Iola City Council members have decided, for now, against a special audit of the city’s financial records of recent years.
What they hope is that auditors from Swindoll, Janzen, Hawk and Loyd, LLC will be thorough enough in its study of the city’s finances to determine if a special audit is necessary.
Council members hired the McPherson-based auditing firm Friday to handle the city’s audits for fiscal years 2011, 2012 and 2013.
The firm will receive $24,500 for the 2011 audit. Of that, $17,000 will go toward regular auditing fee, plus another $7,500 for a single audit, necessary because the city paid out at least $500,000 from federal grants.
The price will escalate to $25,500 ($18,000, plus $7,500 for the single audit) in 2012 and $26,500 ($19,000 plus $7,500) in 2013.
The Swindoll, Janzen, Hawk and Loyd bid was the highest of three received, and more than twice what the city would have paid had it hired the low bidder Jarred, Gilmore and Phillips, P.A., Chanute.
“I think it would be in our best interest money-wise, and time-wise, to combine the two” audits, Councilman Jim Kilby said. “Being a new councilman for the 2010 audit, I just didn’t know what questions to ask. Therefore, (auditors) couldn’t provide the answers about what could have been corrected, what needed to be corrected and what procedures we should or should not have followed.”
Kilby was referring to the city’s recent BBB credit rating issued from the credit agency Standard and Poor’s, which weighs a municipality’s ability to repay loans. Most significantly, a low rating results in higher interest rates.
Council members have estimated the higher interest rates could be worth $100,000 or more through the life of the refinanced loan used to build the water plant about six years ago.
Kilby said he was most comfortable with Swindoll, Janzen, Hawk and Loyd after hearing from Scot Loyd, one of the firm’s managing partners.
Loyd suggested that as part of their initial audit, the firm would list risk assessments of the city’s revenue, expenditures and processes to identify potential weaknesses.
He said his $17,000 still carries significant value because it would cost about 40 percent of the amount of work he and other auditors would put in on Iola’s behalf.
“When you go in and audit something, you want to know everything about them,” Loyd said. “That is not required by state statute, but it is required to understand the entity.
“I believe I could come back and be a lot more knowledgeable… about policies we know are weak, then looking back at your operations and processes and the way it’s been handled, so we have a good understanding of the balance you have today,” Loyd said.
From there, the city could decide whether to proceed with a special audit, council members agreed.
A special audit has been proposed in light of the council’s decision in August to fire former City Administrator Judy Brigham, citing inaccurate figures in various funds as she helped develop Iola’s 2012 spending plan. That plan was initially rejected before a similar one drafted by current City Administrator Carl Slaugh using different worksheets and working strictly off of the city’s current fund balances.
