During an El Dorado City Council meeting Oct. 13, Mayor Veronica Smith-Creer admitted that she was "in trouble" because she did not initially add the city's 2020 legislative audit report to the agenda for the meeting.
The issue was one of several that had been raised just a few hours earlier when the mayor faced the Legislative Joint Auditing Committee: Arkansas Legislative Audit (LJAC) in Little Rock about multiple findings in the audit.
The audit report and management letter were dated Aug. 23 and the LJAC, chaired by Sen. Trent Garner (R-El Dorado) and Rep. David Hill (R-Almyra), reminded Smith-Creer that the audit should have been placed on the agenda for the first regular council meeting after Aug. 23.
Smith-Creer clarified that she received a management letter dated Sept. 12, saying that the LJAC voted Sept. 9 to defer the audit report to its Oct. 13 meeting so that the mayor could respond to one finding.
The matter pertained to payments for a carpet cleaning and vacuum repair service that is owned by Smith-Creer and her husband, Bobby Creer, and payments to two city employees for work performed after hours.
Garner noted that Smith-Creer had responded that the council did not hold its next regularly scheduled meeting on Sept. 8.
The meeting was canceled when the majority of city officials either arrived late or failed to show after having attended "Tip of the CAP," an Arkansas Department of Transportation event to celebrate the Connecting Arkansas Program.
To handle some city business, the council held two back-to-back specially-called meetings on Sept. 23 -- the latter of which was called by Smith-Creer.
Neither special meeting addressed the audit findings.
"Do you have a city council meeting tonight after the audit findings?" Garner asked Oct. 13.
When Smith-Creer said yes, Garner asked if the audit report was on the agenda for the council meeting.
"It is not ... It will be added but it is not on the agenda, though," the mayor replied.
The response, or rather, the length of the response, was one of several issues about which the LJAC grilled Smith-Creer.
"The interesting part is whenever we get responses that are short and say 'we will comply with something' and then immediately afterwards, we find a case where you're not complying with what we told you was law, that brings up a lot of red flags in my opinion," Garner said.
In addition to the "short responses," Smith-Creer was taken to task for audit findings, failing to follow through on responses to some of the findings and what LJAC members deemed a lack of acceptance of culpability for some of the findings.
Later, while discussing the 2020 legislative audit during the city council meeting, Smith-Creer said, "Much of what the legislative audit says that falls under me ... under my position -- let me say that -- under my position, I have no control over."
"But I am the mayor and as the mayor, I get the brunt of it," she continued.
Smith-Creer also reminded council members that "every mayor has" had audit findings and there has been a high employee turnover rate in City Hall during much of her tenure, including 2020.
Audit findings
Among the findings were:
• The city's accounts were under-collateralized by more than $7.74 million (26% of total deposits) by the end of 2020, meaning that the accounts were set at an amount that was too small for the city to use as collateral for the principal amount in a lending transaction.
The status is out of compliance with state statute 19-8-107, which regulates public finance and depositories for public funds.
In the General Fund, the city's total assets came to $24.83 million and total fund balances, $24.8 million by the end of 2020.
Revenues in the general fund totaled $17.7 million and expenditures, $12 million for the year.
• The city paid the El Dorado-Union County Chamber of Commerce $45,000 for economic development services and El Dorado Festivals and Events, Inc./MAD $100,000 to operate the Mad on Ice skating rink.
The legislative audit showed that a contract for services had not been executed for either, as required by state law.
Per the audit, $75,039 came from the city's General Fund and $24,961 from the El Dorado Advertising and Promotion Commission budget.
At the start of 2020, the A&P commission awarded a total of $360,000 in requests for proposals (RFPs) to help promote 2020 events in El Dorado -- many of which were canceled due to the COVID-19 pandemic.
MAD received $158,500.
During a specially-called meeting in October of 2020, A&P commissioners agreed to reallocate the majority of the funding, $100,000, to promote and cover operating expenses for the second annual Mad on Ice skating rink.
Pam Griffin, MAD president and chief executive officer, told commissioners then that of the $158,500, $40,319 had been spent and there was an outstanding invoice of $9,622 by Oct. 7, the day of the special A&P meeting.
Griffin also explained then that MAD was expected to spend another $8,559 in advertising dollars on other events, not including the skating rink, for the remainder of 2020, leaving a balance of $100,000.
At the time, Griffin also said that MAD had reached out to City Attorney Henry Kinslow to verify the legalities of using A&P funding for operating expenses.
Kinslow cited a city ordinance and state law to support such a use for A&P dollars, which are generated by a 3% lodging tax.
He pointed to city code, Section 90-54, which permits A&P funds to be used for "the operation of tourist-oriented facilities, including, but not limited to, theme parks and other family entertainment facilities."
Arkansas statute also says that A&P money may be used for the "operation of tourist promotion facilities in the city or the county where the city is located if the city owns an interest in the convention center or facility, and facilities necessary for, supporting, or otherwise pertaining to, a convention center ..."
A&P Commissioner Barbie Luther, now chairman of the commission, said that the group regularly faces such questions about events it is asked to support.
Each event and RFP should be evaluated on its own merit, Luther said, noting that Kinslow had provided an opinion saying that the practice is legal.
Commissioners briefly discussed the 2020 audit finding during their last regular meeting in September.
"We're working with Henry Kinslow and we have a contract drawn up and I figure I'll get the full commission's approval at the next meeting," said Luther.
The group will next meet at 1:30 p.m. Nov. 16 in the Council Chamber of City Hall.
On Oct. 13, state legislators hammered Smith-Creer about the $100,000 EFEI/MAD expenditure, with Garner asking, "How did that happen?"
He went on to say there were a few instances in the audit report in which the city did not secure a contract for services, adding that "it seems to be a systematic problem with the city."
Smith-Creer said she could not explain the finding and told committee members that the A&P commission operates separately and the mayor does not sign the commission's checks.
Garner then pressed Smith-Creer about culpability, saying, "Mayor, we're pretty methodical about determining who's responsible for what and specifically on this finding, you and the chairperson of the A&P commission (then-Commissioner Barry Bagwell) are the people responsible for this."
Hill asked if Smith-Creer had followed up on a response to obtain a contract for services with EFEI/MAD for 2020.
"It appears not," Smith-Creer said.
"So, the answer is no," Hill replied before moving on to questions about responses to other findings.
• The city paid a local contractor, ERC General Contractors, more than $1.4 million for various city projects in 2020.
State legislators homed in on the low bid that was submitted by ERC, referred to as "Contractor #1" in the audit report, and accepted by the city in early 2020 for a drainage project on 10th Street between North West and North Washington avenues.
The project proceeded for more than a year, during which the city paid $344,878 without any supporting documents, including change orders, to justify the excess payments.
Additionally, the state legislative auditors noted a total of $60,414 in duplicate billings and charge overages, per a review of invoices submitted by ERC.
When the project remained unfinished by July of 2021, the El Dorado Water and Public Works Board, which is made up of city council members, voted to go with the second highest of the original bids.
Diversified Construction and Design was awarded the new contract and completed the job in November of 2021 for $69,493, bringing the total cost of the project to $414,371.
Auditors also reported that ERC charged the city $19,132 for construction materials that were purchased from third-party vendors, adding they could not find any documentation to validate the charges.
There was also some question about the legality of hourly rate bids that were accepted in December of 2019 for ERC to perform construction projects in for the city in 2020.
Several of the projects exceeded $35,000, state legislative auditors reported, adding that the city did not solicit contracts or bids for the work.
State law requires that the city seek bids for projects that exceed $35,000.
• According to the audit, the city violated state law by spending a total of $5,239 -- $1,000 to a business owned by the spouse of an elected official and a total of $4,239 to two Department of Public Works employees for "miscellaneous work" that was performed after hours.
Neither expense was authorized by a city ordinance, auditors noted.
Smith-Creer told the Legislative Joint Auditing Committee that the $1,000 payment went to BC Carpet Cleaning and Vacuum Repair, which is co-owned by the mayor and her husband, Bobby Creer.
The mayor also said that BC had done business with the city prior to her taking office on Jan. 1, 2019, and was hired through the Department of Public Works to clean the El Dorado Municipal Auditorium, among other work.
She said one of her mayoral predecessors advised her "that as long as I was not the person that contacted him to do that work, that was not an issue."
"I can see now that that is not accurate but that is no longer an issue because the public works department no longer falls under my administration. It falls under the city council," Smith-Creer continued.
The payments to the two employees also stemmed from work that was performed after hours at the auditorium, she said.
Smith-Creer said the payments should have come in the form of overtime, rather than "miscellaneous" pay.
Pierce Moore, the city's human resource director, said that when he discovered the practice of labeling such payments as "miscellaneous" he talked to Smith-Creer, a former city treasurer and a city collector about the matter.
He said the overtime/after-hours work typically stemmed from events in the auditorium, the use of the city's trolley bus and two mobile stages.
"They were city employees on the city's payroll but when they would go to the auditorium, they would do a PO (purchase order), like as an independent contractor," he explained. "They would cut them a different check under 'miscellaneous' and they had been doing that for years."
Similar findings were reported in the 2018 and 2019 city audits.
• Moore, formerly the mayor's administrative assistant, was reclassified in June 2020 as the city's human resources director and his annual salary increased from $35,277 to $55,000.
The change was not approved by the city council.
Garner asked Smith-Creer if the matter had been rectified and she reminded him that the LJAC had addressed the matter with her and Moore in 2021.
Smith-Creer previously explained that she did not create a new HR director's position.
Rather, the title of an existing position -- city personnel and payroll clerk -- was changed and the bump in salary aligned with Moore's extensive background and experience in HR and to a more comparable pay scale.
The council approved the expenditure in 2020 budget amendments, but state auditors said the budget was "not detailed enough to determine if the Human Resources Director's salary was authorized."
By last January, Moore's salary had risen to $69,000, which was included in the mayor's administration budget.
In response, the city's Finance Committee questioned the salary and duties/responsibilities of the HR position and voted to cut the HR director's salary to $36,000 in the 2022 budget.
The committee had also asked Moore to gather additional information, including a job description and survey to assess HR directors' salaries in other Arkansas cities that are comparable in size to El Dorado.
City officials have not revisited the issue.
• Administration employees received a 3% pay increase last year without approval from the city council.
The raises totaled $5,964 for seven employees, at least two of which were no longer working for the city by the time the 2021 city budget was adopted.
Earlier this year, Moore explained to the city's Finance Committee that when the 2021 budget was passed in August of 2021, it included a 3% pay increase for city employees.
Moore said he sought guidance and direction, via a text message, from Council Member Vance Williamson, who serves as chairman of the Finance Committee, asking if the raises were retroactive to Jan. 1, 2021, when the budget would have normally gone into effect.
When he did not receive a reply from Williamson, -- who said he did not receive a text from Moore --, Moore said he spoke with Smith-Creer about the matter and moved forward with processing payroll documents to reflect the 3% pay increase, beginning Jan. 1, 2021.
The two former employees were still working for the city at that time.
• A total of $3,134 in unpaid rental fees ($2,917) and court costs ($217) pertaining to rentals of city facilities, including the municipal auditorium by concert promoter Michael Jackson, of Mr. Mike's Productions, between June of 2015 and October of 2017.
In August of 2021, four months after the Union County Circuit Court ruled in favor of the city in a judgement that had been filed against Jackson, the city council agreed to allow Jackson to continue renting the city facilities as long as he pays $500 toward the judgement, in addition to the regular rental fee, each time Jackson rents a city facility.
Kinslow said Jackson has made one $500 payment since the court ruling.
Prosecuting attorney
The 2020 legislative audit for the city of El Dorado has been turned over to the 13th Judicial District Prosecuting Attorney's Office for an evaluation.
Jeff Rogers, chief prosecuting attorney for the district, said he anticipates that within a few days, his office will issue a letter with its own findings, research and recommendations, along with those of state legislative auditors.
"It'll also probably go to the city attorney and the auditors because we are required to do so," Rogers said. "It's one of many recommendations we are required to do, as we do with any of the governmental entities and audits that are done for the six counties (Union, Columbia, Ouachita, Calhoun, Cleveland and Dallas) in my jurisdiction."
Editor's note: This is the second in a two-part story about the 2020 legislative audit. The first story was published in the Sunday, Oct. 23, edition of the News-Times.