Is Bay St. Louis on the brink of financial crisis? Budget approved Friday has cuts, borrowing

Sept. 26--BAY ST. LOUIS -- Fiscal woes brought to light by auditors and ongoing budget failures have some city leaders contemplating the parting words of a municipal harbor commissioner who resigned nine months ago warning of a "public financial disaster."

The City Council on Thursday rejected -- for the third time -- the upcoming fiscal year's budget proposed by Mayor Les Fillingame's administration and recessed the meeting.

Friday night, the Council passed a budget after making cuts to nonprofit funding and borrowing from the city's reserve fund.

"Every time we go into a meeting," Councilman-at-large Mike Favre said, "we find something new that hasn't been paid."

Less than a week remains before the Oct. 1 state-mandated budget deadline.

Fillingame had said his initial budget contained no cuts and gave all city employees 3 percent raises.

But council members questioned that the mayor's budget was viable. They were concerned about $300,000 they believe the city will need to reconcile several accounts, and up to $315,000 from the U.S. Department of Justice that is unaccounted for, Favre said.

"I don't understand where we're missing this money," he said.

Problems foreseen?

The budget stalemate came on the heels of a preliminary audit that contained 15 findings of noncompliance with state and federal regulations as well as the city's own ordinances.

The audit said the administration presented the council with a budget for the 2013-14 fiscal year that contained more than $600,000 in miscalculations.

The findings seemed to affirm what many council members and others have complained about in the past year.

In mid-January, Bay businessman Rod Ward left the seven-member municipal harbor commission after airing his frustrations over an unapproved $19,807 disbursement the city made from the municipal harbor fund.

"I feel that eventually we will all be embarrassed in a public financial disaster that is not in our control," Ward said in his resignation letter.

Ward, armed with a copy of an insurance bill the city received for $19,807 -- the same amount taken from the harbor fund, had claimed the city took the money to pay that bill.

But Fillingame called it a clerical error, and as the Sun Herald broke news of it, City Hall sent a memo to the council saying the money would be returned to the harbor fund.

Favre believes the city may have reached the "financial disaster" Ward predicted.

"I think the audit shows we have," he said. "The audit shows every department has problems, collection problems."

Clerical errors

Fillingame does not believe the city is in a crisis and said many of the problems are easy fixes.

Councilman Lonnie Falgout stopped short of calling the situation a disaster: "I don't know yet. There are so many unanswered questions. Just so many."

Similar instances of large clerical errors have occurred throughout the year, the Sun Herald has reported, including $140,000 withdrawn from the utility fund that was supposed to be deposited into the utility bond-payoff fund. It was eventually deposited hours before the council held a specially called meeting on the issue in April.

In August, the council addressed the whereabouts of up to $315,000 restricted by the DOJ to funding certain police expenses. It was required to be kept separate, but in 2009 the city commingled it with the general fund and apparently lost track of it.

When asked Wednesday how the general fund balance dipped below the amount of the DOJ funding, Fillingame said: "That's a question that I can't answer."

Audit response

City Comptroller Robert Clark said he has submitted responses to all the audit's findings and is awaiting a final review.

The mayor recently hired Clark, an experienced accountant who has even impressed council members who are typically at odds with the administration.

"The new comptroller is very professional, and he's been very forthcoming with everything I've asked him for," Falgout said. "I hope it's a sign of good things to come."

Former city clerks David Kolf and Katherine Smith battled medical issues over the last year, which Fillingame said contributed to some of the city's financial problems.

Kolf resigned months ago, and Smith will retire on disability this month, Fillingame said.

The mayor said parts of the audit were inaccurate, specifically the findings that the city allowed its windstorm insurance to lapse during the 2014 hurricane season and was without workers compensation coverage for 60 days.

"We never had a lapse in insurance," the mayor said.

Clark agreed, saying the wind insurance was a supplemental policy the city didn't need and paperwork confirms there was never a lapse in workers comp coverage.

Fillingame said he feels the auditors released their findings prematurely.

"It appeared to me that they were pushed into making a presentation prematurely because they don't typically present an audit that's not complete," he said. "And I would think, why else would they do it if they weren't pressured to do it?"

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