The city of Tahlequah has found itself in a financial hole, but officials worry that fixing the problem could put a bigger burden on funds.
Earlier this month, Mayor Sue Catron announced the general fund was running a deficit and said changes needed to be made immediately.
"If we cannot turn this ship around and bring our expenses and revenues into line with each other, the city will ultimately be bankrupt," she said.
She explained that the allocation to the general fund had a negative balance of $761,038, and the allocation to the capital improvement fund was a positive $790,885. That worked out to a positive $29,897.
In August, the City Council agreed to hire Arledge & Associates to conduct a forensic review and analyze the city's financial records for fiscal year 2019-2020. Former City Finance Director Marcie Gilliam was hired for contract services, as well.
Catron said Arledge is using analytical tools to identify transactions to examine, and the firm will provide the city with a detailed report once the review is completed.
"They have provided us with an initial set of questions and have received further details from the city's records," said Catron. "Ms. Gilliam has supported this endeavor by doing reconciliations, developing detail spreadsheets, and by clarifying how certain transactions are posting within the city's software system."
Council also agreed to hire Crawford & Associates to assist with compilation of financial records, and the audit will begin once the Arledge review is finished.
At first, Catron estimated the cost for the audit cleanup could be as high as $100,000, but now, she believes the total will be somewhat less than that.
"The $100,000 estimate given was for the full cost of the review, consulting work provided by Ms. Gilliam, the compilation of the financial reports, and the independent audit," said Catron.
This step in pinpointing the problem with city finances is costly, given that the independent audit for fiscal year 2017-2018 had been performed by Michael Green, a certified public accountant. Catron said even though Green's audit focused on 2018, it was completed in May 2019, and his payment has been delayed until the current fiscal year.
"As a result, we will end up paying for two years of audit-related accounting within this year," said Catron. "Discovering that major expenditures were not accounted for in the proper year was not what we would have wanted to find."
Auditors don't get paid until they're complete, and since the audit has been late the past three years, payments end up falling within the next audit cycle.
The Tahlequah Daily Press asked readers during an Oct. 12 Facebook Forum about what could be done to improve the city's budget picture, and whether the city is overstaffed. Catron had earlier discovered that about 90 percent of the general fund was allocated to employee expenditures.
John Yeutter said the city should sell off all real estate property that's not being used for its purposes.
"In addition to a variety of commercial property leased to others, I believe that it owns a vacant residence at Fourth and East. Disposing of these could not only provide one-time funding, but also reduce maintenance costs," said Yeutter.
During an Oct. 3 City Council meeting, Catron said she would like to sell real property the city no longer needs, and turn all excess equipment into surplus.
David Watts said the current administration needed to make changes.
"It's clear that the previous administration spent money without thought for the future. It doesn't matter if the city is overstaffed or understaffed; if they can't pay the staff, they are going to have to make changes," he said.
Earlier this month, Catron stressed that if the city doesn't find more than $100,000 per month over the course of the next nine months, employees could possibly be sent home. She said that amount would significantly extend the time the city has to cut its expenses.
"This was part of a discussion about how the city's cash balance in the General Fund dropped $400,000 during the first three months of the year, even though our department heads have been working to reduce their operating expenditures," she said. "That isn't sustainable at any time, but now that we're using our last savings to operate, we do need to make changes quickly."
Finance Director Dayna Curtis was released from employment a few weeks ago. Catron said they are leaving that position unfilled for as long as possible. The council gave the go-ahead to hire Alan Chapman as interim city administrator earlier this month. Chapman will be working part-time and therefore will cost the city less than the full-time position would.
"Alan Chapman and I are both CPAs, and we have a city treasurer to provide some level of oversight," Catron said. "Our accounting clerical staff are reliable and capable. We believe that together, we have the resources to restore our accounting system."
She said the city is working to ensure there are no mass layoffs, but she can't promise that some individual positions will not be eliminated.
"We are having to look at all expenses very carefully to identify immediate savings," said Catron. "Living on debt would not be an option for us. We aren't to the point of mass layoffs now, and we will do whatever necessary to avoid those in future."
TDP asked readers on its website what else should be done with the city budget being in trouble, and with the council approving a "slowdown" in hiring.
Thirteen voted to eliminate some employee positions or to find another way to trim that has nothing to do with employees. Eight voted not to cut current positions, but suggested not filling any that go dark. Seven said they don't believe the budget is in trouble.
To see more reader discussion on the city budget, to to www.facebook.com/tdpress and scroll down to the Oct. 12 Saturday Forum.