BENTONVILLE -- Benton County Prosecutor Nathan Smith has asked the Arkansas State Police to investigate alleged financial wrongdoing in Cave Springs reported in a recent legislative audit.
Smith sent a letter Thursday to Col. Bill Bryant, director of the State Police, requesting the investigation.
Property Tax Meeting Today
Cave Springs faces the possible loss of $391,000 out of a $1.7 million general fund budget. The city failed to reauthorize its property tax for 2017, according to city records, so the county cannot continue collecting that tax. Benton County Judge Barry Moehring will hold a county court meeting today to discuss the situation.
Prosecutor Nathan Smith concluded in May an Arkansas State Police investigation concluded that month found no criminal intent in the failure to reauthorize the property tax.
Source: Staff Report
Other Problems In Audit
Other problems involving Cave Springs’ finances found by state auditors but not cited for noncompliance with state law include:
• Overpaying a former police chief by $6,993 for unused sick leave and paying him twice for unused annual leave for an over-payment of $2,600.
• The mayor entered a $194,835 contract with an engineering firm without council approval.
• The mayor’s assistant “was paid a car allowance of $4,800 that was not authorized by the council.” Two employees unnamed in the report who were not eligible for family plan health insurance in 2016 got coverage anyway at a total cost to the city of $8,100.
• In the recorder/treasurer office, “receipts were not deposited timely and intact. Numerous posting errors were noted,” and the records are so incomplete “we could not report receipt tests for all funds for 2016 and 2015.”
• The city violated its policy of paying 42 cents a mile for mileage and paid 57.5 cents, and reimbursed travel mileage without a documented business purpose or a mileage log. Cave Springs put an unspecified amount of money meant for legal fees and information technology services into the street fund.
• City vehicles were used for routine commuting and that benefit wasn’t reported on the involved employees’ Internal Revenue Service’s W-2 forms as required by the IRS,.
• Payroll records also omit some required documentation. “All eligible employees were not enrolled in retirement plans, and employee retirement contributions were not properly deducted from employee’s paychecks, reconciled to retirement statements and paid by the city.”
Source: Staff Report
"The audit uncovered the unauthorized over-payment of city officials, alleged misappropriation of city money, and other financial irregularities," Smith wrote in his letter. "After reviewing the audit, it is apparent to me that further investigation into these issues is warranted."
Mayor Travis Lee didn't return a phone call seeking comment Thursday. Kimberly Hutcheson, the city's recorder treasurer, said she had no comment on Smith's letter.
Justin Eichmann, city attorney, said Thursday he and city officials are focused on getting items in the audit fixed.
"It's a bad audit, but it's important for the city to address and fix the problem," Eichmann said.
Eichmann said his goal is to have a clean audit next year and to not repeat the same mistakes. City officials are working with David Williams, a retired auditor, to address the problems, Eichmann said.
The state Legislative Audit found Cave Springs failed to meet the requirements of state law in 22 instances from 2015 through 2016.
The city put $61,307 from its street fund into the general fund in 2016, which breaks the law, according to the report released in late July. The city did the same thing with $19,709 the previous year, according to the audit.
The audit also found a number of expenses paid without proper authorization by the City Council, although they were not cited as failures to meet legal requirements.
For example, the city's recorder treasurer was overpaid $14,509 in 2016, the report found. Another such example stems from an April 12, 2016, city resolution authorizing buying a vehicle for $23,165. The vehicle ordered, however, was $33,655 after $10,155 in accessories were added to the $23,500 base purchase price. This resulted in "a disbursement in excess of appropriation totalling $10,490," the report says.
Cave Springs Alderman Larry Fletcher believes Smith did the right thing in requesting the investigation.
"A lot of good Cave Springs people have been disrespected as the result of the actions of the elected officials who were found to be at fault in the audit," Fletcher said Thursday. "They had put their full faith and trust in those people to conduct the business of Cave Springs and apparently it wasn't done. It was negligence, and personally, it's very embarrassing to see a document like this come out about our city."
Lee and Hutcheson have been locked in a dispute since September, when Lee sent Hutcheson home and blocked her from accessing city computer data. Lee said he did so because Hutcheson had mistreated city workers.
Hutcheson is suing Lee, the six-person City Council and two former council members claiming the mayor and other elected officials won't let her do her job. The lawsuit claims Lee and the council members violated Hutcheson's constitutional rights by punishing her and restricting her ability to do her job. The defendants have denied the allegations.
Most of the instances cited in the audit as noncompliance with state law involve record-keeping provisions of those laws. For example, the city made electronic payments without using a method approved by the Legislative Joint Auditing Committee, as required by law, the report says.
The mayor also hired attorneys without council approval, the audit said. Council approval of such hires is required, according to the report.
"The city paid a vendor $1,093 to set up a nonprofit organization, Friends of Cave Springs, for which the mayor, recorder-treasurer and a city employee were officers, in conflict with [the] Arkansas Constitution, Article 12, Section 5," the report said.
NW News on 08/04/2017