Accountants who audited a central Arkansas insurer echoed concerns Monday from the previous year: One person runs the show, absent of recommended written policies or independent review.
In 1985, several agencies banded together to create a risk management pool, dubbed the Central Arkansas Risk Management Association.
The conglomerate handles property, casualty and liability coverage for its members.
The Pulaski County Special School District, the city of Shannon Hills and Rock Region Metro are among its dozen members.
On Monday, two accountants from Little Rock-based Thomas & Thomas LLP presented 500 hours worth of work to the association's board members.
Accountant Pattie Weed emphasized that the packet she handed out with their findings was only a draft. It addressed data from 2016 and 2017, ending on Sept. 30.
"You had a really good year," Weed told the group. The association holds $14.8 million in total assets, $12.8 million of which is in investments.
Total liabilities amounted to $1.6 million in 2017, down from $3.5 million the previous year, the draft document says.
Accountant Randy Milligan reminded the board that leaner times are likely ahead.
"What goes up, must come down," he said.
Much of the presentation focused on a letter the accounting firm drafted that identifies deficiencies in the association's method of financial reporting.
It's similar to a letter the board saw last year with many of the same suggestions, Weed said.
One concern is that one person, Timothy Miles, the association's risk administrator, "pretty much runs the show," Weed said.
"That's a huge risk. ... If he makes a mistake, if he makes a bad decision, that may be a risk you want to consider," she said.
Additionally, no one has been trained in the event that he, or another key employee, decides to leave, the letter says.
"This creates a situation where ... there is significant risk for error or fraud to occur and go undetected for an extended period of time," the letter says.
The accountants also noted that they couldn't complete their audit of member contributions for 2017 because certain documents couldn't be found, likely because everything is done on paper, the letter says.
The association has already begun using an electronic system.
Contributions were also calculated in an unprotected spreadsheet. No one other than the person who prepared the data reviewed it for accuracy or errors, the letter says.
Weed said her own work is always checked by a peer.
"The worst thing that can happen is a mistake goes out the door," she told the board.
Also, there's no written policy that outlines the procedures to receive, process and pay valid claims, the letter says. This increases the risk that a claim could be overpaid or underpaid, or that a fraudulent claim would be paid, the letter says.
Weed told the board that she is not suggesting a written policy would definitely have "caught what happened two years ago," alluding to a former Pulaski County employee accused of stealing nearly $250,000 over several years from the risk management company.
However, "you create risk by not having a policy," Weed said.
Wanda Wyatt, the former employee, was arrested in June 2016 on charges of theft of property and forgery, records show. A court hearing on her mental status is scheduled for Jan. 24.
Accountants noted that the association has already drafted three policies regarding claim procedures, investments and general operations. However, they weren't finalized before Monday's meeting.
During the board meeting, members voted to ratify those three policies, comprising 13 pages.
Under the written claims policy, checks of $10,000 or greater need two signatures. Under the general oversight policy, some of Metroplan's employees have agreed to provide a layer of oversight.
Milligan emphasized that a policy is only sufficient when it's being followed.
"They're not worth the paper they're written on if they're not being implemented," he said.
Tab Townsell, executive director of Metroplan, the federally designated metropolitan planning organization for central Arkansas, lobbied to set up a subcommittee to oversee the implementation.
The subgroup was approved during the meeting.
"In all honesty, this is the second audit we've been through that's problematic, that's not clean," Townsell said.
Desi Ledbetter with Pulaski County Solid Waste Management mentioned that the group previously formed a subcommittee that never met.
The new subcommittee had its first impromptu meeting after the board meeting adjourned.
Metro on 12/19/2017