It’s a bit surprising that Shad White, as aggressive a state auditor as there is, has until now never exercised the authority given to him by the Mississippi Legislature to compel tardy municipalities to catch up their annual audits.
White and his predecessor, Stacey Pickering, were presumably aware of the law, passed in 2009, that allows the auditor’s office to hire outside auditors to conduct the municipal audits and divert the municipality’s sales tax revenue to cover the cost as well as a hefty fine that the auditor’s office gets to keep for its trouble.
White, who became state auditor in 2018, may be seven years late in flexing the muscle of that law, but it’s good that he is now doing so. He has put on notice not just the current laggards but all municipalities that timely annual audits are important, and if those who run these towns and cities can’t carry out this statutory responsibility, somebody is going to make sure it gets done.
This past March, White’s office sent 68 letters to local governments that were three years or more behind on their audits, telling them to catch up quickly or face the financial consequences. Two of these have so far seen sales tax diversions totaling more than $400,000. Three others are included in the next round of planned diversions, totaling $1.6 million. For two of those towns
The rest of the notified towns so far have been shown some leniency because they have reportedly made progress toward catching up their financial records.
Annual financial audits are required by law for good reason. They bring an outside, objective set of professional eyes to review the government entity’s accounting and see that the taxpayers’ money is being properly spent and properly documented. Without that review, the taxpayers are left in the dark and the municipality’s own officials are flying blind, not really knowing for certain whether their city is financially healthy or courting disaster. The audits can sometimes detect malfeasance, tipping off those with investigatory powers to take a closer look. Incomplete audits can also hurt a municipality’s finances and hinder its ability to initiate new capital projects. Incomplete audits make borrowing tough if not impossible, and they also cut off the funding avenue of federal grants.
When audits get behind, they also can have a compounding effect. If those keeping the books are incompetent or undertrained, the mistakes they make become tougher to correct the farther back those mistakes go.
COVID-19 has been blamed for some of the audit backlog. But that’s not the full story. Some of these municipalities were running late on their audits before the pandemic took hold in 2020. They didn’t consider financial accountability all that important.
Perhaps municipal audits also were not a priority previously in the State Auditor’s Office because, unlike with county audits, it does not have the legal authority to conduct them itself. The 2009 law, however, does give the auditor considerable clout with the municipalities, and it should well serve the taxpayers’ interest that he is now using it.
