East Ridge approves $10.3 million budget

It took three months, but East Ridge passed a $10.3 million budget for 2010-11 Thursday evening, completing a summer of changing deficit numbers and several firings.

The total represents a 1 percent growth over last year's budget, and includes a 1.25 percent pay raise for all city employees.

"Glad it's finally over," interim City Manager Eddie Phillips said Friday morning. "We feel good about this one."

The raise comes despite last year's $681,999 deficit, created when the City Council spent $389,578 in budget surplus funds and the city also suffered a $291,421 shortfall in projected sales tax collections.

But a look into East Ridge's 2009 audit shows warning signs that failed to prevent officials from spending themselves into a six-figure deficit.

"A material invoice was located by auditors that was not reflected in the year-end trial balance," according to documents from the auditing firm Johnson, Hickey and Murchison.

The invoice was a $157,567 bill for 911 dispatching services during the first six months of 2009, an expense then-Deputy City Manager Phillips caught in October 2009.

"Because of this significant deficiency, management may lack the controls necessary to present financial statements and footnotes in accordance with generally accepted accounting principles," the audit states.

The city originally had a surplus of about $560,000, but after paying the 911 invoice in two installments, it shrank to $402,353.

The same month the unpaid invoice was found, the City Council approved employee Christmas bonuses, several Waterhouse Public Relations marketing programs and a now-defunct biodiesel program, which wound up costing the city about $389,000 in surplus funds, records show.

The decision to spend the surplus came five weeks after flooding caused heavy damage to the city. City officials estimated that damage to East Ridge's public infrastructure and public response costs were between $150,000 and $200,000.

City officials later blamed the $292,000 sales tax shortage on the closing of the flooded Sears Essential store as well as lower sales at other East Ridge stores.

The $389,000 in surplus money accounted for 57 percent of the total deficit, but councilmen blamed former city manager William Whitson and forced him to resign.

Before the surplus vote, Whitson warned the council that "staff is concerned that the same positive results will not be evident for 2010."

Mayor Mike Steele recently said Whitson should have been more forceful in his warnings.

Vice Mayor Tom Card and Councilmen Larry Sewell and Brent Lambert were the most vocal supporters of Whitson's resignation. On Nov. 2, Card and Sewell are up for re-election, while Lambert is running for mayor.

In the new budget, former finance director Natalie Blackwell, who along with Whitson handled city finances, did not receive 2010-11 funding for her position. Her last day was Sept. 30.

Contact Chris Carroll at ccarroll@timesfreepress.com or 423-757-6610.

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