Friday, Jul. 11, 2008

City’s accounting mess shows failure of stewardship

THE MORE DETAILS uncovered about Columbia’s growing insurance costs, the more evident it becomes that the city’s poor accounting practices have taken a toll.

Some city officials have insisted that the city is financially stable despite audits being delayed, the failure to follow procedures, the lack of timely, accurate financial reports and budgets being built without firm figures. After all, they said, no money is missing.

But increased insurance and other costs have been eating up tax dollars, and city leaders haven’t been the wiser. Staff writer Adam Beam’s Wednesday article on city finances revealed that officials didn’t realize they had paid about $18 million more for health insurance and other costs in the last three years than was budgeted.

The deficit in the city’s risk-management fund, mostly due to increased health insurance costs and claims, was masked by large end-of-the-year surpluses.

The risk-management fund experienced a $500,000 deficit in the 2005 budget year, followed by an $11 million shortfall the next year. Records from 2007, which are now being audited, show an $8 million deficit.

Bud Addison, senior manager with Webster/Rogers LLP, which is leading the city’s audit, warns that unless the city revamps its health care plan and properly accounts for the increases, it could run into big problems. Mr. Addison said that if the current pattern continues, in a year or two the city could find itself in a deficit.

Mayor Bob Coble and city manager Charles Austin have acknowledged that the city probably could have handled the insurance matter better had there been better accounting. Mr. Austin said city officials have been aware of the underbudgeting problem since last year. But it’s been difficult to gauge how big a problem it was because of the city’s accounting woes.

Columbia is self-insured and pays about 3.4 percent more per employee for health care than other S.C. cities of comparable size, according to BlueCross BlueShield of South Carolina, which administers the city’s plan. Mr. Austin is considering a proposal to require employees to pay more for their health insurance.

Mr. Austin also said the city can’t afford to pay more than it budgets. But that’s exactly what the city has done for three years. And who knows what else lurks out there if the city doesn’t get its ducks in a row?

Mayor Coble and Mr. Austin have said the city, which is getting help from the South Carolina Municipal Association as well as Webster/Rogers, should soon have things back on track. There are plans to reorganize the finance department, institute new policies and procedures, train employees and hire a new finance chief.

It’s good the city is finally taking steps to repair a finance department that’s been in shambles. What is yet to be determined is how much this failure in accountable stewardship has cost taxpayers.