The 2019 Town of Alamo audit report submitted to the Tennessee Comptroller of Treasury showed a deficiency in internal control that is considered to be a significant deficiency.
Included are purpose of the audit, explanation of findings and Mayor John Avery Emison’s response to the significant deficiency findings.
The audit, performed by Alexander Thompson Arnold PLLC, states that, “In planning and performing our audit of the financial statements, we considered the Town’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control.
“A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
“Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weakness or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we and the other auditor did not identify any deficiencies in internal control that we consider to be material weaknesses. We and the other auditor did identify a certain deficiency in internal control, described in the accompanying Schedule of Findings and Responses as 2019-01 that we consider to be a significant deficiency.
“As part of obtaining reasonable assurance about whether the Town’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests and those of the other auditors disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are disclosed in the accompanying Schedule of Findings and Responses as 2019-001.
“We noted other matters involving the internal control and its operation that we reported to management of the Town in a separated letter dated March 11, 2020.
“Town of Alamo’s response to the findings identified in our audit are described in the accompanying schedule of findings and responses. The Town’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
“The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.”
The Schedule of Findings and Responses as 2019-01 that was attached to the audit describes improper competitive bid completion (noncompliance). Conditions were noted as “The bid process related to the residential and commercial garbage services was 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.”
The cause states, “There were sealed bids related to the residential and commercial garbage services that were lowered by the eventual winning contractor on invitation of the Mayor, prior to consideration and approval by the Board of Mayor and Aldermen. The Mayor advised the Board of Aldermen of this fact by memo dated April 25, 2019 prior to the board meeting on May 6, 2019 at which time the board approved the contract. The Mayor signed an addendum to the contract on September 4, 2019 that raised the rate for commercial garbage rate carts (not dumpsters) from $13.50, which was the original bid amount, to $18.50.”
Criteria showed that, “The Request for Proposal that was approved by the board stated that any modification to rates shall not be changed during the life of the contract. Also, that all collection prices shall be firm for the four-year period.”
The effect was that, “The city failed to adhere to their Request for Proposal and normal bidding procedures at municipalities as it relates to commercial garbage carts.”
Recommendations by the auditor states, “We recommend that the city 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. Additionally, 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.”
The town’s response to this finding was that, “The mayor obtained a written commitment from the contractor that their pricing on commercial garbage carts would return to $13.50 as provided in the proposal. Furthermore, on February 27, 2020 the mayor 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 for review and instructions, prior to any action to approve it.’ The expectation is that the error is corrected and a policy has been adopted to prevent any similar occurrence.”