Cooking the Books at the Papio-Missouri Natural Resources District.

NTF Issue Paper: papiomrnrd42.doc.  5-13.

NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
COOKING THE BOOKS: CREATIVE ACCOUNTING AT THE PAPIO-MO. RIVER NATURAL RESOURCES DISTRICT. 

FUNNY FISCAL FIGURES.  NRD Board member Scott Japp has requested the state auditor to investigate the finances of the Papio-Mo. River NRD.  Large discrepancies among bank statements, audit reports, budget and monthly financial reports, and the lack of cooperation from NRD staff and other board members convinced him to ask for this investigation.  Japp first recognized serious problems during FY 2012-2013.  Three budget proposals, dated July 10, 2012, August 7, 2012, and Sept. 11, 2012 indicated that cash on hand in the general accounts totaled $5,398,300, cash on hand in the bond revenue escrow fund totaled $4,883,518, and all cash available totaling $11,597,012 (p.1).

1) However, the June 30, 2012 Wells Fargo bank statement showed a general fund balance of $9,499,337.40. (p.8).   The board-sanctioned annual audit report ending June 30, 2012 reported a checking and petty cash total of $9,468,948.  (p. 2). The difference between the funds in the bank account and the amount shown by the audit report was $30,389.  The General Fund balance provided to board members was $5,398,300. (p. 1). This figure represents an underreporting of $4,070,648 ($9,468,948 – $5,398,300) (p.29).

2) The FY 2012-2013 budget proposals given the board included cash on hand in the bond revenue escrow fund.  All 3 budget proposals reported cash in this account at $4,883,518.(p.1).  However, the June 30, 2012 Wells Fargo bank statement showed an ending balance of $5,001,371.35. (p.4).  The board-sanctioned annual audit report ending June 30, 2012 reported this money market account at $5,001,370.(p.2).  The bond fund balance provided board member for budget purposes was underreported by $117,852. $5,001,370 – $4,883,518) (pp.1, 29).

3) All 3 budget proposals given the board showed total cash available at $11,597,012. (p.1). The board-sanctioned annual audit report ending June 30, 2012 showed total general fund accounts standing at $15,480,859. (p.2). Thus, the total cash balance given board member for budgeting purposes was underreported by $3,883,847 ($15,480,859 – $11,597,012).

Because of this confusing and misleading financial information during the budget process, the board overbudgeted $3,883,847 when figuring the property tax rate.  The tax rate could have decreased by 0.0074 to 0.025353, offering taxpayers tax relief.

BOND ISSUE BLUNDERS.  In 2010, the NRD issued general obligation bonds as allowed by LB 160.  The board approved $13,109,775[1] of bonds for 6 projects.  The NRD board never has voted on building Dam 15A, and this dam was not listed on the 2010 bond issue (P.B2).  This dam was not listed in the NRD board resolution for bonding on Feb. 11, 2010.  However, the board has voted to spend $30,000 on engineering fees for this dam site.  The board also switched bond issue funds from the Waterloo Floodway Purchase to the Pigeon Jones project without opportunity for public comment.  Board members should have used this excess money to pay off bond interest in 5 yrs.

1) Information provided by NRD staff reported escrow funds remaining in the Waterloo Floodway Purchase at $670,187.  However, $265,000 was reported for the beginning balance of this account on July 1, 2012.  Thus, this bond account is short by $405,187.  The NRD now is paying interest on bond monies that it is not utilizing.

2) Information provided by NRD staff reported no escrow funds remaining in the Pigeon-Jones Site.  However, $550,291 was reported for the beginning balance of this account on July 1, 2012.  From where did these additional bond funds come, as the board did not vote to approve additional bond monies?

During the FY 2012-2013 budget process for the Pigeon-Jones Site, the board budgeted $5,476,291 in total income plus $1,243,709 from general revenue to cover the budgeted expense of $6,720,000.  However, from July 1, 2012 through Jan. 31, 2013, only $1,507,969 of revenues received.  With actual revenues of $1,507,969 plus the budgeted general fund revenues of $1,243,709, only $2,751,678 was available to spend on this project.  However, through the end of Jan., 2013, total monies spent on this project totaled $3,788,848.   Thus, overspending of $1,037,170 done without prior board discussion or approval.

3) During the budgeting process for Dam 5, a board majority approved $5,852,447 of additional bonds for this project.  However, in Dec. 2012, a board majority voted to issue a whopping $15,600,000 in bond revenue (p. B3), yet the staff obtained $16,000,000 in bond revenue.  The first problem is that the NRD staff obtained $400,000 more in bonds than authorized.  Secondly, the board majority voted to approve about $10 million over the amount budgeted!  Presently, these additional funds are languishing in a bank account awaiting use.

4) The FY 2012-13 budget for Zorinsky Basin reported cash on hand in the bond escrow account at $1,353,626, board budgeted issuing bonds of $2,161,234, and a shortfall for this account of $150,140, to come from general revenues.  The board never approved these bonds, making this project short revenues of over $2 million.  However, this project proceeded with $2.2 million spent through Jan. 2013.  This shortfall of about $700,000 will come from General Fund monies.

5) The $5,398,300 (p.1) of general cash available through the budget, plus $3,398,039 of unused bond funds (Zorinsky Basin and Dam 5), total cash available should have totaled $8,796,339.  However, the Jan. 31, 2013 financial report to board members reported bond revenues of $15,600,000.  We suspect that the NRD presented this figure to cover its overspending.  NRD staff erroneously reported the $15,600,000 of bond revenue to an account named Papio DS-15A, though the board never approved bonds for this project.  Realistic accounting should show a shortfall of $9,288,627, the $6,311,392 year-to-date balance minus the $15,600,000.

6) Another stark example of misuse of the bond escrow fund is the bond escrow balance of $2,044,413 for Dam Site 5 on July 1, 2012.  Through Jan. 31, 2013, total spending for this project was $4,784,077.  This $2,739,664 excess expenditure was funded by general funds and the misappropriation of bond escrow funds from other bonded projects.  On Jan. 4, 2013, the NRD made a withdrawal of $1,019,139.15 (p. 6) from the Wells Fargo NRD bond account for Dam Site 5.  This sum was partial payment of $2,073,442 to Hawkins Construction.  This withdrawal left $911,989.29 in the bond escrow account.  But this bond escrow account should hold at least $1,485,478 for the Western Sarpy Project and Waterloo Floodway Purchase program.  Currently, this Wells Fargo bond account is short about $573,489 in funds.

NRD accounting is suspect.  For example, the Wells Fargo general fund account shows a total of $22,887,682.87 (p.7) of withdrawals, yet the monthly financial reports provided by staff to the board reported expenses of $19,686,311.75, a discrepancy of $3,201,371.12.  (p. 7).

Time to elect new board members to the Papio-Missouri River NRD!

 

 



[1] Total sum after deduction of servicing fees.

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