Audit of East Ridge notes retiree benefits

Audit of East Ridge notes retiree benefits

January 27th, 2012 by Kate Harrison Belz in News

Cleyta Andrews of Johnson, Hickey & Murchison P.C.

Photo by Contributed Photo/Times Free Press.

Despite ending the 2011 fiscal year with a $391,000 deficit, East Ridge is in "relatively good financial health," according to an audit presented to City Council.

But during a long agenda session Thursday night, councilmen debated a number of possible cost-saving measures aimed at reforming employee benefits.

During her presentation, auditor Cleyta Andrews with accounting group Johnson, Hickey and Murchison urged councilmen to take a close look at city employees' post-retirement benefits, which she said are a sizable financial burden on the city.

The city pays either part or all of retirees' health insurance until they are 60. In 2011, the city paid out $53,000 in post-employment benefits, the audit shows.

"There's hardly any other governmental entity in this general area that actually provide health insurance for their retirees," said Andrews. "I think that's something you have to take a hard look at."

Following Andrews' report, Councilmen Darwin Branam and Larry Sewell suggested restructuring of another employee benefit: leave buy back.

For years, the city has agreed to "buy back" its employees' unused vacation or sick days at varying rates.

In 2011, East Ridge paid $188,000 to buy back extra hours from employees, City Manager Tim Gobble said.

Most cities do not have a provision where they buy back yearly leave time employees earn, instead setting aside accrued hours for retirement or establishing a "use it or lose it policy," Andrews said.

Councilman Denny Manning insisted the policy needs to be left alone.

"All these employees have earned this," he said.

Director of Public Safety Eddie Phillips urged council members not to change the policy, saying it allowed the city to save money by hiring fewer employees.

"If fire and police employees take mandatory vacation, we won't be able to maintain minimal staffing," he said.

City records show that Phillips received $9,554 in leave buy-back funds in 2010.

In Andrews' audit, she noted a handful of findings -- or problems -- with the city's finances in her report.

Among the findings was the discovery that the city's budget manager, Diane Qualls, was unable to draw up the city's annual financial statement.

Gobble said he planned to arrange more training for Qualls, who took the position early last year.

Other findings showed that the city had problems filing a series of public safety grant revenues, and it lacked sufficient accounting for its permit revenue. Gobble said he since has implemented procedures to correct those problems.