Loris City Hall

State officials withheld more than $200,000 from the city of Loris over the last five years because the city failed to obtain proper audits of its finances.

Loris leaders have now hired a Georgetown accounting firm to begin auditing the city's financial records for the last five fiscal years, beginning with fiscal year 2016-17.

“We’re hoping to get back on track, get those done because we have to,” said Keith Massey, interim clerk for the city.

This month, the city received its first invoice of $5,000 from Harper, Poston & Moree, an accounting firm that the city hired in March to begin the auditing process. The firm is starting with the oldest records and will go year by year to the latest fiscal year in order to catch up.

According to the agreement, invoices for fees will be issued monthly as work progresses. The agreement only lists the 2016-17 fiscal year, meaning the city will have to approve further agreements to begin the process for auditing the fiscal years ending in 2018, 2019, 2020 and 2021.

The city budgeted $70,000 for the 2021-22 fiscal year to pay for auditor services, according to public records, though the city has no estimate for how much the entire process will cost.

“It is very, very, very expensive to get this done,” Massey said, adding that sometimes it costs more to do the audit than the amount being withheld by the state. However, he said: “Is that good moral or good practice? No.”

The city hopes to “show the public that nothing wrong was done, that accidents happen, you have to make adjustments,” Massey said.

CPA Robin Poston, who is working on the audit, said it would be hard to put a timeline on how long the process could take.

“It’s so far behind that it’s going to take a good bit of time to first of all work it into our schedule and to continue the process since it appears there is going to be a good bit of work involved to make sure that the information is correct,” Poston said.

Even the older completed audit work included a disclaimer, meaning there will have to be additional work done to make sure all the balances are correct, Poston said. This entails reviewing bank statements and payroll and making sure the information the city has provided is correct.

“If we are unable to obtain reasonable assurance that the beginning balances are correct, then we may have to issue a disclaimer of opinion,” Poston said. “When you’re working with beginning numbers that an opinion had been disclaimed on, we may have to do the same thing because if they are materially incorrect then that would be a scope of limitation and we could not opine on the financial statements.”

The city failing to have proper audits each fiscal year has resulted in the state withholding funds for the fiscal years ending in 2016, 2017, 2018 and 2019, according to the South Carolina Treasurer’s Office. These amounts were withheld each year:

  • FY19: $58,206.82
  • FY18: $45,955.08
  • FY17: $57,567.36
  • FY16: $40,587.03

Funds for fiscal years 2020-21 and 2021-22 will not be withheld.

The city received a letter this month from the South Carolina Revenue and Fiscal Affairs Office stating that funds withheld for fiscal year 2019-2020 for not submitting the 2018 financial reports will be released to the city. Massey said that the city expects to receive the funds in the next few weeks, though it is unclear how much the city will receive.

The money released from the state goes into the city’s general fund budget, Massey said.

According to state law, if a municipality fails to report annual audit reports within 13 months of a fiscal year ending, the state treasurer will withhold all state payments until the audit is completed and received by the state. These provisions are obviously suspended for the 2021-22 fiscal year.

Reach Hannah at 843-488-7242 or follow her on Twitter @HannahSOskin.

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