published Friday, February 11th, 2011

Audit finds problems in East Ridge

by Chris Carroll

Independent auditors uncovered five "significant deficiencies" in how East Ridge managed its revenue during the most recent fiscal year, prompting a verbal spat between City Manager Eddie Phillips and the former finance director he blames.

"You can't blame me forever," Natalie Blackwell said at Thursday night's City Council meeting. "If people want to believe lies without proof, there's nothing I can do about that."

Phillips then read a long list of accusations against her, including a failure to post payroll adjustments from July to September and reporting grant revenues as expense items.

"But I don't want to get into those things," he concluded.

"You don't want to get into those things that you conveniently have ... right in front of you," Blackwell shot back.

Among other problems, city officials kept no supporting documentation for credit card expenditures, failed to document cash bonds for the fiscal year and neglected to provide oversight to employees handling receipts during the 2009-10 fiscal year, auditors said.

East Ridge officials also "[credited] revenues incorrectly" and never secured two certificates of deposit, according to the Johnson, Hickey and Murchison audit.

In a three-page response memo, Phillips, who has no formal finance education despite supervising the city's economic team, blamed Blackwell, referring to "the former finance director" five times.

Blackwell's position wasn't funded during the city's most recent budget hearings, and her last day was Sept. 30. Before that, the City Council created a job for a "budget manager," but no one has been hired.

The audit paints a dire picture of the city's ledger, finding that assets shrank and long-term liabilities increased.

The audit was released five months after city officials revealed a previously unforeseen $681,999 budget deficit -- the largest shortfall for East Ridge in at least two decades.

It also follows a period when councilmen touted the city's financial strength with the purchases of a crumbling community pool for $120,000 and voting to buy property for $340,000, not including environmental tests, structural inspection, utility repairs and soil examination.

"As for the schemes from council, they each thought up their share of the goofiness," Blackwell wrote on Facebook.

Contact staff writer Chris Carroll at or 423-757-6610.

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