The city got just what it asked for.
More than five months after it began, the audit of Killeen’s finances from 2002 to 2017 found no evidence of fraud or abuse — based on information the city provided.
That’s certainly a welcome announcement for the city’s residents.
But the audit wasn’t a forensic audit, which would have taken a more in-depth look at the city’s books. Instead, the city received exactly what it paid nearly $400,000 for — a management audit that largely examined policies and procedures across several departments.
From the outset, Houston-based McConnell & Jones representatives told the council they didn’t want to do a forensic audit, though the city had advertised for a forensic audit in its request for qualifications.
The council ultimately agreed to a management audit and also tasked the auditors with focusing on seven key areas of concern, including bond spending, fund transfers and pay raises.
Certainly, the auditors’ final report to the council last week addressed important questions and highlighted problem areas — and there were several.
Among them were a troubling pattern of deficit spending, weak internal controls and lack of clear policy direction over a 12-year period.
In the 173-page report, the auditors recommended solid solutions that are bound to help the city operate in a more efficient, cost-effective manner.
Still, it’s notable that the auditors didn’t — or couldn’t — thoroughly examine each area of concern specified in the contract.
Auditors were unable to determine specific causes of a dramatic increase in general fund capital outlay because the city couldn’t provide the information needed — specifically the trial balances — to pinpoint the problem areas, though the city disputed that assertion in its response.
In some cases, documentation either couldn’t be located or no longer existed.
In noting this, the auditors cited the city’s failure to maintain some documents and data according to state records retention guidelines.
They also noted the city failed to document discussions with the city’s bond counsel regarding proper use of bond proceeds — making it difficult to track bond expenditures.
Both of these situations are problematic, reflecting not only improper city procedures but also a lack of transparency.
It is also troubling that auditors found some departments maintained a separate sets of books, and the finance department often added new accounts because of an inability to understand how previous staffers used existing accounts. The end result was “convoluted bookkeeping” that the auditor said posed a risk of potential manipulation of transactions.
But the biggest takeaway may have been the city’s inefficient handling of the municipal budget.
Auditors found city management failed to reduce Killeen’s operating fund expenditures to align with operating fund revenues for a period of nine straight years, beginning in 2008. The result was deficit spending totaling more $81 million over the period, though they dipped into ratepayers’ funds and reduced the amount to $3 million.
The auditors also noted that spending for governmental activities — specifically public safety — doubled over the past 10 years without a corresponding increase in revenue.
How could this deficit budgeting continue over a period of years without the necessary course corrections?
No doubt, the city’s rapid growth over the period of the audit strained the city’s ability to keep up with infrastructure and provide services, as auditors noted. But they also determined the city’s frequent change in leadership created what they termed “inconsistencies in focus, directives and processes.”
That should come as no surprise. Since early 2005, Killeen has had six city managers — though two served in an interim capacity — and six finance directors.
It’s also important to note that since the departure of Tal Buie in 1998, Killeen did not have another top city official with prior city manager experience until Ron Olson took over the post early this year.
In its conclusion, McConnell & Jones noted what it termed a lack of fiscal discipline in the budgeting process.
That’s certainly a concern for taxpayers, especially when revenues consistently fail to keep pace with expenditures.
And while previous city managers have been quick to point the finger at council members when it comes to overspending, the city staff bears some of the blame — especially if the council has little time to consider a spending issue and is going off of staff recommendations.
Bottom line: the city needs to live within its means.
The $8 million shortfall in last year’s proposed budget was based on an accounting projection, as the auditors noted. But truthfully, that projection never should have seen the light of day.
Fiscal discipline should have dictated across-board-cuts, deferred spending or other reductions to bring the budget into line — as the council was forced to do with a series of 11th-hour actions.
Already, Olson has taken a major step in that direction by proposing a bare-bones, balanced budget for the coming fiscal year. The council will vote on that plan Sept. 19.
Looking forward, Olson says he will incorporate the more than two dozen recommendations offered by McConnell & Jones into the city’s business plan going forward — a sound strategy.
In the final analysis, the audit uncovered some significant problems that needed to be addressed, and the firm offered reasonable solutions. That would make it appear to be a good investment.
Still, there will be some residents who question the completeness of the audit’s findings. Given the somewhat limited scope of the investigation and the obstacles auditors faced in completing their work, that’s probably inevitable.
Some may also ask why city management and staff were allowed to offer input to auditors during the course of the investigation — especially those who had a stake in the investigation’s outcome.
Again, it comes down to the fact that this was not a forensic audit; it was a management audit.
And that’s exactly what the city paid for.