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A recent special examination of Salyersville Water Works (SWW) by the Kentucky Auditor of Public Accounts has revealed significant financial and operational issues spanning multiple years. The findings detail a lack of internal controls, improper use of public funds, and questionable billing practices, raising concerns about the management of the public utility.
Key Findings
The audit, which covered the period from July 1, 2021, to March 31, 2024, highlights several systemic issues:
• Lack of Internal Controls: SWW failed to implement basic safeguards, such as securing blank checks and credit cards, reconciling bank accounts, or requiring documentation for purchases.
• Improper Billing Adjustments: Adjustments to customer accounts were made without oversight or justification. The audit noted that multiple adjustments were given to certain customers, including family members of a former general manager, despite a policy limiting adjustments to one per year.
• Questionable Use of Public Funds: Public money was used for personal or excessive expenditures, including employee bonuses, gift cards, and meals. These expenses lacked documentation and were found to violate the Kentucky Constitution in certain instances.
• Unauthorized Fee Implementation: A $7 monthly grinder pump maintenance fee was introduced in 2023 without proper statutory authority, bypassing approval from the City Council as required by state law.
• Property Transactions: The report raised concerns about the legality of real estate transactions, including the transfer of city property to SWW and its subsequent use as collateral for loans totaling up to $400,000.
Transition of Leadership
The audit period spans two mayoral administrations. Many of the issues originated prior to January 1, 2023, when Mayor Stanley Howard assumed office. In October 2023, Mayor Howard dissolved the SWW Board, consolidating control of the utility under the city. This action was taken in response to the utility’s ongoing financial instability and inability to pay bills.
Recommendations for Reform
The report provides a series of recommendations to address these issues, including:
• Implementing written policies and procedures to guide financial operations.
• Ensuring segregation of duties to reduce the risk of fraud.
• Maintaining accurate capital asset records.
• Strengthening oversight of billing adjustments and expenditures.
• Consulting legal counsel to resolve statutory violations related to fees and property transactions.
Next Steps
Under Kentucky law, the City of Salyersville must notify the Auditor and the Legislative Research Commission within 60 days of which recommendations it has implemented and provide explanations for those it has not. The city is also expected to post its responses publicly.
The situation at SWW highlights the importance of strong oversight and adherence to statutory requirements in the management of public utilities. Residents of Salyersville, who depend on the utility for essential services, will be watching closely as the city works to restore accountability and trust.
For updates on this story and its impact on the community, stay tuned to Appalachia Insider.
TO VIEW FULL AUDIT PLEASE FOLLOW LINK: https://www.auditor.ky.gov/PressRoom/Pages/Auditor-Ball-Releases-Salyersville-Water-Works-Special-Exam.aspx
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