Sodaville addresses potential audit violations

The Sodaville City Council approved the city’s audit during its meeting Feb. 15.

CPA Peter Gelser, of Koontz, Blasquez & Associates, P.C., presented his findings of the city’s audit, noting that there were some issues, but overall the financials have improved over the years.

“Overall, the accounting and the financials look fine, with a few caveats,” Gelser said. “Obviously over the last couple years the City has been losing a little bit of money,” he said, alluding to the City’s struggle with water costs.

One of the biggest problems he found was the fact the City operated all its finances through only the general fund instead of three funds that would separate the water business from the City government. Gelser told the council they could adjust their accounting back to the required three separate funds (kind of “pretending” they’ve been operating that way all along) before submitting the audit report, or they could submit the report as-is with the one fund, but that would give them a “qualified opinion” on their financials.

“A ‘modified opinion’ means everything’s great,” Gesler explained. “‘Qualified (opinion)’ means things are good except for this one significant issue.”
Submitting an audit that “pretends” the City was operating with three separate funds still presents violation because the financials don’t match the budget, but “it’s the lesser of the two evils,” Gelser said.
Councilor Joseph Parsons tried to recall why they combined everything into one fund, to which City Administrator/Recorder Alex McHaddad explained he recommended they do that for two years in order to “clean things up.” Going into this next fiscal year, McHaddad plans to recommend the city returns to budgeting with the three separate funds.
“There were a lot of things in the previous budgets that didn’t really match up with what I was seeing in the account statements, so I figured it was a way to clean things up nicely and get some information and get some data over a period of time so we can track things better,” McHaddad said.
He was hoping to be able to continue operating the budget with the one fund, but he learned there are federal rules that prevent him from doing that.
“I think we have a lot of better data in our systems now to be able to do that a lot more financially,” he said.
Another observation Gelser made was that he could not find any published public notices for budget committee meetings. He found one public notice for the budget hearing, he said, but it did not include the required published budget information.
Since the goal was to submit the audit to the state by Feb. 29, McHaddad asked the council if they would vote to approve the audit as-is, or would they want to hold a special meeting within the next week or so to further clear up the financials/audit.
“We have a lot to deal with as a city right now, and I think our time is better used on some other things we have pressing,” McHaddad said.
Councilor Roger Perry said the budget is much better than it has been in the past, to which Gelser agreed.
“You should be proud of Alex,” Gelser said. “He’s put a lot of work into this.”

Gelser clarified for Lebanon Local that the council opted for the version wherein “the financials match fund accounting standards and show three funds.”

In other business, the council:

◆ Awarded an RFP bid to Udell Engineering & Land Surveying, LLC, securing them as a firm on retainer for future projects, including adding a new well to the city’s water system;

◆ Adopted a resolution to remove water restrictions;

◆ Adopted an ordinance for changes to water rates. The recent water rates included 12 tiers of water charges based on gallons used. The new rates include only four tiers, with higher rates during water restrictions.

◆ Heard the water report from Public Works Director JD Burns. He said about 21,000 gallons of water was used on Feb. 1 to clean and inspect the reservoir. Burns also announced he plans to flush the system from March 18-21, the sink faucet at the park is inoperable and needs to be replaced, he will be attending an OAWU (Oregon Association of Water Utilities) conference from March 4-8, and Oregon Health Authority will conduct a water system survey on Feb. 28.

◆ Heard administration updates from McHaddad who reported the state legislature is being more cooperative with each other than he’s ever seen in 10 years. In his agenda notes, McHaddad said senate republicans might walk out during this session, which could jeopardize funding for the city’s water system expansion, but he’s feeling confident the money will come through.
He also mentioned he planned to attend the CIS (citycounty insurance services) conference at the end of the month, which could entitle the city to discounts on insurance payments. Councilor Adina Olivares expressed concern that, given McHaddad’s limited work hours and the fact he might resign soon, there would be a whole week that no city business would be attended to during that time. Mayor Brian Lewis agreed that if McHaddad accepts a new job soon, they need him to be available to work as many days as possible.