County officials respond to recent audit

Here are statements from the recent audit of Cannon County concerning the Industrial Development Board.

Deficiencies were noted (by the auditors) in the administration of the Industrial Development Board.

Our examination of the fund maintained by the Cannon County Industrial Board (the Board) and administered by the county executive revealed the following deficiencies:

A. The Board did not exercised sufficient oversight for its financial transactions. During the year ended June 30, 2012, the Board held only two meetings. The Board minutes dated October 2011, reflected no details of any discussions held or actions taken. On June 12, 2012, the County Commission appointed new board members, and the new board met for the first time that same night. The only significant actions resulting from that meeting were the election of officers, setting a regular meeting time, and approval of the budget for 2012-13. This lack of oversight resulted in financial transactions and certain decisions being made and carried out by the county executive without the knowledge of the Board..
B. Our review of the financial statements and the minutes of subsequent Board meetings reveal that three companies occupied buildings owned by the Board during the year examined. At June 30, 2012, all three of these companies were delinquent in rent payments owed to the Board …. Of the uncollected amounts …. Only the among due from PC Disposal is reflected as a receivable in the financial statements of the Board at June 30. The failure to collect rent due resulted in a significant loss of revenue for the Board.

Management's Response - Industrial Development Board Chairman

A. In the spring of 2012, I approached the Cannon County Commission chairman and informed him of the fact that the county industrial development board had not had one meeting with a quorum for several years and therefore was having issues conducting business. Until I spoke with the commission chairman, the county commission had never been informed of this problem. The commission chairman contacted every member of the former board and attempted twice to call a meeting of this board. Both attempts to have a meeting failed due to lack of a quorum. On June 12, 2012, the county commission voted to completely replace the membership of the industrial board, except for myself, due to a lack of meeting attendance. The newly formed board has met monthly, with a legal quorum, since their appointment in June and has dealt with numerous issues. I want the record to show that the current board, which is made up of unpaid volunteers, is exerting tremendous amounts of energy to exercise sufficient oversight of its financial transactions; however, years of inactivity by the previous board cannot be corrected in one meeting. As the one remaining member of the former board, I completely agree with the auditor's statement that the lack of oversight of the former board resulted in transactions and decisions being made and carried out by the county executive without knowledge of the board. For increased internal control of industrial board funds, the current board has formally requested that the board chairman be required to cosign all checks written on the board's fund. However, the county executive has refused to allow this change.

B. I concur that the failure to collect monies resulted in a significant loss of revenue. I would like to point out that the county executive was responsible for administering this fund, and he failed to collect these monies. It should be pointed out that two of the companies the audit points out as owning rent did not have written lease contracts nor a cost/benefit analysis performed on both of these companies to determine the correct PILOT amount to begin with. Upon formation, the current board discovered this and immediately had a cost/benefit analysis performed on both of these companies and south to secure written PILOT agreements. One company chose to vacate the industrial park instead of sign a lease contract, and the other is currently in litigation with the board. As stated before, the previous board did not have a quorum when dealing with these companies.

C. This issue took place prior to the current board being instated. The current board has initiated a policy that all future repair work, which is the responsibility of the board, be performed by the county instead of repairs in-lieu-of rent. In the defense of the company in question, the previous board had not had a quorum in years, so the company was having difficulty getting formal board approval for needed repairs.

D. Due to ongoing liti-gation, I cannot comment except to say that I agree with the audit finding in that here was never an executed written contract or lease agreement between the industrial development board and this company.

I agree with the recommen-dation that the Industrial Board should implement policies and procedures to insure adequate oversight of financial trans-actions. The newly appointed board is in the process of doing just that. However, I do not believe that implementing policies will address many of the issues this audit has indentified plus the numerous other deficiencies that the current board has discovered. Policies adopted by the board are practically worthless if they are not followed by the entity's financial management.

Management's Response - County Executive

A. No financial transac-tions or decisions concerning financial transactions were made by the county executive without approval from the chairman of the Industrial Board.

B/C. It is the responsibility of the Industrial Board to ensure that companies occupying buildings owned by the Board stay current, and it is the responsibility of the County Executive's Office to collect such payments. The P.C. Disposal Company was two months delinquent as of June 30,. 2012. The T.H.C. Select Company was delinquent due to a disagreement between company officials and county officials as to how much the company spent readying the building at the time the company took possession. Crane Interiors was not delinquent as of June 30,. 2012, due to an agreement between the company, the county executive, and the chairman of the Industrial Board to allow rent abatement for much needed building repairs. The repairs consisted of drainage ditches, rock, and a concrete slab at the rear of the building. All repairs were visibly inspected by the county executive to ensure the work was completed.

D. It is admitted that the Board had no formal contract with T.H.C. Select as of the June 30, 2012, date. There was a verbal agreement between T.H.C. Select, the Industrial Board, and the county executive at the time T.H.C. Select occupied the building. The county attorney had been asked to prepare a lease agreement, but some issues were not clear at the time and no lease agreement.