let your ego affect your “Jackson Country Club” ego.
Not only is “Don Drake” stupid, he is also very crude. Who ever the egotistical idiot he is.
If there was a documentary about Jackistan's water system it would be called "Wack-a-mole."
I am so glad Judge Reeves issued his Order today holding the City and state accountable for their parts in letting our water get to this level.
Is there any nice property for sale in northeast Jackson at a reasonable price?
That is only $3000.00 per hour 24 hour a day 365 days a year. Who cares?
“This just goes to show there's not a single competent person working at city hall.”
And who are they going to hire that is competent that would actually want to work for this s$$tshow of an administration?
"A frustrated auditor lectured the Council: 'We should not have to tell the city you have to do this. We should not be having to change 2/3 of the numbers on every page as we do.'"
Folks, this is the capitol city of one of the United States of America.
A glimpse of The New Republik of Jackson.
The financial situation is why I do not buy any bonds that have to be paid by COJ.
I guess most of you don't read the actual audit.
The losses you are focusing on are directly related to the water system failure and the city council's haggling over the garbage contract.
IF the entire governmental system had worked in concert and adequately funded city services, accounting errors would be reduced as well as losses avoided.
A happy marriage is cheaper than an ugly divorce people!
This is politics at its worse and you are feeding the beast!
Melvin Priester tried to tell you...we keep losing our sane and smart in government as you make their lives Hell on Earth!
@9:19 AM, the RFP for the garbage contract was in October 2021, four months after the FYE Audit date of 06/30/21. And the water system failure you mention was the result of not making people pay their bills!
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