NATCHEZ — A draft copy of the audit for the City of Natchez’s 2011-2012 fiscal year indicates significant deficiencies were found in the city’s financial accounting.

In a draft copy obtained by The Natchez Democrat, the city’s independent auditor, The Gillon Group, found a “material weakness” and “significant deficiencies” in the city’s financial reporting.

The material weakness was found in two different aspects of the city’s accounting.

The draft audit suggests reconciliations of the city’s bank accounts to the general ledger “were not performed timely or, for some accounts, at all during the year.”

As a result, “the city’s management was making decisions without complete and accurate information available to them.”

The auditor recommends that city management implement a process where the reconciliation for all funds and all accounts within those funds are completed every month and reviewed by a member of management, such as the city clerk or another designated individual.

“This will allow for more timely review of reconciling items, error corrections and more accurate information going to the Board of Aldermen,” the audit states.

Financial information and financial statement preparation was also included in the material weakness finding.

The draft audit notes that the city converted its accounting system to new software in 2012, and, at the same time, had “staffing issues.”

City Clerk Donnie Holloway has said that the death of the city’s longtime data processor and the extended absence of another employee caused problems in his office.

After the fiscal year ended on Sept. 30, 2012, additional employees and contractors were hired to help close the books for the year and reconcile accounts, according to the draft audit.

“But many routine functions were still not being performed and the changes needed to process basic transactions were not made timely.”

Not completely understanding the new software completely led to duplication of cash disbursements in every month, according to the draft audit.

The overall lack of internal controls also considerably delayed the start of the audit, which was due June 30, auditors wrote.

A “significant deficiency” is noted in the draft audit in the city’s cash disbursements accounting.

The auditors randomly selected a sample of 60 cash disbursements and found that paperwork to support the expenditures could not be found in 22 percent of the disbursements tested.

In other testing, the auditors found multiple instances of duplicate payments issued to vendors for the same invoice.

Auditors also noted claims entered into accounts payable for the fiscal year 2011-2012 as late as May 2013, thus creating a mismatch of the general ledger and subledgers.

In effect, the draft audit states, financial information produced by the city might contain errors.

Improvement is needed in the cash disbursements accounting, the draft audit states, because the daily operations of the city are reported on the cash basis of accounting, meaning “the two most important aspects of the system are cash receipts and cash disbursements.”

The draft audit also  suggests that the city’s former information technology director, Eric Junkin, may have violated state purchasing laws.

Mayor Butch Brown said that Junkin purchased equipment from a relative and did not follow purchasing law as it relates to “related-party” transactions. The city did not reimburse Junkin for the purchases, and the matter was one factor that led to Junkin’s eventual termination, Brown said.

When asked about the issues raised in the draft copy of the audit, Mayor Butch Brown stressed that the findings were preliminary and not part of a final audit.

Brown took office in July 2012 and only served three months of the 2011-2012 fiscal year.

He said, therefore, he does not have direct knowledge of everything that transpired in City Hall before taking office.

Brown said he thinks the preliminary findings of the draft audit are the result of several years of mismanagement of the city’s accounting.

“It had to be going downhill for several years,” he said.

Brown said he is optimistic about the future of the city’s bookkeeping, however. He said additional staffing and a better understanding of the software has led to better bookkeeping in the current fiscal year.

Brown said an auditor for the state auditor’s office also recently visited City Hall at Brown’s request to offer suggestions and recommendations for better accounting to city employees.

“The proof in the pudding is going to be the next audit,” he said. “That will show how much we’ve learned and how much we’ve incorporated our software and the new technology we have.

“But I think we’re getting our arms around it more and more.”