KRUM — A long-overdue audit of city finances showed the city with less than two weeks’ worth of unrestricted cash in its general fund at the end of the 2006 fiscal year.

In addition, in a separate letter to the council, auditor Jim Eastup said that bank balances were not reconciled to the city’s ledger and that some bond payments were not made out of the proper bond account.

In both the letter, and in person during the regular council meeting Monday, Eastup told the council that it should amend the budget to reconcile significant differences between the budget and actual spending. By not amending the 2005-06 budget, the council missed an opportunity to control spending, he said.

In all, the city spent $2.78 million, or almost two times what it had budgeted for 2005-06, while taking in just over $100,000 more than city leaders anticipated for income. 

The excess spending left the city with nearly a $1.20 million deficit for the year, which had to come out of the fund balance, Eastup said.

The $78,508 in unreserved funds represents less than two weeks’ of cash at current spending levels. Generally, auditors have recommended to area cities that they have about three months’ worth of unrestricted funds for a healthy cash flow.

Eastup’s report was among the first orders of business after the swearing in of Terri Wilson as Krum’s new mayor and two new council members Joe Beall and Doyle Fletcher.

Several council members said they would like to study 2006-07 expenditures in light of the information, even though they are more than six months into the new fiscal year.

While there is no express penalty for noncompliance, the state’s local government code says audits are due 120 days after the fiscal year ends. Krum’s fiscal year ends Sept. 30, making the audit due at the end of next January.

Several members of the Krum Fire Department addressed the council after the audit, since that department’s budget showed the largest variance between budgeted and actual expenditures. The audit showed the department more than $230,000 over budget.

After reviewing Eastup’s letter to the council about the audit’s management findings, Mayor Wilson said she had asked Eastup to go through the activity in the city’s accounts over the last 45 days.

Eastup cautioned the council in his letter that the purpose of the audit was not to assure internal controls. However, he recommended that several issues be addressed, including the lack of reconciliation to bank accounts, the recording of notes and lease proceeds, and the provision for payment of bonds from the debt service fund.

Moreover, Eastup declined to serve as the city’s auditor for next year. The council voted to issue a request for proposals for a new auditor for the 2006-07 year.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com .

Auditors told the Krum City Council that by not amending the budget, it missed an opportunity to control spending. Here’s how the money came and went in the 2006 fiscal year:

Here’s a snapshot of Krum’s finances, as of Sept. 30, 2006:

*Attributed to a contribution of park land by a developer

Source: City of Krum