Mandated state audits straining budgets of Ohio's villages, small cities

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A coalition of Appalachian mayors is asking the state to change the way it provides auditing services to smaller municipalities, and to help alleviate the financial burden the audits create.

Members of the Mayors Partnership for Progress — a consortium of mayors from 15 southern and southeastern Ohio counties — said the costs of required audits disproportionately affect small towns and villages.

“Our revenues are tight, our budget is tight, as well, but we have little flexibility,” said Athens Mayor Steve Patterson. “What we need is something that is reflective of the budgets of smaller villages and cities.”

Patterson said that each mayor in the consortium is from a county where the biggest cities have populations of fewer than 20,000 people, and most of the mayors represent villages of fewer than 5,000 residents.

With shrinking budgets and fewer trained staff members and elected officials who can handle the audit requirements compared with bigger municipalities like Columbus, audits can have big costs for small towns, said Jack Frech, a retired Athens County Job and Family Services director who is an adviser to the mayors group.

“These are people with smaller budgets and smaller capacities,” Frech said. “They’re getting disproportionately punished for mistakes.”

Gary Goosman first noticed a spike in the cost of required state audits when he became mayor of Amesville almost eight years ago.

During his time as a councilman in the Athens County village of fewer than 200 residents, Amesville’s audits cost about $1,500. With a general fund of about $110,000, Goosman said the audits were reasonably priced and cost the village less than 1.5% of its funds. The village also used to choose an accounting firm from a list of three or four options.

Within a few years, however, Goosman said the rate rose to $6,000 per audit, and the village was assigned an accounting firm by the auditor’s office.

During one particular audit, Goosman said, the village was flagged for putting money in the wrong account. The issue increased the next audit’s cost to $10,000.

“That’s 10% of our budget,” Goosman said. “It was quite a burden on a small town. It just seemed excessive.”

Luke Feeney, mayor of Chillicothe, served as city auditor for three years before being elected mayor in 2016. Feeney said while audit costs might not be breaking the budget for cities such as his, it’s the smaller municipalities and organizations, such as county land banks, that he worries about.

“Those budgets are minuscule in comparison,” Feeney said. “Seeing the audit cost’s proportion to the overall budget, it’s just not proportionate.”

Feeney said one example that sticks out to him is the Vinton County village of McArthur, with a population of roughly 1,700 residents.

“The village is struggling to find a new police cruiser — a single new cruiser — and an audit cost of a few thousand dollars is a huge blow,” Feeney said.

The issue of paying for audits is compounded by state funding cuts to local governments, Feeney said.

“There are all these funding sources that local governments used to get, and as the state legislature took those away, it makes the pain of paying state government for services greater,” Feeney said. “It’s like adding insult to injury.”

Mayors in the partnership have suggested a number of solutions to ease the burden of audit costs: determining audit costs by population, putting a cap on how much an audit could cost, and increasing the amount of training for local officials paid for by the state auditor’s office.

The best solution to the problem, mayors in the partnership said, would be for the state auditor’s office to help pay for required audits.

“These are all public dollars, and since the goal is to protect taxpayers, then the auditor’s office should be funded directly so it’s not so much of a burden for these smaller local governments,” Frech said.

Ohio Auditor Keith Faber requested about $10 million be added to his office’s budget specifically to fund audit-support services for local governments.

“Audits are invaluable in helping ensure that taxpayers’ dollars are being spent properly and identifying potential incidents of fraud or theft, but I understand that the cost can place a strain on the budgets of smaller communities,” Faber said in an email.

Faber said his office is reviewing pricing structures for auditing local governments.

Feeney said he thinks the ideas proposed by the Mayor’s Partnership for Progress are realistic, and he hopes the state auditor’s budget request is accepted. Until then, he’ll keep waiting.

“I hope that this money is put to dramatically reducing our audit costs,” Feeney said. “I will hope that it is until I see it.”

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