The internal procedures of several departments within Pine Bluff city government were identified for further analysis by accounting firm BKD CPAs & Advisors as part of a risk assessment it conducted at the request of the city council.
Aldermen Bill Brumett, Steven Mays, George Stepps and Thelma Walker and Mayor Debe Hollingsworth were briefed Wednesday by BKD partner Andy Richards on the assessment’s conclusions.
“The goal of this assessment was to identify areas that city employees think are potential concerns,” Richards said at the beginning of the meeting. “Last July a team consisting of me and BKD partner Cindy Boyle met with 25 city employees in 12 municipal departments and based on those conversations, we identified the areas that they believed pose a high financial or fraud risk to the city.”
Mays expressed initial concern over the brevity of the six page report.
“This is taxpayer money being used and we authorized $10,000 to handle this,” Mays said. “I just want to make sure that the money is being used wisely. Based on the price, I thought that we would get more than six pages.”
Mays later said he was satisfied that the people’s business was being conducted through the completion of the risk assessment.
The risk assessment cost the city $8,520 out of the authorized $10,000 total.
Walker said it had been her understanding that a forensic audit had been conducted.
Hollingsworth said that the risk assessment is a first step.
“This will point us in the right direction as to whether a forensic audit is needed,” Hollingsworth said. “The people who prepared this report are experts at risk assessment. They know which questions to ask to get a financial overview that is a good indication of whether there are areas of concern.”
Richards agreed with Hollingsworth’s explanation.
“This is typical of developing an internal audit plan,” Richards said. “It should identify concerns that exist.”
Richards identified the Community Development Department and Finance Department as being in particular need of further review.
“Community Development needs to be looked at regarding the procurement process,” Richards said. “In speaking with employees, we identified several areas where the potential for financial or fraud risks is present. There is the possibility that purchased equipment could be misappropriated. In the previous administration, there were issues with noncompliance with grant rules and regulations. Problems with a lack of supporting documentation on projects and with rules regarding the purchasing and bidding process not being consistently followed were also identified.”
Richards said that a review of the finance department turned up several items of concern.
“We identified a lack of review of additions or changes to vendors before they are changed in the system as well as a lack of periodic review,” Richards said. “Potential exists for abuse without this review. We also identified the commingling of grant and other project funds and a lack of formal budgetary process and procedures.”
Richards said that the establishment of bank accounts using the city’s taxpayer identification number without appropriate levels of approval was also identified.
“Actually I spoke with City Treasurer Greg Gustek the second week I was in office and asked him to create a list of all city accounts including dormant accounts,” Hollingsworth said. “He identified four or five accounts that apparently had been set up a long time ago to hold money from fundraisers. He closed these dormant accounts.”
Richards said that in conversations with representatives of the Pine Bluff Police Department, it became clear that concerns existed over the potential for the theft of fuel and ammunition.
“They said that inventory items like ammunition can be stolen and that fuel is also susceptible to theft,” Richards said. “It is a matter of putting the proper controls in place.”
Richards said that the Human Resources Department was identified as being in need of a clear separation of duties by employees and that a consistent hiring process must be followed for all city employees.
It was agreed that the council would evaluate the results of the risk assessment in conjunction with the Mayor’s Office prior to committing to any additional projects with BKD.