Summary

The results of our operational audit of the Town of Callahan, Florida, for the period October 1, 2000, through January 31, 2002, and selected actions taken prior and subsequent thereto, are summarized below.

GENERAL MANAGEMENT CONTROLS

Finding No. 1:  The Town had not established written policies and procedures necessary to assure the efficient and effective conduct of accounting and other business-related functions and the safeguarding of assets.

Finding No. 2:  The Town had not provided for an adequate separation of duties, or established compensating controls, in certain areas of its business operations.

Finding No. 3:  The Town’s overall financial condition is showing signs of deterioration which, if not corrected, could result in a future financial emergency.  In addition to the effects of control deficiencies, as discussed throughout this report, factors that have contributed to this condition include a lack of periodic cash analysis and forecast, financial plans, and interim financial statements.

BUDGETARY CONTROLS

Finding No. 4:  The Town, for the 2000-2001 and 2001-2002 fiscal year budgets, did not maintain adequate documentation to support the estimated beginning fund equities, and did not amend the budgets to show actual beginning fund equity balances.  In addition, contrary to Section 166.241(3), Florida Statutes, the Town did not include appropriations for Special Revenue Funds.

Finding No. 5:  Contrary to Section 166.241(3), Florida Statutes, the Town Council adopted the original budget for the 2000-2001 and 2001-2002 fiscal years, and a budget amendment for the 2000-2001 fiscal year, by resolutions rather than by ordinances.

Finding No. 6:  The final budget adopted by the Town Council for the 2001-2002 fiscal year was $25,230 less than the budget advertised and used by the Town to control its expenditures.

Finding No. 7:  Contrary to Section 166.241(3), Florida Statutes, actual 2000 2001 fiscal year expenditures exceeded amounts budgeted for certain object level expenditure categories totaling $56,961 for the General Fund, and total actual expenditures/expenses and other financing uses for the Utility and Excise Tax Funds exceeded budgeted amounts by $7,679 and $15,828, respectively.

CASH AND INVESTMENTS

Finding No. 8:  The Town’s records did not demonstrate that a public purpose was served for petty cash fund disbursements totaling $1,610.  In addition, $125 of petty cash fund disbursements were not supported by receipts.

Finding No. 9:  The Town could have earned additional investment income of approximately $10,000 by investing more moneys with the Florida State Board of Administration.

FIXED ASSETS

Finding No. 10: The Town had not established general ledger control accounts for its classes of fixed assets.  In addition, the Town has not established a uniform property numbering system and tangible personal property records did not include all information necessary to properly identify and evidence the establishment of accountability for property items and did not include all property items.  Further, some items could not be located or were not marked as property of the Town.

Finding No. 11:  The Town did not perform a physical inventory of tangible personal property during the period October 1, 2000, through January 31, 2002. 

CASH CONTROLS AND ADMINISTRATION

Finding No. 12:  Prenumbered forms used to document collections and other transactions affecting cash resources were not properly accounted for.

Finding No. 13:  Collections received through the mail were not documented at the initial point of collection.  In addition, collections were transferred between employees without the use of a transfer document.

REVENUES AND OTHER RECEIPTS

Finding No. 14:  The Town assessed and collected $5,700 for water and sewer connection fees in excess of the amount authorized by ordinance.  In addition, several Town citizens had not, of record, paid the required water and sewer connection fees.

Finding No. 15:  The Town had not established adequate controls to ensure the collection of unpaid water and sewer fees.

Finding No. 16:  The Town assessed and collected $1,138 for building permit fees in excess of the amount authorized by ordinance.  In addition, the Town’s records were not adequate to support the basis for $1,164 of building permit fees assessed.

Finding No. 17:  The Town had not established adequate controls to ensure the assessment and collection of amounts owed to the Town for occupational license fees and fire inspection fees.  Our tests disclosed $1,134 of occupational license fees, and $2,640 of annual fire inspection fees, that were not collected, recorded, or deposited of record. 

PERSONNEL AND PAYROLL ADMINISTRATION

Finding No. 18:  The Planning and Zoning/Grant Administrator was paid compensation totaling $190,590 for the 2000-2001 fiscal year.  The reasonableness of such compensation was questionable and the Town had not, of record, documented how such compensation was commensurate with the Planning and Zoning/Grant Administrator’s assigned responsibilities.  In addition, the Planning and Zoning/Grant Administrator was overpaid $80,168.

Finding No. 19:  A 5 percent pay raise for employees approved by the Town Council at its September 17, 2001, regular meeting was not timely and equitably implemented. 

Finding No. 20:  The Town has not established adequate controls to ensure the accuracy of employee leave and attendance records.  Sick leave used by two employees was not recorded in the employees’ leave and attendance records.  In addition, one of the employees, as approved by the Town Council, was paid for 30 hours for the last week in February 2002, although the employee was absent from work during that week and had no leave available.  Although requested, we were not provided with an explanation as to why the Town Council approved this payment.

PROCUREMENT OF GOODS AND SERVICES

Finding No. 21:  Deficiencies in the Town’s disbursement processing procedures included a lack of vendor invoices to support payments, a lack of signatures of approval on checks, failure to use purchase orders, and failure to cancel or stamp as paid invoices to prevent duplicate payments.

Finding No. 22:  Contrary to Ordinance 2-O-1995, seven purchases totaling $5,156, each exceeding an aggregate total of $500, were not approved by a majority of the Town Council at a regular or special meeting.

Finding No. 23:  Contrary to Ordinance 2-O-1995, purchases totaling $1,300,087 for goods or services were acquired without the benefit of a competitive selection process. 

Finding No. 24:  The Town made contributions totaling $1,650 to three nongovernmental organizations without benefit of agreements setting forth the specific purposes for using the moneys and follow-up procedures to determine such use.  In addition, contrary to Ordinance O-11-1988, the contributions included $500 paid to a for-profit organization and $150 paid to a nonprofit organization without enacting a resolution authorizing the contribution and identifying the specific public purpose served.

Finding No. 25:  Our audit disclosed expenditures totaling $9,929 for which the Town’s records did not clearly demonstrate that a public purpose was served.

CONTRACTUAL SERVICES

Finding No. 26:  Contrary to law and good business practices, the Town acquired certain contractual services without using a competitive selection process and, in some instances, without benefit of formal written agreements.  Invoices submitted by some contractors for services rendered were not in sufficient detail to allow a determination as to whether fees charged, and expenses submitted for reimbursement, were appropriate.  In addition, $19,927 paid to an individual that the Town had contracted with to act as building inspector was not supported by invoices or other documentation.  However, we determined, based on the terms of the written agreement with this individual and the amount of building permits revenue as recorded in the Town’s accounting records, that this contractor appeared to have been overpaid $3,617 to $7,987 depending on the types of inspections provided.

Finding No. 27:  The Town had not ensured that the building inspector had complied with the terms of his written agreement.  Contrary to the written agreement and Ordinance 1-O-1986, the Planning and Zoning/Grant Administrator, rather then the building inspector, approved the issuance of numerous building permits.  Also, the Town was unable to provide documentation that several building inspections were performed or were not necessary.

TRAVEL EXPENSES

Finding No. 28:  The Town Council had not adopted an ordinance or resolution, or otherwise provided guidance, as to the assignment and proper use of Town gas credit cards.  Nor did the Town require users of the credit cards to sign written agreements specifying acceptable uses of credit cards.  In addition, our audit disclosed 20 instances in which gas expenses totaling $493 were charged to a gas credit card that appeared to be of a personal nature that served no public purpose. 

Finding No. 29:  The Town had not established adequate controls to ensure that travel expenditures are adequately supported and in accordance with Section 112.061, Florida Statutes.

Finding No. 30:  Contrary to Federal regulations, payments for nondeductible travel expenses (Class C meal allowances) were not subjected to withholding for payment of Federal income tax and employment taxes.

COMMUNICATION EXPENDITURES

Finding No. 31:  The Town had not established adequate controls to ensure that communication expenditures served an authorized public purpose.  In addition, our audit disclosed numerous cellular and long-distance telephone calls that appeared to be of a personal nature that served no public purpose.

Finding No. 32:  The Town paid $861 of Federal, State, and local telecommunication taxes from which it is exempt.

VEHICLE USAGE

Finding No. 33:  The Town Council did not approve the assignment of Town-owned vehicles on a 24-hour basis to two employees who drove the vehicles home overnight.  In addition, the Town’s records did not demonstrate that the assigned vehicles were used primarily for a public purpose and used only incidentally for the personal benefit of the employees assigned the vehicles.  Vehicle usage logs were not maintained and the personal use of the vehicles was not included in the employees’ gross compensation reported to the Internal Revenue Service.

Finding No. 34:  The Town did not maintain vehicle maintenance logs for its vehicles, including the two fire trucks, that identified preventative maintenance services and repairs and the dates such services were performed.

RISK MANAGEMENT

Finding No. 35:  The Town has not established adequate procedures to ensure that insurance coverage for real and tangible personal property was adequate in the event of damage or loss of property.  As a result, the Town did not insure its fire station and insured a trash truck that was not owned by the Town.

COMMUNITY DEVELOPMENT BLOCK GRANT - HOUSING PROGRAM

Finding No. 36:  The Town had not, of record, documented that CDBG Housing Program services were provided to applicants having the greatest need for assistance.  As such, it is questionable as to whether the Town was entitled to receive $457,000 of funding for the Program from the Florida Department of Community Affairs.

Finding No. 37:  The Town overpaid a contractor $18,040 for the construction of two houses funded from the CDBG Housing Program.

OTHER MATTERS

Finding No. 38:  The Town did not comply with Section 166.041(3)(a), Florida Statutes, regarding the adoption of ordinances.  In addition, for several emergency ordinances, the Town’s records did not demonstrate the basis for adopting ordinances as an emergency, and the Town Council had not established procedures for determining whether an ordinance should be adopted as an emergency.

Finding No. 39:  The Town purchased bakery items from the wife of the Town Council President, who approved payments to his wife for such services, which appears to be a conflict of interest in violation of Section 112.313(3), Florida Statutes. 

The Town's written response to the audit findings and recommendations can be viewed in its entirety on the Auditor General Web site.