State report documents recordkeeping deficiencies for town of Sidney

By David Slone

INDIANAPOLIS — After a thorough review of the records and finances for the town of Sidney from Jan. 1, 2018, to Dec. 31, 2021, the Indiana State Board of Accounts released its findings in April.

Issues pointed out by the SBOA include that the town lacked any internal controls, poor record keeping and not all documentation was provided to the state that was required.

To review the reports on Sidney in full click here.

According to the supplemental compliance report of the town of Sidney from the SBOA, only a minimal amount of claims for the years of 2018 and 2019 were presented for audit. Three to five folders were presented to the field examiner for review of claims paid for 2018 and 2019. No organization was discovered in the folders. “There were claims paid in years prior to 2018, no claims paid during 2018 and haphazard minimal claims paid during 2019,” the report states.

The report later states that numerous claims, bills and invoices were paid late during the period of January 2018 through April 2020, indicating that claims may have been paid in 2018, but no records of them were kept or kept well.

Most of the claims found for 2019 were claims that included late fees and finance charges due to late payment. Some invoices were paid as much as nine months late. Due to not paying bills timely, the town was assessed and paid late fees and finance charges totaling $458. In addition, the town also was assessed and paid an early termination fee of $260 for phone and internet services from Frontier.

Officials and employees have the duty to pay claims and remit taxes in a timely fashion, the ISBOA report indicates. Failure to pay claims or remit taxes in a timely manner could be an indicator of serious financial problems, which should be investigated by the unit (town).

“Additionally, officials and employees have a responsibility to perform duties in a manner which would not result in any unreasonable fees being assessed against the unit. Any penalties, interest or other charges paid by the unit may be the personal obligation of the responsible official or employee,” the report states.

The accounts payable vouchers, invoices and other supporting documentation for claims paid during those two years were kept in an outside storage unit that was damaged by weather and animals destroyed most of the documentation, the ISBOA report states.

The town did not withhold federal or state taxes from salaries and wages paid to officers and employees during 2018. The town did not report the compensation of officers and employees to the Internal Revenue Service (IRS) or the state of Indiana. Instead, the report states, the town reported those wages only to the IRS on a tax form.

In regards to salary ordinances, the report states that the only ordinance presented for audit for 2018-20 was for 2014, which contained a provision that salaries set therein “… shall be effective beginning Jan. 1, 2014, and each year thereafter until such time as amended by subsequent ordinance.”

The salary ordinance in effect included only the elected officials and included only the base amount paid from the town’s general fund. Amounts paid from the wastewater utility operating fund and additional compensation for services paid pursuant to the Indiana code were not included in the salary ordinance.

Total compensation paid for 2018-20 exceeded the amount included in the salary ordinance by $13,320; $11,670; and $2,530, respectively.

Both the town and wastewater utility paid sales tax on various purchases, including material amounts included on purchased electricity for street lights and power for the wastewater lift stations. Sales taxes that are paid on qualifying purchases by the unit may be the personal obligation of the responsible official or employee.

Under a section titled “Bank Account Reconciliations,” the ISBOA report states that the combined bank account reconciliations for Dec. 31, 2018, could not be located or was not completed. The timeliness of the handwritten bank reconciliations during 2018 through 2019 could not be determined. Bank reconciliations were not prepared for any months during 2020. Bank reconciliations were completed during 2021, but contained unidentified variances each month. Based on the ISBOA-prepared reconciliations during the audit period, the total bank account balances and record balances reconciled on Dec. 31, 2018, and Dec. 31, 2019, but at Dec. 31, 2020, and Dec. 31, 2020, there was an unidentified variance of $490, with the record balance being short of the bank balances.

Indiana code requires that all local investment officers “shall” reconcile at least monthly the balance of public funds, as disclosed by the records of the local officers, with the balance statements provided by the respective depositories.

There also were deficiencies in the internal control system of the town related to financial transactions and reporting.

No bank reconciliations were presented for 2018-20. Bank reconciliations were completed for 2021, but contained an “unidentified error.” There was no oversight, review or approval process to ensure that a bank reconciliation was performed.

The clerk-treasurer was responsible for issuing receipts for funds collected, preparing daily deposits for the bank accounts, taking the deposits to the bank and entering receipts into the accounting software system. There were no internal controls in place.

Disbursements were paid prior to the town council’s approval. The clerk-treasurer was responsible for processing vendor and payroll checks, signing checks and inputting disbursements into the accounting software. There were no internal controls in place.

Funds for items like payroll and bills can’t be released until the council signs the claims docket and releases the funds. In that way, the council serves as oversight of the funds to make sure there’s no impropriety.

The clerk-treasurer entered and submitted the financial information for the town into the Indiana Gateway for Government Units financial reporting system, which was the source for the annual financial report and financial statements. There was no evidence of internal control to ensure the accuracy of the information entered.

Financial and other information are required to be entered annually into the Annual Financial Report (AFR) via Gateway. During the audit period, the following noncompliance was noted with the AFR:

• The AFRs for 2020-21 were filed 46 and 29 days late, respectively.

• The detailed fund receipt and disbursement information entered into Gateway was incorrect. The 2020-21 bond principal and interest payments were incorrectly classified.

• The leases and debt information entered into Gateway were not accurate. The ending principal balance and principal and interest due within one year were overstated by $15,000 and $305,438, respectively.

• The investment fund statement was not submitted in the AFR transmission for 2018 or 2019.

Every month, the bank reconcilements, approved town council minutes and the funds ledger summarizing total receipts, disbursements and balances by funds are required to be uploaded monthly to the state. Annual upload requirements include the year-end bank statement, year-end outstanding checklist, year-end investments, detail of receipt activity, detail of disbursement activity, current year salary ordinance and an annual vendor history report.

The town failed to upload any of the monthly and annual files on Gateway for 2018 through 2021, until December 2022.

A capital assets plan indicates what a town has and sets a threshold for those assets. Sidney does not have a capital assets policy, does not maintain a detailed listing of its assets nor does the town keep track of additions or subtractions.

The town certified on Gateway that internal control standards have been adopted for 2018 through 2020. The town did not adopt internal control standards until July 12, 2021, according to the ISBOA report.

The monthly revenue bond ordinance transfers required from wastewater operating to wastewater bond and interest during 2019 and 2020 totaling $19,847 and $19,584, respectively, were not made and only $9,563 of the $19,322 required transfers were made during 2021.

There were deficiencies in the internal control system of the town related to financial transactions and reporting, the report states.

Clerk-treasurers since Jan. 1, 2018, were Lana Wolfe from Jan. 1, 2018, to Jan. 22, 2020; Etta Hurd, Jan. 23, 2020, to Feb. 24, 2020; Lyda Neal, Feb. 25, 2020, to May 25, 2020; and Lisa Parrett, May 25, 2020, to Dec. 31, 2023.

Town Council presidents were Jack Wolfe, from Jan. 1, 2018, to March 15, 2020, and Sharon Rancourt from March 16, 2020, to Dec. 31, 2023.

Lana and Jack Wolfe are wife and husband, and Lisa Parrett is the mother to current councilman Gavin Parrett.

Lisa Parrett and Rancourt have filed for re-election this year, as has Councilman Brandon Allen, and Wolfe has filed for town council again.

The report states that its contents were discussed on March 16, 2023, with Lisa Parrett, Allen and Gavin Parrett and Rancourt. The contents were discussed on March 20, 2023, with Neal.