In a social media post Saturday, Alva City Councilman Daniel Winters voiced concerns about actions revealed by the annual City of Alva audit report. The FY 2018-2019 audit is on the city council’s agenda for the regular meeting Monday, May 18, at 6:30 p.m. The council will be meeting in at the Alva Recreation Center fieldhouse to allow for social distancing. A public comment period is scheduled before the council tackles agenda items.

In his post Winters states, “The audit findings are frustrating to say the least. The former City Business Manager was borrowing cash from other funds to meet operating and capital improvement expenses. Let me preface that none of this was illegal and honestly very common. The problem is that when the balance of these inter-fund loans reaches a level that is not feasible for timely repayment (within one year). This was obscured in the numbers and how they were reported. This led to some bad decisions by council. Now, all of that money is accounted for and the net position for the city actually increased by $500,000 which is fantastic. Some projects would not have happened, however, had we known the real situation.”

Winters says the total of balances owed from one fund to other funds is $2.2 million. “This can be corrected fortunately but cannot be corrected in one year,” he says. “This is why it is a problem. Borrowed cash from one fund to the other is expected to be repaid within a year and that balance should not consistently increase. This amount more than doubled in a year.”

The city council delegates much of its work to committees consisting of three council members. One of those is the finance committee that typically meets once a month prior to the full council meeting to go over more detailed information relating to finances. The city business manager usually attends the finance committee meetings to explain financial information and answer questions.

Winters says the finance committee (he’s not one of the three members) was presented monthly reports showing the balance of all certificates of deposit (CD) but the sale or purchase of CDs was not reported.

“So, in order to detect the sale of a CD the Finance Committee would have needed to compare reports from each month. Mind you, other changes I do believe were reported,” he writes. “Also, when a fund transfer was made it was not reported to Finance Committee or to council. Since Finance Committee was not being presented information clearly it wasn't reported clearly and my trust kept me from verifying.”

Winters suggests three ways to correct this problem:

1) The sale or purchase of CDs should require council approval by ordinance.

2) The transfer of funds from one fund to the other should be submitted as a report to council at every regular monthly meeting by ordinance.

3) Fund balances should be separated into their own respective accounts. Those account balances and fund balances should be submitted in a report to council at all regular monthly meetings by ordinance.

“Much of the above has been implemented already as a matter of policy and procedure. I want to thank (Interim Business Manager) Angelica Brady, Mayor (Kelly) Parker, and the members of the Finance Committee (Bo Hannaford, Connor Martin, Brandon Sherman) for already starting the process of correcting this and preventing it from happening again,” Winters said.

Will This Affect Airport Projects?

Paul Kinzie, a member of the Alva Airport Commission, saw the post by Winters and brought his concerns to the newspaper.

In a written statement, Kinzie says, “It has come to my attention that the audit of the City of Alva indicates that the airport fund is owed approximately $976,000.” Much of the city’s budget is handled in the general fund but several entities like the airport have separate budgets.

Kinzie says under the revenue use policy of the Federal Aviation Administration (FAA) Order 5190.6, airport revenue constitutes money received by the airport for the use of the airport. All of the revenues within the definition represent some form of payment for airport property or use of airport property, whether it is rent, concession fees, aeronautical fees or mineral rights.

He believes the money in the Alva Regional Airport Fund falls within the above definition.

FAA Order 5190.6 also lists prohibited uses of airport revenue. Quoting from that source, Kinzie says, “Unlawful revenue diversion is the use of airport revenue for purposes other than airport capital or operating costs of other facilities owned or operated by the sponsor and directly and substantially related to air transportation. Revenue diversion violates federal law and AIP (airport improvement project) grant assurances …”

Kinzie points out the diversion of funds from airport capital or operating costs is not allowed by state statute. According to Oklahoma Statute 3-65.12 on application of airport revenues and sale proceeds, the revenues obtained by a municipality from the ownership, control or operation of any airport or air navigation facility, including process from the sale of any airport or portion thereof of air navigation facility property, shall be deposited in a special fund to be designated the “Airport Fund”, which revenues shall be appropriated solely to, and used by the municipality for the purposes authorized by this act.

“Every time the Alva Regional Airport receives a federal grant from the FAA, the City of Alva signs a document for FAA AIP Assurances,” Kinzie states. Quoting AIP Assurances No. 25, “All revenues generated by the airport and any local taxes on aviation fuel established after Dec. 30, 1987, will be expended by it for the capital or operating costs of the airport …”

Kinzie poses some questions for the City of Alva and the Alva City Council. “Can you please inform me when the money will be restored to the Alva Regional Airport Fund? What measures will be put into place to prevent diversion of airport money? If the airport is owed this money then why has the monthly financial statements not reflected it? How can the Airport Commission trust future financial statements and their accuracy?”

Monday night, the city council will not only be looking at the audit report, but they will also consider the finance committee recommendation to seek a line of credit from local banks not exceeding $1 million. The city is experiencing reduced cash flow due to COVID-19 and is expecting sales tax revenue to be reduced.

The council will also hold an executive session to discuss the hiring of a city business manager with action to be taken upon return to open session.