Magnolia will solicit bids from accounting firms to conduct an in-depth audit of its spending, with officials expressing hope that the review will provide clues for how to strengthen Magnolia’s financial footing and prevent future use of utility money to balance the budget.
How we got here
The city council approved moving forward on the audit at its Oct. 13 meeting. Council member Raymond Gaskin called for the examination after expressing concern at the city’s last council meeting that Magnolia for several years has been balancing its budget using transfers from water and wastewater utility funds.
Gaskin characterized those fund transfers as "basically taking money from your savings to your checking account, kicking the can down the road.”
For this year’s budget, Magnolia is transferring $295,000 from utilities to cover other expenses like engineering employee costs and the city’s economic development corporation. In the two prior budget years, the city moved more than $1 million from utilities to cover other spending, according to a budget overview.
The item directed staff to find an auditor to do a six-month financial review of Magnolia's general fund and focus on those utility transfers.
The vote to recruit a firm for the audit was unanimous. It’s unclear how much the audit will cost until bids are made, but City Administrator Bob Harvey suggested it could cost up to $100,000.
Harvey told the council that the city's normal annual audit costs around $24,000 to $35,000, but clarified those were "simple" audits.
Items worth mentioning
Mayor Chris Blair said the council intends to leave a position on the city council vacant until Magnolia's next council election in May.
Buck Perino resigned from his council seat on Sept. 30. The council approved an item to accept Perino’s resignation and take applications for the seat, but Blair said he would rather the seat be filled in an election.
“We're going to leave the seat vacant at this moment and wait for a new election to come, unless something major happens where we need it,” Blair said.
Perino said Monday that he resigned to prevent any appearance of a conflict of interest after accepting a job with a contractor that has done work with Magnolia and to have more time to spend with his family.
In a 3-1 vote Tuesday, the council approved asking the city’s economic and community development boards to review whether Economic Development Director Rachel Steele violated any ethics policy for failing to provide detailed financial records council member Gaskin requested from her.
Gaskin in August emailed Steele asking for detailed expenditure and financial records that he said he never received.
Magnolia’s economic and community development corporations are both funded by city sales taxes and work to fund projects to attract businesses and better the quality of life for residents.
Two members of the city's economic development board told the council that the board has engaged a CPA firm to assist in fulfilling the request for more than 200 records and help provide annual review statements going forward.
Council member Brandon Jacobs voted against it. Jacobs said as far as he knew, Gaskin’s request was the first time a request like that had been made to the economic and community development corporations.
