Poor fiscal management has led to the City of Whitesburg being shorted hundreds of thousands of dollars in delinquent water bills, state road assistance and business licenses, the state Auditor of Public Accounts said in a report released last week.
Auditor Mark Harmon wrote to the city last week, saying the management problems include “poor fiscal management; failure to obtain required annual audits; inconsistent compliance with state and City laws, policies, and procedures; and ethics concerns.”
According to Harmon, the city was owed more than $350,000 in unpaid water bills at the time his audit was conducted, lost $92,973 in state road aid money because of its failure to have audits conducted, and over billed restaurants for more than two years for taxes on the sale of food and alcohol, something that Harmon said could lead to lawsuits by businesses to recover the money they overpaid.
The auditor also criticized the city for expenditures of Alcoholic Beverage Control tax money, which he said included $58,500 in questionable or disallowed expenditures. That total includes $39,500 in holiday expenses such as Fourth of July and Labor Day fireworks shows and entertainment, gift cards for food for city employees and others, and $19,000 in payroll expenses for non-ABC related employees.
The holiday expenses disallowed by the auditor included Christmas hams provided to the city’s city’s employees, volunteer firefighters, and council members. The auditor said hams and gift cards are bonuses “above and beyond the amount of salary earned,” and are prohibited by the Kentucky Constitution and state law.
Harmon also criticized Mayor James Wiley Craft for running his part-time law office out of City Hall, for using a city employee to type letters for his law practice, and for accepting a family plan insurance policy that is not available for all other employees.
The audit notes that Craft has $60 deducted from his paycheck to reimburse the city for using his office for his business, but said that amount the auditor called, “nominal.”
Craft said while the use of the office was not approved by the council or the city ethics board, “Every person in the whole city of Whitesburg, and specifically every member of the city council is aware of this arrangement.”
Craft said he has paid $120 a month every month for the use of the office. While that “ may seem nominal to someone who compares the costs of a Lexington, Louisville, Frankfort and even a Whitesburg law firm, I spend most of my time dealing with city issues,” Craft wrote in his response to the auditor.
Auditors also found what they termed as several problems with the city’s relationship with City Attorney James Asher, including a claim the city paid $22,755 over a three-year period for his health insurance. The audit said it was unclear in Asher’s contract how much money he was to receive in payment for legal services, and that what he did receive was not always reported to the IRS.
In a response, the city said Asher is not a city employee, but is allowed to receive health insurance as an employee who receives a “10-99” tax form at the end of the year.
The biggest issue in dollar amounts was the failure to collect water bills. According to the audit report, nearly 20 percent of city water accounts were more than 90 days past due, and 29 of those owed the city more than $2,500 each. Delinquent bills including those of three city employees and City Councilman Larry Everidge, whose residential bills totaled more than $2,600. The city owed itself $11,000 in water bills, the Letcher County Jail had an outstanding balance of $16,000, and a business associated with Everidge was behind $8,000. In addition, City Attorney Asher was involved in a water billing dispute with the city that had left his business account $22,785 in arrears as of last February.
The city notes that Asher had paid a bill monthly, but had not paid the full amount because of a dispute over the amount owed. While the city said adjustments had been made and Asher no longer owed that amount, the audit said that the city billing records are so bad that they were “not adequate in identifying amounts actually owed.”
The city said in its response that it worked out payment plans with more than 40 water customers, turned off the water to 19 others, and retrained its employees. The city and the jail now have zero balances. The city also said in its response that the state Road Aid money has now been paid to the city in full.
The report also says that Craft has now bought a business license for his law practice. It did not promise any change in his health insurance, saying that the insurance is part of his total compensation package, was approved by the city council, and was intended to be “comparable to that of those holding the same office in other local cities of similar size and function.”
It said his compensation is “still significantly lower” than other Kentucky mayors.