Positive financial reports and internal control deficiencies found in in Alamo Audit

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The Tennessee Comptroller of the Treasury released the annual audit for the Town of Alamo on February 25 reflecting a positive financial report with continued internal control concerns similar to the previous year.

The financial overview states that the towns basic financial statements are comprised of government-wide financial statements, fund financial statements, notes to the financial statements and contains required and other supplementary information in addition to the basic financial statements themselves. This allows a broad overview of the towns’ finances.

The government-wide financial analysis states that the net position may serve over time as a useful indicator of a government’s financial position. Alamo assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $14.24 million at the close of the most recent fiscal year. The largest portion of the town’s net position, 56.45 percent, reflects its investment in capital assets including land, buildings, machinery, equipment and infrastructure; less any related debt used to acquire those assets that is still outstanding. Alamo uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Alamo’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the towns’ net position 15.62 percent represents resources that are subject to external restrictions on how they may be used. The remaining balance of net position representing unrestricted net position, 27.93 percent, may be used to meet the towns’ ongoing obligations to citizens and creditors. At the end of the 2020 fiscal year, Alamo is able to report positive balances in all three categories of net position, both for the town as a whole, as well as for its total governmental and total business-type activities.

During the current fiscal year, Alamo’s net position increased by $1.15 million. There was an increase in net position for the year of $609 thousand in the governmental activities including a prior period adjustment of $3 thousand. There was an increase in net position of $539 thousand in the business type activities.

The financial analysis of the government’s funds says the focus is to provide information on near term inflows, outflows and balances of spendable resources, which is useful for assessing financing requirements. In particular, unreserved fun balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Based on the statements and discussion, the overall financial position of the town has improved during the period.

The general fund and general-purpose school fund account for 16.75 percent and 67.74 percent respectively, of governmental fund revenues. Accordingly this discussion will focus on the general fund and general-purpose school fund. General fund balance was $1.20 million at the end of the current fiscal year. $1.20 million of that balance is available to meet the day-to-day needs of the town. The general-purpose school fund balance was $2.81 million at the end of the current fiscal year.

Revenues in the general fund increased in the current year by approximately $39 thousand with the primary reason being due to an increase in federal and state grant funds in the current year.

Revenues in the general-purpose school fund increased from last year by approximately $142 thousand. The most significant changes in revenues in the general-purpose school fund were in state education funds.

The towns’ proprietary fund provides the same type of information found in the government-wide financial statements, but in more detail. Net position of the proprietary fund was $4.62 million with unrestricted net position making up $1.33 million of that total. There was an overall increase in net position for proprietary funds of $539 thousand during the current year.

Alamo made revisions to the original appropriations approved by the board of aldermen or school board. Both general fund and general-purpose school fund had budget amendments.

Actual revenues and other financing sources were over budgeted amounts by $16 thousand in the general fund. Actual revenues and other financing sources were higher than final budgeted amounts by $60 thousand in the general-purpose school fun. Other state revenue funds were budgeted for $16 thousand but $44 thousand in revenues were recognized during the year resulting in over budget of $28 thousand in the general-purpose school fund. Federal and state revenues were under budget by $72 thousand in the general fund.

Expenditures and other financing uses were $182 thousand under budget in the general fund and $412 thousand under budgeted amounts in the general-purpose school fund. Support services were under budget by $175 thousand in the general-purpose school fund. Capital outlay expenses were under budget by $172 thousand in the general school fund and downtown tourism grant expenses were under budget by $36 thousand in the general fund.

There were no other significant variances in revenues, expenditures and other financing sources and uses other than the ones that were detailed.

In terms of capital asset and debt administration, the report states that at the end of fiscal year 2020, Alamo had invested $8.28 million net of accumulated depreciation in a variety of capital assets and infrastructure

The town had total long-term debt outstanding of $240 thousand. The entire amount being comprised of debt backed by the full faith and credit of the town.

Economic factors and next years budget states that the unemployment rate for Alamo is currently 6.8 percent while the states average unemployment rate is 9.6 percent and nationwide unemployment rate is 11.1 percent. These factors were considered in preparing the towns’ budget for the 2021 fiscal year and the town has no plans to incur new debt.

The audit for fiscal year 2020 showed internal control issues concerning competitive bidding.

In 2019, the audit noted the bid process related to the residential and commercial garbage services were improperly handled and that residential garbage rates were allowed to be lowered by a bidder after the sealed bids were opened in a public meeting. It was recommended then that the town adhere to their request for proposals and that no contracts be modified without board approval, especially contracts that have a direct impact on the taxpayers. It further stated that bid information should not be allowed to be changed after the opening of the sealed bids unless all bidders are given an equal opportunity to do so.

At that town, a letter submitted from the town by Mayor John Avery Emison stating that he issued a purchasing policy improvement to city employees which states “effective immediately any modification of a cost schedule or price list that is part of an existing contract with the Town of Alamo, or any other modification of an existing contract, or any new contract, will first be submitted to the Town Attorney (Randy Camp) for review and instructions, prior to any action to approve it.” He said this should correct the error and the policy adopted should prevent any similar occurrence.

The 2020 internal control portion continues to cite issues with the town and competitive bidding practices.

The audit cites improper waiver of competitive bid. They noted that the competitive bid process on the Wi-Fi grant project was waived based on several factors including donated services, not-to-exceed contracts, and the fact that the chosen entity was a non-profit,

A local electric non-profit performed work for the town related to their Wi-Fi project and the town subsequently waived the bid process to award the project directly to them. Mayor Emison and the board documented and agreed to the waiving of the bid process due to several factors documented in the board packet, including multiple reasons that could be considered questionable.

The towns policy’s require that bids for equipment or projects that exceed $10,000 which this project will exceed, resulting in failure to adhere to their own bid requirement policy.

Auditors recommended that the town adhere to their existing competitive bid policies that historically remove doubt as to whether municipalities have obtained the best offer possible for a piece of equipment or in this case a project.

A letter from the town signed by Mayor Emison said, “The Mayor and Board will work to make sure hat competitive bids are taken on items that exceed the $10,000 threshold.

2020 Full Audit found here.

2019 Full Audit found here.

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