BY TRACY LEE TATE
Times Staff Writer
LAKE BUTLER – The audit is complete and was presented to the Lake Butler City Commission at a special workshop on June 29. The document presented by Caleb Perla and Carl Harmon with the firm Powell and Jones and was a combined report for the period from Dec. 31, 2021, to Sept. 30, 2022, covering both the regular required audit and the results of the forensic audit ordered by the city to help determine the figures for overspending on the part of previous City Manager Dale Walker.
Current Interim City Manager Richard Tillis confirmed that the city budget had been overspent by about $1 million, with money pulled from various areas with no budget amendments approved by the commission. In fact, there were numerous major expenditures paid with no apparent discussion or knowledge of the commission.
“While a city manager has some discretion and can move funds within a department to do what is necessary, this spending cannot cause that department to exceed its budget total,” Tillis said. “You cannot exceed the budgeted limit for that department, and you cannot transfer money from one department or fund to another without a budget amendment approved by the board.”
It turns out that some of the money spent incorrectly was income derived from grants – particularly the ARPA funds awarded to the city to assist with recovery from the worst of the COVID-19 pandemic. This was one of several cases where grant funds were placed in the general fund, rather than is separate funds as good accounting practices require.
The two-part ARPA funding totaled about $900,000 and the board had discussed and expressed its desire to use these funds to pay for work, repair and some replacement to the lift stations in the city in preparation for the new wastewater treatment plant planned. No motion or vote was made to use the funds in this way, however, and most of the amount was used to fund the property purchase for a new public works building and work done to prepare the building for use.
Walker even acknowledged the board’s desire to use the funds for lift stations in one of his prepared financial documents but stated that the money was to be used for the other project ahead of the need for the lift station work and then be replaced as needed from other funds.
In the process, the general fund reserve was depleted to below 25% of the required reserve and then was refunded from the wastewater fund, which is now on a less than solid footing. None of this spending or shuffling of money from one fund to another was mentioned to the commission or approved by it.
“The depleted wastewater fund could present a problem in the future as the new wastewater plant will cost more to operate than the current, smaller facility,” Tillis said. “The planned solar field for the new facility may be the saving grace for the city, as it should provide for the plant’s electrical needs about 80-85% of the time (excluding weather conditions). Currently, the city is paying about $10,000-$12,000 a month for electric service and the new plant, being larger and more technologically advanced, would cost about $15,000 to operate at current electric rates without the solar array.”
Thankfully, Tillis reported, the grant funds for the new wastewater plant are safe and untouched as all the plans and grants were secured by city engineers Mittauer and Associates. Walker never had access to these funds as they are being administered by the engineering firm, and the project is set to proceed as originally planned.
The city reserve funds are not in good shape, Tillis said.
“The wastewater and water reserves are below or close to below where they need to be,” Tillis said. “Standard practice is to reserve 25%, or three months, cost of operation for the city in the various funds. This money is held in reserve for emergencies (such as a hurricane), or unforeseen expenses not planned for in the budget. We have to be careful to keep the reserve funds where they need to be to avoid the state noticing and, possibly, stepping in to see what is going on and correcting the problem.”
As for other spending, on the city credit cards, Commissioner Melissa Hendrix had asked the auditors to break the report down by credit card user. The auditors listed unallowable or illegal expenditures for all the cards used by city staff. Almost $14,000 in sales tax was paid for numerous purchases even though the city is not required by law to pay sales tax. There were three instances, totaling about $19,000, where city credit cards were used to purchase alcoholic beverages. There are also many charges tagged as unallowable personal expenditures and travel expenses.
The city is investigating these purchases to determine if the employee benefitted from the charges or if they were simply acting as directed by the city manager. It is suspected that the alcohol purchases were made to provide a bar at meetings hosted by the city at the Lake Butler Community Center, such as a meeting of the Florida League of Cities. Even if this proves to be the case, it could be problematic as the city has rules for the use of the community center stating that no alcoholic beverages be sold, served or consumed on the premises. There are also questions concerning consumption of such beverages at a meeting of public and/or elected officials.
A few dealings also require further investigation or attention, including the “land swap” between the city and Welch’s Automotive that resulted in the city needing to purchase a new public works facility, the expenditure to pay out accumulated sick/leave days for Walker without commission knowledge or approval, and the finding that the city paid for the manager’s rent and provided him with a vehicle and fuel (both used for personal travel as well as city business) with no tax documentation (1099) given to the manager for tax purposes. The tax issue will be handled, by unanimous vote of the commission, by auditors Powell and Jones, but the other matters will require attention as well.
The auditors had several recommendations, many of which were defined as material weaknesses, largely based on how city finances were conducted under the previous city manager but listed as corrected in the current year. These included, improper financial oversight of spending, expenditures over budget with no commission approval, depletion of fund balances, balance sheet reconciliation with adequate financial documentation, unreconciled bank statements (including credit card statements) and lack of adequate emergency funds. Tillis and City Finance Director John Sapp have spent the past several months identifying, addressing and correcting these problems and have largely brought things into line – but this does not include fully straightening out the city’s finances.
“It will take the city at least a decade to recover from all that has been done,” Tillis said. “Budgets will be tight during this time and will have to be strictly adhered to. In a community this size, it can be easy to show disregard for the budget, but it cannot be ignored. Amendments can be made as necessary, but otherwise the budget must be followed as written.”
Currently, Tillis and Sapp are working on the budget for the next fiscal year, which is required to be done by mid-July. Tillis said a big problem is that with the previous disregard and changes to the budget he has no recent guide to go by in preparing the new one. It seems that a previous budget is often used as a template for creating a new one, with new figures filled in based on projected income and expenses for the new budget year. Without this guide the new budget will have to be created “from scratch,” a very lengthy procedure.
Tillis is also addressing a new rate structure for the city utilities, returning to a base fee that covers a minimum usage of water (in the past, the first 2,000 gallons used) rather than billing customers from the first drop used. The schedule created by the previous manager has proved to be something of an issue for many city residents living on a fixed income.
Tillis said he plans on leaving the interim position with the city in the best possible shape but hopes the commission will soon authorize him to advertise for the position. He said he was enjoying his retirement and answered the call for help when it came, but he does not want to resume the position on a permanent basis. He said he hopes to have a couple of months with the new manager, when one is hired, to make sure that they start out with a firm footing in the position.
“I will stay as long as I am needed, but I really hope not to be here past December,” Tillis said. “In a way I have enjoyed being back and am very happy to have been called to fix the mess, but I am going to be 82 soon and this is exhausting. As soon as the right person is found and trained, I look forward to going back to being retired.”
