13 findings corrected; operating losses & fund deficit remain
The Tennessee Comptroller of the Treasury has released the Fiscal Year 2016/17 audit report of the Public Building Authority (PBA), which owns and operates the Manchester-Coffee County Conference Center (MCCCC).
The audit report shows that 13 findings of previous audits have been corrected, and five previous findings continue to exist.
A finding is a significant issue found during an audit.
MCCCC was built in 2002, with taxpayers in Coffee County (including those who live in Tullahoma) and Manchester splitting the cost for the project equally.
The building cost $3.5 million, and more than $1.5 million is still owed. The two entities also equally share operating losses, which topped $500,000 last year.
Two 2017 findings in this year’s audit are related to the operating loss and the fund deficit.
During the 2016/17 fiscal year, the conference center suffered a net operating loss of $505,975.
The auditors’ recommendation is that “care should be taken to ensure the conference center operates at a break-even point in the future.”
PBA board members have responded that “priority measures with accountability requirements have been implemented to work within budget and decrease net losses.”
To correct the fund deficit, auditors recommend that “efforts need to be made by the board to create a positive balance at the conference center. PBA’s response is that “strategies are being implemented to bring the fund balance to a positive position.”
Patricia Pinegar, chairperson of PBA, credited General Manager Rebecca French with improvements at the center.
“Rebecca has worked fiercely on cleaning up previous audit findings,” Pinegar said. “She has moved our audit position from an adverse result to an unmodified result in 12 months, with no findings considered material weaknesses.”
French has implemented policies and procedures resulting in cleanup and removal of 13 pre-existing audit violations, according to Pinegar. The bookkeeping and recordkeeping have also improved, she added.
“As part of a three-year fiscal cleanup projection, we are at year 1.5, and we still have work to do on all aspects of the budget,” Pinegar said. “Rebecca has shown commitment to making those changes through her actions and some tough decisions. We appreciate the communication, feedback, positive comments and support we have received at the conference center and look forward to continuing these relationships in working with (Manchester) city, (Coffee) county and the community.”
Current fiscal year
With the operating losses increasing: $301,329, $407,178 and $505,975 for 2014/15, 2015/16 and 2016/17, respectively, Coffee County officials have expressed concerns about the financial situation at the center. They have stated their hope to see the conference center losses decreased during the current fiscal year.
French has requested $280,000 from Coffee County and Manchester to cover projected losses this fiscal year. With the two funding bodies equally splitting the losses, the county’s share of this year’s projected losses would be $140,000, if losses don’t exceed the projected number.
During their meeting on Tuesday, members of Coffee County Budget and Finance Committee asked Coffee County Director of Accounts and Budgets Marianna Edinger about the losses during the 2017/2018 fiscal year.
Edinger said she was not aware of the amount of losses so far this year, and added she will present those numbers to budget and finance members during their next meeting.
Significant deficiencies in internal control were disclosed by the audit, but no findings were considered to be material weaknesses.
Fund deficit and operating losses
This year’s findings include the fund deficit and net operating loss of $505,975. The recommendation of the auditors is that measures be taken to ensure the conference center operates at a break-even point in the future.
Segregation of duties
The review of the overall controls of the accounting system found several areas where proper segregation of duties might be obtained.
Three-day banking law
The audit revealed that deposits are not always made within three days of receipt.
The audit identified bank accounts that only require one signature to withdraw funds.
The auditors noted that actual expenditures exceeded the amount appropriated in the budget in the general fund.
Controls over disbursements
PBA’s files did not include adequate supporting documentation for some disbursements which were selected for testing.
The following findings from previous years have been corrected, according to the audit.
Bank reconciliations: In prior years, the audit had found instances of bank accounts not being reconciled on a timely basis.
Journal entries: Testing revealed a lack of controls over the journal entry process and supporting documentation was not made available during testing.
Checks not voided properly: Testing revealed instances of checks not properly voided in previous years.
Bank account transfers: Auditors were previously unable to establish completeness of transfers between PBA’s bank accounts.
Cash withdrawals: Testing in prior years revealed instances of cash withdrawals from PBA’s bank accounts.
Sales tax and liquor tax returns: Instances were noted where sales tax returns and liquor sales tax returns appeared to be inaccurately prepared.
Receipts: During testing in prior fiscal years, some receipt carbons were not intact in the receipt book.
Payroll controls: Auditors noted instances of timecards not being signed by the supervisor or employee.
Bonuses: Testing revealed that bonus amounts were not paid as approved per the proposed holiday bonus structure.
Failure to establish and follow policies regarding credit cards: Previously, auditors’ testing indicated a significant lack of oversight related to credit card charges.
Supplemental pay: Previously, testing revealed 26 instances of supplemental pay totaling at least $3,600.
Surplus fixed assets: Auditors were unable to verify board approval for fixed assets that were deemed as surplus during the fiscal year.
1099 forms: Previously, testing showed form 1099 is not being issued for required service providers.
The audit report was prepared by Bean, Rhoton & Kelley, PLLC.
Elena Cawley may be reached by email at firstname.lastname@example.org.