County loses bond rating

Whitman County officials were notified last week that Standard & Poor’s Ratings Services suspended its long-term rating on the county’s general obligation bonds and removed the rating from CreditWatch.

County commissioners Monday during their regular meeting discussed the ramifications of the notification and concluded they aren’t really sure how this will affect the county’s financial business.

The rating was suspended because the county didn’t submit paperwork needed to satisfy S&P’s policy.

“I’m concerned about how this affects us. This is a third of the county’s revenue,” said Chairman Art Swannack. “We need to fix it now. My biggest concern is roads.”

“We have fired the financial director before, but we’re not going in that direction,” said Commissioner Michael Largent. “I want to know where we’re at and how we are going to move forward. I do know it’s not a lack of staff. I want to see what the (state) auditor’s response is and then move forward.”

“I do know it will be more difficult to enter the borrowing market,” said Gary Petrovich, county administrative director.

The suspension applies to the county’s Limited Tax General Obligation Bonds, issued in 2002. The bonds are set to be retired at the end of this year.

According to county Auditor Eunice Coker, the county’s 2012 financial report was not submitted to the state auditor before a March 31 deadline which was set after the county was allowed several extensions

She said the report was actually six months late, and she expects her office will turn in the report when it’s complete which should be by May 30.

Petrovich said the county had an A-plus credit rating before this happened.

According to the S&P’s letter, after it suspended the long-term credit rating on the county’s general obligation bonds, it removed the rating from CreditWatch where it was placed with negative implications on March 20.

“The rating suspension reflects our lack of receipt of timely information of satisfactory quality” from the county, the letter stated.

On Tuesday morning commissioners met with Coker and county Treasurer Bob Lothspeich for almost two hours. At times, discussion between the board and Coker became heated.

Coker explained to the board that the 2012 financial statement has discrepancies in the bank reconciliation. She said she would discuss these statements during a “pre-exit” meeting with a state auditor Thursday. She expects the state auditor’s report will have a finding.

“This is what you will hear,” Coker told the board. “There will be a finding for 2012. The bank reconciliation will be the only thing wrong. We can’t fix 2012. When we turned in the 2011 statements, the state had never audited an internet system before.”

The county now is using a new computer system that is done entirely on the internet.

Coker said now the county has no rating, but after the financial report is complete, she will send the auditor’s report to S&P and after an evaluation, they will “give some kind of rating,” she said.

“Our situation shouldn’t spill over to the junior taxing districts,” Lothspeich said.

“We’re working toward what the glitch is,” Coker told the commissioners. “I know very little about the implications.”

“After the auditor’s assessment on Thursday, we will continue to find out what the problem is,” Coker said. “We’re going to fix it. New World (the county’s accounting system) is still new. We’re moving forward and we’ll get things done.”

At least two of the commissioners were skeptical.

“Last fall, we were told ‘We’ll fix it.’ Then a couple of months later, we were told again, ‘We’ll fix it.’ A couple of months after that, we were told again, ‘We’ll fix it.’ Bob (Lothspeich) told me he has got 600 hours of staff time devoted to this. You have neither the staff or the staff with skills to solve this problem. I know you’re trying. I think it’s a poorly designed system,” Swannack said in a loud voice.

“I think the solution lies in accounting theory and accounting design,” said former CPA Largent. “The problems Eunice is experiencing now is not of her making. The system was transferred to her with problems. I suggest the solution is an accounting quest that needs to be done by accounting experts.

“This is not a throw Eunice under the bus time,” Largent continued. “It’s symptomatic of a larger problem. This is specifically addressed accounting theory and design. The focus should not be on New World. The county needs to take a hard look at the cash system.

“The point is we need a strategy to design a plan to address accounting design and theory. I think we need to bring in some expertise. It’s never a convenient time to do this,” he said.

“We don’t have the funds to have expertise on staff, but we do have the money to bring expertise in,” Swannack said.

“Cinnamon (Brown, county financial director) is exceptional,” Coker started saying but was interrupted.

“You’ve had five months and I know you’re trying,” Swannack said, and Coker held up her hand and asked if she could finish.

“There were four people on the financial side under the commissioners, and I was to have that fourth position. That’s a major part of the solution. I need to show what we’re doing before they can fix it. Cinnamon needs that fourth position. In the meantime, we’re doing the 2013 report as we speak. We can’t stop and do this over here. You must staff the accounting department appropriately,” Coker said.

“We attempted to change,” Largent said to Coker.

He asked if she had read two books he had suggested and she said she hadn’t.

“The books suggest that in order to achieve change it’s important to be willing to change and to do so in structured methodology,” Largent said.

“We’ve had discussions about staffing. I think it’s more appropriate to staff around a design by the county. If we knew the accounting design, we would know about staffing. The model is not working and we’re not blaming you. We need to ask how will we achieve design outcomes. We do not have a staff problem, we have a process problem,” Largent said.

“So now we’re arguing,” Coker said. “I believe it can be done. I believe the solution is to give Cinnamon her worker bee and give the treasurer’s office their own accountant.”

Swannack interjected his own philosophy.

“I see it like a combine tire with 500 cracks in it,” Swannack said. “You need to fix the combine tire.”

“Cinnamon is bright and can pick up on everything,” Coker said.

“We’re not hearing a specific plan,” Largent said. “I would like to see a written strategy. I’m hearing more staff, not a plan.”

Largent’s tone became softer.

“I love you Eunice,” he said, and Coker replied, “I love you too.”

“But we’re struggling. I’m always willing to talk to you. I want to see a plan. This is what it should look like. These are the processes for cash accounting, with staffing expertise. This is a specific problem that cries out for a solution. Once achieved, let’s organize our staff as a model,” Largent said.

Coker replied she believes her department is progressing.

“I have to agree with Michael to a certain extent,” Lothspeich said. “What is wrong with us? When the dust settles, Cinnamon may get another staff.”

“We’re in a really good place,” Coker said. “We’re moving in toddler steps now. What I see is this county has been moving in the right direction since 2010.”

Swannack was not satisfied.

“I get a little upset about this because it affects everyone’s departments,” he said. “I don’t think we can wait for a toddler to become a teen and then wait two more years for the teen to become an adult. We can’t wait. If the accounting system isn’t reliable, it’s going to affect all departments. We need to replace the toddler with an adult.”

“How much is that going to cost?” Coker asked.

“It’s going to cost a chunk,” Swannack said. “I bet it’s going to cost us a hundred grand. We need to fix it.”

“I think we need to quit being concerned about various turfs,” Largent said. “You’re the authority on this issue. I would like direct resolution for this specific problem. I want to be part of making your life easier.”

“I agree if we had funds, we need an expert,” Coker said.

Then Largent asked Coker if she had called the state auditor’s office for assistance.

Coker looked at Lothspeich and asked if he had called and then told Largent she had not called.

“Someone needs to manage the project and move ahead,” Largent said. “It’s you that needs to make those phone calls.”

Commissioner Dean Kinzer had been quiet during the meeting, but finally spoke up.

“Come hell or high water, you’ve got to get the job done, no matter how many hours it takes,” he told Coker.

“I do take ownership of the problem and the solution and everything, to the point that I’ve p—-ed off some people,” she said. “I feel confident we’re going down the right road.”

“I’m not real confident in the numbers,” Kinzer told Coker. Coker replied that the numbers were correct, but Kinzer wasn’t convinced and questioned her again. Then she changed the subject.

“We’re going to find it and we’re going to fix it,” she said. “We’re going to have a finding (from the state auditor’s report) and we’ll write a response. Audits are a good thing.”

“What’s the next step?” Coker asked the commissioners.

“An accounting process model,” Largent replied.

Coker asked if Petrovich could help in the process and also asked if constraints would be placed on any county staff members.

“We fully realize this is going to cause staff concerns,” he said. “You tell us.”

“I think an external firm should come in,” Swannack said. “It would be a discreet effort, which means it would be a separate effort to achieve our goal.”

“I don’t know who you need to talk to,” Largent told Coker. “We can’t impose something in your office when you have control.

“But move on, I think we must,” he said.

“What we need from you are answers, a strategy, a plan, to fix the system,” Swannack said.

“We need to focus on a county design to achieve professional standards. It may be even more employees than you anticipate,” Largent said.

“One of the major projects I’m working on right now is submitting Cinnamon’s job description for reclassification.

“I need a person to fill in and stay during Cinnamon’s maternity leave,” Coker said. “I’m not trying to put out a fire. We should have 2013 financial report done by May 30.”

“I appreciate having the board having the wherewithal to deal with this issue,” Coker said.

Largent tried to reassure Coker.

“I’m on your side,” he said.