Annual audit reveals glaring issues in Hattiesburg

By Steve Wilson | Mississippi Watchdog

Several glaring issues revealed in the city’s annual audit could be a sign of rough waters to come for Hattiesburg.

Issues with water bill collections, outstanding fines owed to the city and reimbursements for both cash transactions and items that had not yet been purchased were spotlighted in the fiscal year 2013 audit conducted by Hattiesburg accounting firm Nicholson and Company.

State Auditor Stacy Pickering strongly suggested in a letter the city come up with an action plan to deal with the discrepancies after an analysis of the audit by his office was sought by the city council. Pickering said there were two findings that were “of great concern to his office and should be of great concern to the city council.”

According to state law, Pickering doesn’t have the legal jurisdiction to audit municipalities, but his office has the ability to review audits for compliance with accounting standards. The city’s audit, according to Pickering, complied fully with general accounting standards.

The audit spotlighted “management overrides of internal controls” on delinquent water bills. It said the city “did not consistently require the termination of water services nor the payment of past due amounts prior to the resumption of services.” The audit report also noted “significant inconsistencies with the City’s enforcement of the existing
water cut-off policies.”

Fines of more than $21.4 million were outstanding as of Sept. 30, 2013, and the city is not in compliance with requirements for periodic financial reports to enable monitoring fine collection, including ones where partial payments are authorized.

The city also was criticized for its reimbursement procedures on federal Transit Formula Grants. The audit found the city had included reimbursements for cash transactions that hadn’t yet been made and items that hadn’t yet been purchased.

Hattiesburg Mayor Johnny DuPree was out of town, according to his office, and unable to comment. The city administration said in a response accompanying the audit it has taken action to correct all of the discrepancies.

Also addressed in the audit, but not mentioned by Pickering in his letter, is the city’s failing sewer system. The city terminated a 30-year contract with local firm Groundworx on July 9 that would’ve cost Hattiesburg more than $16 million a year to process its waste. Groundworx was to use a land application system for treated wastewater that would’ve cost more than $141 million to build.

Groundworx filed a lawsuit June 19 in Forrest County Chancery Court for breach of contract and is seeking an injunction to prevent termination of the contract and compensation for expenses incurred.

Groundworx officials didn’t respond to repeated messages left for comment.

The city is still under a 2012 order from the Mississippi Department of Environmental Quality to fix the sewer system. The deadline for design work for improvements is Oct. 31. The city also agreed to submit a copy of the notice to proceed for construction before Jan. 31, 2015, and the project must be completed by Feb. 28, 2017.

If Hattiesburg doesn’t meet its permitted effluent requirements from its two sewage lagoons into the Leaf and Bouie rivers by May 31, 2017, the city will have to pay a penalty of $100 per day. The Gulf Restoration Network filed a lawsuit under the Clean Water Act over the city’s discharge into the two rivers. That case is scheduled for a bench trial Oct. 6.

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