EXTRA CONTENT: Reactions mixed after troubling audit report for city of Corbin

To read the city’s 2013 audit, click here.

An audit last week revealed that for the second straight fiscal year, the city of Corbin spent more money than it took in — but officials say measures are now being taken to make sure the same thing doesn’t happen for a third year in a row.

The annual audit report for the city of Corbin was released during a special meeting last week, and the news for city leaders was sobering, showing spending in three government departments considerably over budget and larger than expected losses at The Arena, leading to a net loss for the year despite the fact that the city collected $705,000 more in revenue than it did the year prior.

In the wake of the audit’s release, city commissioner Suzie Razmus said she was “gravely concerned” about the audit and called the spending in some departments “ridiculous.”

Since, she said she has met with Corbin City Manager Marlon Sams to address concerns about the city’s financial direction.

“He gave me some assurances that things were being done to control spending,” Razmus said. “I think we are going to be OK. It’s something we definitely need to stay on top of.”

Sams would not returns calls from The News Journal seeking comment.

Three departments — the Police Department, Fire Department, and Public Works — combined to spend $857,979 over what they were originally budgeted for the 2013 fiscal year. The Police Department was the furthest off plan, starting with a budget of roughly $1.9 million, but ending the fiscal year with $2.287 million in total expenditures — $363,3446 over budget.
Four city departments: General Government, the officer of Building Inspection, Parks and Recreation and the Main Street Program, finished the fiscal year under budget.

Parks and Recreation was actually the most frugal city department, when compared to its original budget, spending $130,000 less than planned.

For the year, the city spent more than $1 million more than it did in the 2012 fiscal year.

During a brief interview following release of the audit, Sams said extra spending could simply be blamed on “other expenses” that came up during the year. The only specific expenditure he gave was the purchase of a garbage truck for $123,899, but it was done through a loan from TCF bank at 3.29 percent interest. Final payment on the loan is due Oct. 23, 2017. Only around $15,000 was paid on the loan during the fiscal year.

Sams said he would explain the extra expenditures last Thursday, but never did so.

“You know how it is. It’s the same way every year,” Sams said. “I’m not going to go on record to say …”

“We are in a good place right now.”

Corbin Mayor Willard McBurney said in an interview last week that much of the cost overruns in the Police Department could be blamed on the necessity of hiring five new police officers. He said paying overtime in the department while the new officers were trained at the police academy was expensive. He also noted the purchase of new police cruisers as a major expense.

McBurney said overtime costs would be greatly curtailed in the future, and projected the Police Department would be held to around $1.5 million in spending in future fiscal years — about $400,000 less than its original 2013 budget.

Salaries and wages in the Police Department are also likely an issue. The City Commission took the unusual step of abruptly issuing a municipal order freezing wages at the Police Department last year because the cost of paying officers was getting out of control. At the time, city leaders said a pay scale was adopted as part of a budget by a prior commission that instituted automatic raises, causing costs in the department to spiral out of control.

Another expense that could also explain a portion of the city’s excess spending involves settlement of litigation with SMG — the Philadephia-based firm that managed The Arena for two years. The city agreed to pay SMG $65,000 to settle claims the company made against it in a lawsuit.

Corbin City Commissioner Bruce Hodge said Tuesday that the audit, and other issues, might embolden him to be more vocal for the rest of his term and into a second term if he is re-elected. To this point, he said he has remained mostly silent at meetings.

“I’m going to start voicing my opinion about a lot of stuff,” Hodge said.

“I’m not in charge of the budget … I do go in there and look at them [financial reports] and ask questions about them, but I don’t know anything other than that. If I was on the budget committee, then I would pay more attention to it. I’m just one guy out of four.”

Hodge, who has been an outspoken critic of The Arena in the past, said a good portion of the city’s financial struggle in 2013 could be blamed on $441,000 in losses at the facility. Both Sams and McBurney admitted The Arena had a bad year in terms of outside revenue, but were optimistic the picture would improve in 2014.

Commissioner Joe Shelton and Ed Tye are on the city’s budget committee. Neither attended the meeting last week when the audit was released.

Wallace Smallwood, a Certified Public Accountant for Cloyd and Associates, the firm that conducted Corbin’s audit, said he is unconcerned at the present time about spending in the 2013 fiscal year. Smallwood presented the audit to city officials last week. He noted that while the city did spend in excess of revenues in 2012, it was only by about $40,000 which he said was negligible.

“I would tell them if I though they had a spending trend that was looking bad. I would bring that to their attention,” Smallwood said.

“If I go in there next year and I do an audit and there’s even $100,000 more spending than what was brought in, I will mention it to them. What they do about it is up to them. They ultimately run the city.”

Routine audits done for municipalities and other local governments typically only attempt to answer a single question — do the financial statements and internal accounting of the entity being audited fairly reflect the financial position of the city, and the transactions that took place during the fiscal year.

Auditors found no irregularities in that regard, but did make note of several “material weaknesses” that could strengthen the city’s accounting practices.

Smallwood said cities can sometimes show deficit spending, or the financial snapshot of a city may look worse at any particular time, because of a delay in receiving grant funds from other government agencies to help pay for projects its funded up front.

The city is already eight months into its current fiscal year. The 2014 fiscal year ends June 31.