BY KRISTEN BUCKLES
Chuckey Utility District's 2012-13 audit features numerous instances of what Certified Public Accountant Mickey Ellis has described as "questionable practices by the management."
The audit listed 17 findings, among them unauthorized bonuses, unreliable or incomplete meeting minutes, unauthorized fuel purchases, inadequate control of credit card purchases, missing records and unauthorized loans.
Of the findings, nine were described as "material weaknesses" and five were described as "significant deficiencies."
A "material weakness" is "such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis," the audit says.
A "significant deficiency" is "less severe than a material weakness, yet important enough to merit attention by those charged with governance."
The Chuckey Utility District, along with Cross Anchor Utility District, placed four employees on leave in October after Ellis reported his preliminary findings.
Employees placed on leave include: former manager Shirley Collins; her husband, Willie; their daughter, Kandie Jennings, who became acting general manager after Shirley Collins retired; and Jennings' husband, Bill.
Thursday's release of the audit was the most complete look the public has had so far of those "questionable practices."
Chuckey Utility District Board President John Carter, who also serves as a County Commissioner, commented on each of the findings on Thursday, following the audit's release:
* Unauthorized Bonuses
"The manager effected a holiday and longevity bonus check for the former manager, as well as bonuses for herself and selected others without apparent authority or approval from the board," according to the audit, which lists this as a violation of state law.
The Greeneville Sun previously reported Shirley Collins' 2012 bonus at $28,700.
Kandie Jennings received a $2,640 bonus in 2013 and a $6,400 bonus in 2012.
According to the board, these bonuses were unauthorized.
* Defectively Executed Consulting Contract
"A consulting contract between the district and the former manager was apparently signed by the board president, although he does not recall signing it. The board secretary did not attest the contract. Further, the minutes approving the contract appear to have been altered after signature by the board president," according to the audit, which further casts "uncertainty" on the "validity and enforceability of the document."
According to documents obtained after a prior records request by The Greeneville Sun, Shirley Collins received a monthly check of more than $7,000 since her retirement for services as an independent contractor/consultant.
Since her retirement, she received over $50,000 from the district between April and October of 2013.
Carter said on Thursday that prior management altered the minutes to reflect this contract.
"They whited my name out and added another couple paragraphs, then added my name back," he said of the handwritten minutes.
He said that Chuckey Utility District's Board did approve to pay Collins' health insurance for two years after her retirement, but never approved a consulting fee.
"The way they wrote it up, it looked like we approved to pay her, too, but we did not," he said.
* Duty Requirements Unrelated to District Business
"Several employees were required at various times to perform duties at the manager's discretion which were unrelated to district business, but wages were paid from district funds, according to the audit, which lists this as a violation of state law.
Carter declined to comment on this finding, saying that this was a report to the auditor from employees.
Ellis also declined to elaborate on this finding.
* Meeting Minutes Unreliable or Incomplete
"Minutes of meetings were maintained by the manager. Some actions remembered by the board were absent from the record, while one instance of alteration was apparent and the ensuing entries were not familiar to board members," according to the audit, which notes that this is a violation of state law.
Carter said this problem was prevalent, including in relation to the issue of the bonuses that did not have board approval.
"Part of the minutes were, I think, gone and weren't filled out appropriately and weren't signed where they needed to be," he said.
* OPEB Plan Not Properly Authorized
"The board entered into an Other Post-Employment Benefits (OPEB) contract and Trust agreement, but documents did not bear the board secretary's attestation. Subsequent revisions to the documents bear the board president's signature but he denies that he signed them," according to the audit, which notes that this is a violation of the district by-laws.
Carter said that this finding is in relation to the earlier-mentioned consultation contract, which he said was not filled out completely.
"It's just not my signature on it," he said. "We never agreed to do anything like that -- none of us."
* Unauthorized Fuel Purchases
"An employee was paid mileage for reading the master water meters. However, he had a Fuelman credit card on which he regularly purchased gasoline. [...]
"Diesel purchases from a local market were also charged to the card, which was issued through the force (joint venture) account, but force account employees purchase diesel at the local Co-Op, which does not accept Fuelman cards.
"Chuckey employees do not purchase diesel at the local Co-Op, but there are separate Fuelman cards for each piece of off-road equipment," the audit states.
The audit further notes that, "the district is in violation of state law and fails to safeguard its resources."
Carter said that the employee in question is Willie Collins, who "was the only one that drove his own vehicle."
* Improper Signatures
"Several documents examined displayed the signature of the board president but he has repeatedly denied they are his," according to the audit, which notes lack of adequate oversight as presenting increased opportunity for fraud.
Carter said that there are several documents on which he does not believe the signature present was his, although he said there may have been times a document was misrepresented and he signed it.
* Undocumented Expense Reimbursements
"Several employees receive fixed annual reimbursement amounts for business use of their personal cell phones. They are not required to justify or account for the business usage nor must they request the reimbursement," according to the audit. "Board members were unaware the amounts were being paid and no approval was evident in the minutes."
The audit notes this as a violation of district policy, as the district did not bid the service.
Carter said that these allowances were given once a year instead of monthly.
"I was under the impression that we owned eight to 10 phones and that was the only phones being used," he said. "I had no idea they were doing that. That was another one of my mistakes."
He further detailed that some employees had "top of the line" cell phones when a more basic model was all that was necessary.
The Greeneville Sun previously reported that Shirley Collins' 2012 telephone allowance came in at $2,400. Kandie Jennings' was $3,600 in 2013 and $3,000 in 2012.
* Inadequate Purchasing Policy
"While the district has adopted a purchasing policy that is compliant with [state law], it is not detailed enough to define discretionary purchase authority/limits applicable to management; amounts above which board approval is required," according to the audit.
"The utility manager held a retirement party for the retiring manager at a total cost of approximately $7,600. The board's input regarding appropriate cost was not sought.
"As a result, the board had no opportunity to evaluate whether the cost was in compliance with applicable law," the audit continues, noting this as a failure to safeguard assets.
Carter said that the Chuckey Utility District Board commissioners had believed Kandie Jennings to be personally paying for the retirement party, which he and other commissioners attended at the Collins' home.
He added that the board will adopt a new purchasing policy, among other policy revisions.
"It's not our job to micromanage that office," he said. "That's the manager's job. It just got out of hand."
* Failure To Communicate Information
"The manager was routinely provided essential financial information [...] by the district accountant to present at the regular board meetings. The manager did not deliver the documents for the board's consideration," according to the audit, which notes this as preventing the board from providing oversight.
Carter said that this was not something of which he was aware prior to seeing the audit. He said employees have told him since the former management was placed on leave that the management previously told employees that they could not attend board meetings.
* Inadequate Control of Credit Card Purchases
"A MacBook Pro computer was purchased on a district credit card by the manager, however the unit could not be found on district property or in district vehicles," according to the audit. "Further, all district technology operates on the Microsoft platform.
"A significant charge to the Olive Garden restaurant was made, but no details regarding business purpose were available," the audit continues, adding that this may have been a violation of state law and was without board approval.
Carter said that Kandie Jennings purchased the computer on her credit card, but that the district has confiscated all district credit cards for now.
According to bookkeeper Stephanie Wallin, the Olive Garden bill was $710 and did not detail the purchases.
* Vacation Policy Inconsistently Applied
"The manager effected pay for unused vacation for herself and selected others while promulgating the belief among remaining employees that vacation days were to be used or lost, and a payment option was not offered," according to the audit.
Carter said that he hopes to see the Chuckey Utility Board address the vacation policy during its February board meeting.
* Improper Reporting to the Tennessee Consolidated Retirement System
"The former manager was paid bonuses which were not approved by the board of commissioners, and which were reported to TCRS as earnable compensation," according to the audit.
* Missing Records
"Numerous receipts for credit card purchases, fuel purchases and check stubs/receipts for payroll payments could not be found in the office or other district-owned locations," according to the audit, which notes that this may be a violation of state law.
Carter said that such records include those for credit card and fuel card purchases.
* Improper Employment Practices
"Management (non-board) fostered an employment environment that exposed the district to legal challenges in the areas of whistleblower policies, retaliatory discharge, and wage and hour violations," according to the audit.
"This occurred through direct threats to several employees for their continued employment if they were guilty of upstream information transfers."
Carter said he has heard such reports from several employees who have told him that they were "not allowed" to approach board members with complaints.
"I think they were afraid they would lose their job," he said.
* Unauthorized Loans
"The manger of Chuckey Utility District (and also Cross Anchor Utility District) caused the Cross Anchor Utility District to write a check for a Chuckey debt (a tank painting invoice in the approximate amount of $53,000) from the Cross Anchor money market account because cash flow was such that Chuckey could not pay the bill when due," according to the audit.
Carter said that he does not understand why this took place and that he disagrees that the appropriate cash flow was not available. He said that the funds were only "borrowed" for a few days.
* Purchasing Policy Not Followed
"The manager failed to acquire bids and document compliance with prcedures for equipment purchases in excess of $10,000 per item," according to the audit.
Carter was not familiar with the background of the finding or any specifics, but Ellis did say that the purchase of a boring rig was an example of equipment for which the district did not issue bids prior to purchase.