Mount Sterling’s general fund is ending fiscal year 2016 more than $400,000 in the red, stemming mostly from theft by former village administrator Joe Johnson, as well as poor accounting practices.
Last week, fiscal officer Cindy Miller and representatives from the state auditor’s Local Government Services (LGS), were finally able to close the books on the year. It’s been a grueling process due to missing records, years of oversight and an ongoing criminal investigation.
They found that the general fund is in the negative by $406,044, although almost all other funds are still positive.
“It’s better than what they were expecting,” Miller admitted. “Initially, they thought there would be five or six negative (funds).”
The general fund is the sort of catch-all fund in the village’s coffers. It’s used to pay bills and employees. It can also be used to supplement other funds in an emergency.
As that money is used quite literally to keep the lights on, and the state is allowing Miller to continue paying bills to keep the village running.
“Since I have closed out 2016, the state is now allowing the vendors to be paid,” she said. “Until further notice from the state, I am paying all bills.”
Dominic Binkley, a spokesman for the Ohio Auditor’s office, said although the general fund is in the negative, all other funds are positive, so they can still pay bills as they technically have money to spare.
However, the village can’t just move the money over to the general fund, due to regulations. This means the village needs to wait for guidance from the state auditor on how to pay off the balance. The auditor’s office is reviewing the end-year balance to determine how to proceed.
“When a village enters a difficult financial situation involving a loss, the state has ways of classifying the situation as a fiscal caution, watch or a fiscal emergency,” said Binkley. “They will set up some recommendations, depending on the situation, to slow the loss.”
In this case, the village may be classified a watch or an emergency.
A watch is declared when there’s a deficit that exceeds a little more than 8 percent of the income the village can get.
The most severe classification is a fiscal emergency, which can be declared if there’s a deficit more than 16 percent of the village’s income, the village can’t pay employees without assistance for 30 days or it defaults on a loan. The village’s budget for 2016 was about $621,000, putting the current general fund deficit at about 65 percent.
The next step after the state declares the village’s fiscal situation depends on the severity.
For watches, council has 120 days to draft a plan to go back to a positive general fund and avoid a future situation.
If it’s an emergency, the plan is directly created by a commission set up by the auditor’s office, which would consist of a representative of the auditor’s office, a representative of the treasurer’s office, Mayor Lowell Anderson, President Pro-Tem Mary Lou Stiverson-Ratliff and three representatives selected by Anderson and Stiverson-Ratliff, as approved by Governor John Kasich.
Currently, the state auditor’s office is reviewing the finances and will meet with council to discuss what the situation is in about 10 days, according to Miller.
The state ordered a full-scale audit of the village’s funds after the previous mayor, Charlie Neff, resigned last year. Johnson is accused of embezzling up to $1 million from the village. He pleaded guilty to racketeering, theft in office, money laundering and tampering with records last month.
As part of the plea deal, Johnson is required to pay back $724,239 to the village of Mount Sterling, as well as the cost of the audit, estimated to be $42,460.
“I am being told by LGS that the general fund is mostly from the issues with Joe Johnson,” said Miller. “I do not have anything in black and white from the state that says that. Hopefully when they meet with the village, that will be addressed.”
In other news on Mount Sterling’s finances:
• Miller will stay on until April 15 as fiscal officer. She was originally going to resign in February but because the books took longer to close than expected and the auditor’s office hasn’t given direction yet, she decided to wait.
“I told the mayor and [council member Rebecca Burns] that I would stay on until things are ready,” she said. “I still plan to help out with my son starting this summer.”
Anderson said he was going to wait to put out a notice for resumes. Miller said she hopes they start looking soon so her successor can be properly trained.
• Stiverson-Ratliff stepped down from the village’s finance committee as well as her position as committee chair. Burns, who is already on the committee, will take over as chair while council member Diane Spradlin will now serve on the committee.
“I have some time constraints and I didn’t feel I could devote the needed time to the position any longer,” said Stiverson-Ratliff. “I still serve as President Pro Tempore, representative for the village to the Sterling Joint Ambulance District and the parks and recreation committee. So, I’m still giving it my best.”
Maximilian Kwiatkowski can be reached at 740-852-1616, ext. 1617 or on Twitter @MSFKwiat.