The Wrangell Borough Assembly met Tuesday evening, Aug. 25. During this meeting, they reviewed an FY 2019 audit of the borough. This item was postponed from their meeting on Aug. 11, to wait for a representative from the auditing firm to be available to answer questions.
According to the agenda packet, the fund balance for the city's governmental funds sits at $53.65 million, and approximately $54.31 million in the enterprise funds. Of these, unrestricted funds sit at about $9.16 million and $5.31 million, respectively.
"This audit was extremely difficult to complete for Fiscal Year 2019," the packet reads. "The supporting documentation for the numbers were hard to locate and reconcile as, being new, staff was not familiar with the Borough's processes. There was a time lag for reconciling Fiscal Year 2018 and therefore affected the Fiscal Year 2019 timing. These issues, as well as reconciling Fiscal Year 2020 have been resolved."
There were four main findings of the FY 2019 audit: The borough's general ledger reconciliation and preparation lacked an appropriate level of precision, their internal controls over financial reporting did not ensure proper review or ensure supporting documentation was retained, their internal controls over non-payroll expenses lacked appropriate safeguards, and the FY 2019 audit was not completed within a proper timeframe.
Three of these related to a lack of internal controls, the packet reads, and adds that things are different from this audit and new guidelines and controls are in place. The fourth finding, according to the packet, the city blames on the auditors.
"Municipal audits are technically due to the State by March 31st of the following fiscal year," the packet reads. "This was a finding in 2018 as well. Administration places the blame for this finding squarely on BDO – the auditor. This is the second year in a row the audit has been months late."
Sam Thompson, with BDO, said that a corrective action plan had been put in place by the city to address these findings. However, he did not currently have enough information to say if the findings had been corrected yet. Thompson added that delays in completing the audits can also be attributed to delays in receiving information from the borough. Finance Director Joyce Mason said that new internal controls and guidelines have been implemented, to make sure these shortcomings do not appear in future audits.
After some further discussion, the FY 2019 audit was approved by the assembly.
The assembly also considered rescinding $250,000 in CARES Act funding to the Wrangell School District. This follows recent concerns from the school board, and the public, after a recent shopping trip by the superintendent and some staff members to Juneau. According to Superintendent Debbe Lancaster, in a special school board meeting last Monday evening, the trip was to purchase supplies for reopening schools and COVID-19 mitigation. The entire trip cost $5,788, she said. Of that, $1,332 would be CARES Act expenses. From the borough's perspective, Mayor Steve Prysunka said, travel costs for the trip seemed excessive. He added that the perception of several school staff members taking a chartered plane to Juneau for a shopping trip was not positive. The city is potentially going to be audited on its CARES Act funding, he added, so they need to pay close attention to how it gets used.
Lancaster said, during the assembly meeting, that she was very sorry for the trouble she caused. She did not realize the way things looked, she said, only that she was in a hurry to purchase supplies needed to reopen the schools. If the CARES Act funding is cancelled, she said, they would have to potentially cancel other orders they have made, or find ways to pay for them out of the district's general fund. She understands the borough's situation of needing to be responsible for how the funding is used, she said. She reiterated that she was very sorry for the perception her trip caused.
Members of the Wrangell School Board spoke during the meeting to defend the funding. Board Member David Wilson admitted that this was a mistake on the part of the superintendent, and he regretted any trust that was broken between the district and the city. However, he said that the board was taking proactive steps to correct these mistakes, and said that this money was very important for safely providing an education this next year. Board President Aaron Angerman asked for time to correct this misstep on their own, before the assembly stepped in. If they did not have some adequate solutions to stop a mistake like this happening again in an adequate span of time, he said, he then invited the assembly to step in. He also reiterated Wilson's point that this CARES Act money would be very important in the upcoming school year.
Assembly Member David Powell said this exact situation was what he was afraid of when they first provided the funding to the school. The trip was completely unwarranted, he said, and they were not being thrifty with how it was being spent. He said that he would prefer the school spend its own money, and then come to the city for possible reimbursement later. He also agreed that this whole fiasco has damaged relations between the district, the city, and the wider community.
The travel and food from the trip was not eligible for reimbursement, it was clarified after questioning from Board Member Ryan Howe. Howe said that schools are going to open in early September, and that the school board was rightly upset about what happened. Rescinding the funding right now seemed counterproductive to him, he said.
Prysunka said he was not feeling as forgiving as some other assembly members might. He was alarmed that school staff was going all the way to Juneau to buy basic safety supplies, on very short notice. That does not seem like the actions of a prepared school district, he said. The CARES Act money priority is for the community in which it is given, he said. The city is constantly trying to
save money wherever it can, and he said he is really
scared the CARES money will be gone soon and the city will have to dip into its own
funds for emergency situations.
"When I see waste like this, it irritates me," Prysunka said. "I'm really, really upset about this."
The discussion continued for some time, but the assembly voted to rescind the $250,000 in funding. They determined that they would revisit the topic at a later date, and provide CARES Act funding to the school district with stricter parameters in place. Howe voted against the rescission, and Assembly Member Patty Gilbert abstained.
The assembly also declared an economic disaster in response to the COVID-19 pandemic and poor regional returns of salmon. The declaration calls on the state and the U.S. Secretary of Commerce to declare two economic disasters: in 2020 statewide tourism and the 2020 Southeast Alaska salmon returns among all species.
According to the declaration, Wrangell has a 10.8 percent unemployment rate in 2020, compared to 7.7 percent in 2019. Wrangell and the entire Southeast Alaska region have seen a decline in tourism. Wrangell is at a loss of about 21,000 visitors due to a cancelled summer cruise season, and millions of dollars in tourist spending. Furthermore, the declaration reads, while the fishing season is not yet over, reports indicate a very poor year for salmon returns across Southeast Alaska. This is on top of a drop in prices paid to fishermen.
"Most (88%) of Wrangell businesses say the economic outlook for their business or industry over the next 12 months is negative,"
reads a June business climate survey by Rain Coast Data, attached to the agenda packet. "When compared by communities across the region, Wrangell has the most negative outlook for all communities. Sitka has the least negative outlook. No community expressed a positive outlook."
Prior to the meeting, the assembly also held a workshop on the FY 2021 Capital Improvement Projects Plan. As this was a work session, no formal action was taken. A writeup of this workshop will be in next week's edition of the Sentinel.
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