Audit finds City of Benton Harbor $6 million in debt

By: Brandon Lewis Email
By: Brandon Lewis Email

Emergency Financial Manager Joe Harris said Monday's audit presentation to the commission was the first in the city's history. It outlined the debt and 15 deficiencies in financial management. One effect of a deficiency resulted in "out of control spending."

The commissioner's meeting began contentious as Mayor Wilce Cooke and two other commissioner voted against allowing Harris' presentation. They argue Harris did not follow proper procedure to make a presentation during a commissioner's meeting.

Five others voted in favor of hearing the audit and the auditor was allowed to present. Harris said if the commissioners did not vote in favor he would have held the presentation at 200 Paw Paw.

Accountants found the city is $6,082,509 in debt. They also were unable to find data on infrastructure projects beginning after fiscal year 2002, while the most accountants generally require data from 1980 to present.

"The problem is that the finance director was well entrenched. The city manager did not have a plan, had a 62 point plan that did not address the cost of government, which is significant, so in my opinion there needed to be a change," said Harris.

The report left some commissioners wondering how did the problem get to be so bad? Commissioner Duane Seats who voted against allowing the accountant's presentation ended up thanking him for providing the numbers.

Auditors criticized the city in 15 areas:

  • Bank reconciliations were not completed monthly. Instead they were completed in December by a third party, without internal review.

  • Voucher packets were difficult to find and missing authorization because there were no accounting procedures in place.

  • Tax money put in a trust account and then distributed, which is illegal under Michigan Law.

  • Computer equipment containing city records is in an unsecured maintenance closet.

  • Computer records are not backed up on site or off site

  • Fee structure is inconsistent or unavailable

  • Over and under-reimbursement for city employee mileage.

  • Unknown petty cash amount and location

  • Some employee time sheets were not signed or approved

  • Water and sewer billings have not been paid, but are not on delinquency

  • Water and sewer rates are not being reviewed and set annually, in accordance with bond covenants.

  • Lack of financial orientation by City Commission. "Budgets, while created, were not effectively used as no comparative financial information was available. Constraints were not in place to prevent overspending and no acceptable long term recovery plan was in place and followed."

  • Accounting and finance "positions did not exist, were filled by persons without the required knowledge and skills, and operated without reference to required policies and procedures."

  • Lack of accounting policies and procedures in writing.

  • No periodic financial reports from treasurer or clerk

All of the findings were responded to by the city with a plan to reform.

Harris said he will begin providing commissioners with monthly updates beginning in April. He will hold a town hall meeting later this month to discuss the city's finances with residents.

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