Hoover’s chief financial officer on Monday night sought to allay concerns about the city’s financial health following a troubling forensic audit released in August.
The audit found no evidence of financial fraud, fraud, or asset misappropriation, but did include false financial reporting, deletion and destruction of financial records, unbalanced transactions, unreconciled accounts, IRS fines, and loss of experience and skills. A number of problems at the Ministry of Finance were exposed, including the lack of. , training and communication.
Some citizens expressed alarm at the findings, demanding answers from city officials about the city’s current and future financial situation and even calling for an external investigation by state officials.
Jennifer Cornett, Hoover’s chief financial officer, took office in January and called for an outside audit, but on Monday night she submitted a report to the Hoover City Council and the public, stating that many of the audit’s findings were not clear to her. He said it was not surprising. And the city has already begun corrective measures to resolve the problem. He also emphasized that the city is not hiding anything.
“The city is committed to transparency, accountability and responsible government,” Cornett said. “The city is actively addressing these issues.”
While it is true that the city’s general fund balance was overstated by $36 million in unaudited financial reports for fiscal years 2022 and 2023, there was no indication that it was underfunded, Cornett said.
Instead, large transfers to capital projects were not recorded as committed funds in the financial statements, leaving balances inaccurate and inflated, Cornett said.
“Corrective action was taken to resolve this issue upon publication of the audited financial statements,” she said.
There have also been errors in recording regular general journal entries, accrual entries, and auditor adjustments over the past few years, many of which have resulted in the need for additional training and increased staffing levels in the finance department. Cornett said.
“These issues will be addressed in the future through training, monitoring, self-checks and adjustments,” she said. “Therefore, from now on, a system of self-review and quality control will be put in place to ensure the reliability of interim financial statements.”
Deleted and Destroyed Records
Both electronic and paper files were destroyed or removed from the offices of the former City Administrator and the former Chief Financial Officer and Treasurer, while the City’s financial staff was With the help of our legal team, we were able to: Cornett said permanent financial files would need to be recreated.
Although some documents could not be recovered, “no supporting documents or evidence related to financial transactions were removed,” she said. “We do not believe any mission-critical information was lost in the process.”
In addition, the city has reported deleted, lost and destroyed files to the state attorney general’s office and increased the frequency and retention period of backup files, Cornett said.
The Treasury Department is understaffed compared to cities of similar size in Alabama, but Cornett said steps are being taken to improve that. Two former employees were brought in to help clarify the financial situation: retired Chief Financial Officer Robert Yeager and former division director of general ledger and payroll Melissa Woods. He returned from retirement and was appointed as a full-time employee. A temporary employee has filled the new Senior Financial Analyst position.
“She will be a great help in training new and existing employees on the city’s historical best practices,” Cornett said.
Additionally, payroll experts from companies associated with the city auditor provide on-site review, guidance and training on the payroll process and assist in the development of written payroll policies and procedures, Cornett said. Ta.
Since the external audit was completed, the Hoover City Council has approved a total of four new positions in the Finance Department, and the City Council on Monday night approved $55,000 to convert conference room space into offices for three of the positions. did.
Cornett said the city’s treasurer gathered fiscal policies and procedures from neighboring cities as a starting point for developing the city’s own formal, written policies and procedures.
He said care will be taken to ensure the city incorporates existing policies related to debt, investment, general fund balances and budget stabilization. He said there was already a significant amount of work being done on subsidies and pay policies.
Cornett said the transition to the city’s new accounting and software systems under the previous chief financial officer did not go smoothly, leaving some people overpaid and others underpaid. , which led to incorrect W-2 reports to the Internal Revenue Service.
“Since its introduction, payroll professionals have worked tirelessly to resolve payroll issues related to employee pay inaccuracies,” she said. Currently, “payroll is on time and accurate.”
A software trainer came in in August to assess the situation, but no immediate solution was reached, Cornett said. “We are currently evaluating our options,” she said.
The city has already paid $78,000 in fines to the IRS for false and late reporting, and has hired an auditing firm on behalf of the city to correct discrepancies in the city’s reports to the IRS. She said she hired the department.
Additionally, the city properly adjusted its financial accounts in the second quarter of this year and now has a documented process for future adjustments, Cornett said.
He said some of the Treasury issues are expected to be resolved by the end of March, while others are expected to be resolved by the end of June.
Despite the problems, Cornett said, “The city is currently in a good financial position and has ample reserves of cash and investments.”
Cornett also said that at a September Investment Committee meeting, the city’s financial advisor told city officials that the city’s bond rating of “AAA” remained safe.
“My team and I, along with the Mayor, City Council, and other city officials, take our responsibilities seriously and collect public funds, and we are committed to being faithful stewards of your funds. I want to prove it,” she said. “We are committed to addressing all concerns found in the report and will provide quarterly updates until all remaining issues are resolved.”
Several City Council members expressed appreciation for Cornett’s report and his efforts to review the city’s finances before submitting a formal financial report to the City Council. Councilman Kurt Posey, chairman of the city’s finance committee, said Cornett kept the council updated on the situation along the way.
