Audit report raises furor

Published 8:30 am Wednesday, February 14, 2007

By Staff
Council recesses meeting during mayor’s presentation
BELHAVEN — A Town Hall meeting was disruped by shouts and cursing among residents and town officials Monday night as the mayor attempted a scrutiny of the town’s audit report.
The report was submitted to the town council later than usual and in approving the audit by a majority vote, the council also amended the contract to allow for the late report.
Jeff Best, of the accounting firm Pittard, Perry &Crone, Inc., presented to the council the audit, which he said was in good shape.
Mayor Adam O’Neal directed a few questions to the auditor, then stood to make a presentation with use of an overhead projector. Before he got through the first slide, the council attempted to table discussion on the audit and when the mayor refused to recognize the motion and second to that effect, the council then moved to recess the meeting.
Councilman Charles Boyette made the motion to recess. After a quick second by Councilwoman Cynthia Heath, Boyette asked for all in favor to say “aye.” Four council voices called out “aye,” and those members then stood and stepped away from the table.
O’Neal kept at his presentation and was shouted at by some residents in attendance. The mayor asked for order and when he couldn’t restore order, asked an officer to remove a resident from the premises, which caused more commotion and other residents to be escorted out of the building.
During the disorder, Best approached the council and asked if the members needed his services any more that night. Several council members shook his hand and told him he could leave the meeting.
Meanwhile, O’Neal was attempting to review a cost-allocation study in place and compare it to the audited numbers.
O’Neal has been after a conclusive cost-allocation study that would determine how much general-fund expenditures pay for items in enterprise funds such as the electric fund and the water and sewer fund.
Enterprise funds are designed to be self-sustaining and separate from the general fund.
O’Neal says the study that was done in the mid-1990s is not an accurate representation of the budget. Belhaven’s budget, particularly the transferred amounts from enterprise funds to the general fund, has been the subject of debate for many years, involving even the Local Government Commission, a state agency that monitors such activity.
From the 1985 until 1993 the amount transferred from Belhaven’s electric fund into the general fund went from $231,665 to $499,134.
At that time, according to the mayor, the Local Government Commission stepped in and told the town that its transfer line item was too high and that the town should not be supporting its services with revenue from the electric fund. The following year, the transfer line item in the electric fund dropped to $141,602; but another line item appeared in that fiscal year’s budget that did not exist in previous budgets. The electric fund was charged $283,298 for administrative costs, and that amount was reimbursed to the general fund.
This trend continued in slightly different forma over the past decade. While the administrative costs being reimbursed to the general fund have increased, the transfer line item has decreased.
O’Neal has called this reimbursement a “shell game” and has pressed for a new study to be done to justify how much enterprise funds should be charged for goods and services provided by the general fund.
The LGC has voiced its support of a new cost-allocation study, and Town Manager Tim Johnson has agreed a new study was warranted because the one that was in use is a decade old.
During his presentation Monday, O’Neal tried to show what would happen when plugging the audited numbers into the cost-allocation study.
According to O’Neal’s calculations, the two figures don’t match.
The finance department was reimbursed $315,502, the audit shows. Based on that figure and the cost-allocation study — which states the town’s two major enterprise funds should reimburse the department by 65.47 percent — the total budget of the finance department should have been $481,903. But according to the audit, the department budget was actually $353,658, meaning the reimbursement should have been only $231,539 if the cost-allocation study percentage were used.
What was reimbursed and what O’Neal pointed out should have been reimbursed was a difference of $83,962.
O’Neal said in his presentation that not one department in the general fund was reimbursed an amount that matched the cost-allocation study.
In a letter dated June 8, 2006, Johnson wrote to the council and O’Neal a response that addresses, in part, a concern the mayor presented regarding how the reimbursements were calculated.
In an interview Tuesday, O’Neal said the budget should be cut instead of paying for general-fund services out of the utility funds.
The mayor pointed out that the town council approved a 2006-2007 budget that increases the general fund by 28.75 percent.