Williamsport, Pennsylvania — It’s been a month since Williamsport City Council has been made aware of the city’s dire financial situation.
At the time, Tracy Rash, who was brought into the finance department on a contract basis after the departure of finance director Joe Pawlak, discovered that the city had several outstanding issues with the IRS, state audits incomplete, bank accounts with inaccurate information and grant reports that had not been followed up.
Since then, Mayor Derek Slaughter said one of those IRS issues has been resolved.
Slaughter said Rash was able to waive the $12,000 penalty the city was facing for filing its fourth quarter 2021 taxes late. He said he was unaware that those taxes were filed late.
That still leaves the city facing a $160,000 fine from the IRS for not sending the city’s W2s, 1095s and 1094s to the IRS. Slaughter says the chances of this being canceled are still “slim to nil”.
Slaughter also said some of the more than 50 bank accounts the city operates have been reconciled. He did not provide details on which accounts are in order and which are not. He said the city’s financial situation should become clearer over the next “month.”
“[Rash] will be at a place where we can really start to understand a bit of where we are,” Slaughter said.
The city is also still working to complete state audits for 2019, 2020 and 2021.
“Tracy works at the same time as the auditors, so she balances [accounts] at the same time, she gives them information while she reconciles,” Slaughter said.
Slaughter said that once the auditing firm receives the information, they have to verify everything independently, which takes time. Companies must also complete each year’s audit in sequence and cannot work on multiple years at the same time.
These problems go back beyond the last two years and their depth is still murky. The problems currently identified date back to the administration of former mayor Gabe Campana, who was in office from 2008 to 2020, and the city is already facing a State Attorney General’s investigation of embezzlement via River Valley Transit (now the River Valley Transportation Authority and a separate entity from the city).
“We had all these different inflows inbound [grants, taxes, etc.], and it was basically going into a big pot,” Slaughter said. “We weren’t following him. We did not follow him…. We were not respecting grant agreements.
Council Chairman Adam Yoder described the financial situation as “disconcerting, frustrating and overwhelming”.
“We’re three years in as a new group of Chosen, and I don’t understand how it wasn’t taken three years ago,” Yoder said. “That’s what’s just as frustrating and disconcerting. I find it hard to understand how it wasn’t taken in that first year. The transition of administrations.
Still, there is a city to manage and moving forward has presented challenges when it comes to initiating budget discussions.
Council member Elizabeth Miele said she would have liked to start budget discussions in July, which Slaughter said was not possible.
“Before July, it was really difficult to show up in front of the mayor or get his ear to start this conversation,” Yoder said. “The perception is that he has no interest in doing it or just doesn’t want to do it, and I don’t know why.”
Slaughter argued that entering into budget talks when the city is unsure of how much money it has could lead to problems once the expected payment to the federal and state governments is made regarding the Attorney General’s ongoing investigation.
Slaughter said that according to audit firm RKL, entering into budget talks without accurate information could exacerbate issues of fraud, embezzlement and mix-up of accounts.
“You can start from scratch…but we know we’re going to owe the federal government some money,” Slaughter said. “So we’re not really starting from scratch. But we don’t know how it will turn out. »
Yoder said he understood the concern, but called it a “poor excuse”.
“We now have a two-year budget. We will now be entering year three,” Yoder said. “We have a very accurate revenue forecast. We have real-time data on the location of our collections. And we have pretty accurate data on what we spend.
Yoder continued, “We may not have done an audit, but we have a pretty good understanding of money coming in and money going out.”
It is also frustrating for Yoder that past budgets submitted to the board never addressed deficit spending, which is public expenditure, higher than revenue.
Yoder said the board, and Miele in particular, have tried to “articulate” the need to address the budget deficit, but “it continues to fall on deaf ears.”
Slaughter said he was committed to getting the budget talks started, but he didn’t want to have “hypothetical conversations.”
” During the last years [council has been developing a budget] but they didn’t use the exact numbers,” Slaughter said. “They were doing it without the accounts being reconciled.”
Yoder, a Republican, said he commends Slaughter for joining former councilman Republican Joel Henderson in sounding the alarm about the city’s finances and making it a bipartisan issue, but he believes that Slaughter is overwhelmed.
“He’s not a financier. He’s a math teacher,” Yoder said. “There is a big difference between finance and mathematics. He doesn’t have that skill set and he didn’t fill that role to complete that skill set.
Slaughter said finances have been on his mind since serving on city council.
“I’ve been talking about it since I was on city council,” Slaughter said. “I spoke at length about finances. That’s what I ran on. That’s why I wanted to become mayor.
River Valley Transportation Authority
There is also the matter of transferring the Williamsport transit buildings to RVTA, which was due for council approval on September 1.
Slaughter said the problem with transferring buildings is that federal and state interests in those buildings supersede those of the city.
If the city wanted to own one of those buildings, it would have to repay any federal interest, which is between $40 million and $50 million, according to Slaughter.
Slaughter noted that buildings the city thought it completely owned ended up having a federal interest attached to them, pointing to the public works building.
Slaughter said he believes the administration has given the board everything it needs regarding federal and state interests related to RVTA buildings preventing title transfers.
Yoder says the problem with the administration isn’t a lack of information; It is a “lack of will or interest” in collaborative efforts with the board.
” For [council] to, in good faith, provide oversight, we need to get the cooperation of the administration,” Yoder said. “We have to trust what they give us, and that has been difficult.”
Who to hire next?
Yoder said he thinks a number of those financial issues could be alleviated by hiring new employees. He said he and the council have been pushing for the mayor to hire a new director of administrations for the past few years.
“We basically renamed the director of administration,” Yoder said. “There has been a director of administration position that has been open for years…. He refuses to move forward. »
Yoder said that’s a skill set the city needs that the mayor doesn’t have.
Slaughter didn’t talk about hiring a new director of administration, but he said he wants to hire more people in the finance department once they have a better idea of where. lies the city’s money.
Slaughter noted that Rash, as part of her contract with the city, will also make recommendations on the future of the city’s finance department as she steps down. She will also work with the new hire prior to departure to ensure a smooth transition.
Yoder said that if Slaughter is so concerned about city finances “maybe he shouldn’t ask [council] spend it as if it were water.
“If we don’t know what we’re working with, he shouldn’t have given people raises last year,” Yoder said. “He hired a contractor [referring to Rash] that if they worked full time, it would cost us $300,000.
Yoder said Rash is great and a “pleasure to work with,” but stressed that she’s not a city employee.
Going forward, Slaughter said his administration is trying to make things more digital and is currently considering software that would allow members of the public easy access to city financial information.
“All public finances will be forward-looking on our website,” Slaughter said. “You’ll be able to click on the mayor’s office, or codes, or public works, or anywhere and see revenues, expenses. Everything will be there. We’re not there yet, but that’s what we’re looking at right now. »