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Public Notices

April 20, 2014

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State Audit Issues 'Finding' In County's $1.93M Investment

Originally published: 2013-02-26 11:07:51
Last modified: 2013-02-26 11:08:45
 


BY KRISTEN BUCKLES

STAFF WRITER

The Tennessee Comptroller of the Treasury's audit report for Greene County in 2011-2012 has found that the investment of some county funds did not meet the standards set by state law.

The report, released Monday, found a "material noncompliance" related to the investment of $1.93 million of idle county funds through an investment company.

A "material weakness" is defined by the audit as a deficiency so significant that it creates the reasonable possibility that a misstatement of the county's finances "will not be prevented, or detected and corrected on a timely basis."

Another, non-material finding was made against the Greene County School System in relation to a reported conflict-of-interest in contracting a business owned by a county commissioner. (Please see related article, this page.)

The overall audit was "unqualified," which is preferable to a "qualified" audit report in which auditors express serious reservations about being able to determine the true financial status of the company or organization being audited.

The state auditors also declared Greene County as a "low-risk" auditee.

'MATERIAL FINDING'

In the material finding, the investment company, Highland Capital Management, invested the huge bulk of the idle funds, $1.86 million, in 61 various government funds, some of which the audit considers "questionable investments" into municipal authorities and territorial (Puerto Rico) bonds.

Municipal authorities and territorial bonds are not authorized investments by state statute, the finding notes.

"Some of the bonds purchased were either not rated or were rated lower than minimum requirements established by state statute," according to the finding.

The remaining investment of $74,000 was in mutual funds, which state law also does not permit a county to do.

'NOT MONITORED'

"The company was given the authority to act on behalf of the county to select and dispose of various investment instruments and to receive compensation for its services rendered," the finding noted.

"The trustee did not sufficiently monitor the activity of the invested funds to ensure the investments were of the type permitted by state statute.

"As a result, many investments made by the investment company were not permitted by state statutes."

NO MINUTES OF MEETING

The County Commission Investment Committee reportedly approved these investments, but minutes for the meeting were not kept by the committee, according to the audit report.

A reporter from The Greeneville Sun attended the meeting and wrote a news story.

The newspaper's archives show that the committee meeting occurred in February 2011, during which a motion by Commissioner Nathan Holt received unanimous approval from the committee for the investment of $2 million for two years into these "certificates of deposit."

The article states that the reason for the action was Trustee Walker's reporting to the committee that Highland promised higher interest rates.

A Greeneville Sun reporter routinely attends every meeting of this committee; the meetings normally occur quarterly.

Trustee Dan Walker liquidated the investments in September 2012 when the auditors found the issue and called the county's attention to it, the finding concludes.

The Investment Committee last met on May 10, 2012 and on July 24, 2012, according to the Sun's archives.

Since the committee has not met since July 24, there has been no public reporting of the $1.93 million liquidation until the release of the state audit report this week.

COUNTY RESPONSE

"Dan made an investment with county funds and actually made the county money," Mayor Alan Broyles said in an interview on Monday.

"This interest is way low now. A lot more interest was paid through the investments here. It was just a case here that they weren't fully government-backed."

Mayor Broyles also said that he has issued a memo to all chairmen of the committees that minutes are to be submitted through his office of every committee meeting.

Walker also made a brief statement of explanation, saying: "We didn't stand a chance of losing anything, it was just that they were supposed to be AAA [rated.]

"Just as soon as that happened [as soon as the state auditors said that there was a problem], we went ahead and closed it out. We don't have any more of the treasuries [bonds]."

 
For more information and stories, see The Greeneville Sun.

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