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State auditors indicate progress being made in correcting Sunnyside's financial problems

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State auditor Kelly Collins speaks to the Sunnyside City Council about the results of the city's accountability audit report, released yesterday.

The audit presented to the Sunnyside City Council at last night's meeting painted a picture of declining financial condition, lack or documentation supporting financial actions and the potential for fraud in the city's finances, but also indicated that the state auditors were satisfied with the city staff's response to the problem.

State auditors Kelly Collins, Kent Zirker and Teresa Hanford presented two reports to the city council, starting with the accountability audit released on Monday.

Hanford noted that the auditors do not look at everything, only high-risk items. They listen to citizen concerns, news items, previous minutes of the council meetings and other areas known to have the potential for abuse. The audit covered both 2010 and 2011.

In most areas, the city was in compliance with state laws and regulations and the city's own policies and procedures. However, three items were significant enough to be listed as findings in the final audit report that was just released to the public yesterday morning.

The dramatic decline in the city's financial condition was the top finding.

"If something isn't done immediately, the current services are going to decline, or loans will have to be taken out to keep things going the way they are going," said Hanford.

She said the cause of the problem, based on discussions with members of city council, was that they weren't receiving timely and accurate reports of the city's financial situation.

The city was already responding to the problem, according to Hanford.

After the meeting, Interim City Manager Frank Sweet said city staff is already responding to the dramatic decline in funding by evaluating what can be cut without major reduction in services to the city.

"If we do nothing, we're in some deep trouble," said Sweet. "But it's a very serious issue and we're making changes as quick as we can."

One way the city is saving money is by delaying the hiring of the vacant finance director and police chief positions until January. A chip-seal application to city streets is also being delayed.

"We're getting $200,000 in savings from not doing the chip-seal and delaying the hirings," said Sweet. "And each department is evaluating their budgets and making as many cuts as possible."

Sweet said the city doesn't know how much they need to save yet.

"We're waiting to look at cost reallocations," he said. "We don't yet know what we are working with."

The second finding was that money from restricted funds was being transferred to the general fund without adequate documentation.

Collins said one of the causes of this problem was turnover in staff. She also said that it's an issue statewide and auditors were looking carefully at restricted funds as resources decline around the state.

Hanford noted that the city was being proactive in dealing with the problem.

The third finding was that the city did not have adequate oversight in financial matters, leaving the city open to financial shenanigans.

"I just want to say right up front that I did not identify any loss or fraud," said Hanford. "But there's definitely an environment that would allow that to occur."

The city's checks were pre-signed with no monitoring of employees paying the bills.

The auditors also found late payments that were incurring extra fees.

The city also did not have a detailed review of payroll. Personnel files were incomplete, employees were being overpaid when they leave the city because they had accrued more leave than allowed by the city.

Hanford complimented Sunnyside human resources/payroll officer Anna Bullock on her progress and cooperation, stating that the city was making improvements even as the audit was conducted.

As the auditors finished presenting the accountability report, Deputy Mayor Don Vlieger asked if the report covered time prior to the hiring of Sweet as interim city manager. Collins answered that it did. Vlieger then asked if the auditors have been getting more cooperation since Sweet was hired. The auditor said they were, but a lot of the previous problems were due to turnover on the staff.

The auditors then presented the results of the financial audit of the city for 2010, which was released in September 2011. Both the financial and federal audits were clean.

Zirker said the next audit would be conducted either early in 2013 or in the fall of 2013.

After the presentation, the council opened the floor to public comments. No one stepped forward.

Councilman Nick Paulakis asked Sweet to tell the public what was being done to address the problems in the audit.

Sweet said that as problems were revealed, the city made changes to address the issues. Specific changes include having the assistant finance director review accounts payable, giving individual departments their own budgets to review and payroll being reviewed before it is issued.

"We're making everyone more aware that these are public dollars and we have to make sure that everything we do is correct," said Sweet. "There's significant changes we're going to make in the future, again, making sure that accountability is there."

He went on to remind the audience that the city staff is paid by residents of the city and is accountable to the residents.

Vleiger spoke up, reminding the audience of the controversy over the hiring of Sweet.

"I didn't want to badmouth anybody," he said. "I still don't, the issue is we said you would understand at some point why we made the change. Well, here you have it in black and white."

Councilwoman Theresa Hancock took issue with Vlieger's statement.

"I don't feel like it was completely the city manager's (fault)," she said. "I think the council has their own blame in this in that we spent money even when our city manager and our finance director was telling us it was going to be an issue going into 2011 and 2012. We spent one-time dollars on ongoing expenses."

She went on to say the council should be looking forward and solving the problems. She stated she had faith in Sweet.

"I think we can't always point our fingers at staff," she said. "We need to look internally at ourselves."

Mayor Mike Farmer then spoke, saying he certainly wanted to move forward as well.

"But council members have to make decisions on reports that have been given to them," he said. He said the reports they were given were inaccurate.

"Maybe council spent some money it shouldn't have spent," he said. "But when I look at a report and it says we have this much money and this is a priority, I'm going to spend it."

He said the incomes were shown, but the expenditures were not given to them until too late.

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