The division of financial management and reporting duties between two Fairhope municipal employees and their departments might violate state law, an attorney with the Alabama League of Municipalities said this week.

During a mayoral forum at the Fairhope Civic Center on Sept. 25, incumbent Tim Kant said he separated the duties of two city employees in order to provide better checks and balances in the city finance system.

“When it comes to watching your dollars, Nancy Wilson, our treasurer, works to make sure every nickel goes to where it’s supposed to go,” Kant said. “And Rose Fogarty, (financial reporting manager), reports exactly what happened. I separated the duties because I didn’t think that the person writing the checks should be filling out the paperwork that the council and mayor are going to see.”

Kant’s statements were in response to challenger Dean Mosher’s allegation at the forum that the city had been “cut off from Home Depot two days ago for nonpayment.”

Records provided by the city have refuted that charge, and Mosher could not substantiate his claim when contacted Thursday.

However, Kant’s statements raise a different issue of financial management practices involving the separation of powers in city government, Tracy Roberts, the ALM attorney said.

Roberts said Kant may have exceeded his legal authority as mayor by dividing those duties between Wilson and Fogarty that are set out by state statute as belonging solely to the city treasurer, a position appointed by and answering to the City Council.

“The treasurer … shall be the custodian of the funds of the municipality, keeping an accurate record of the funds of the several departments, and shall keep books showing accurately the financial condition of the city,” the Alabama statute reads, describing a city treasurer’s duties and responsibilities. “He shall make report once a month or oftener if required by the council of the financial condition of each department authorized to draw on the treasurer and shall make a quarterly statement, under oath, of the financial condition of the city or town to the council.”

During an interview last month at which both Wilson and Fogarty were present, it was learned that the city has two departments handling financial matters, with one answering to the council and one to the mayor. Wilson said she reports to the council, and Fogarty said she reports to the mayor. Wilson said she is not Fogarty’s supervisor.

“The Treasury Department is made up of two people: myself and my assistant, Belinda Job,” Wilson said by e-mail at that time. “The Finance Department is made up of three people: Rose, the city accountant (Jill Cabaniss) and an accounts payable clerk, Nancy Bell.”

City finances a hot election topic

The subject of city finances has been one of the most contentious issues during the race for mayor between Kant and Mosher that will be decided in Tuesday’s runoff election.

During the Sept. 25 forum, Mosher called for an audit of the city’s finances going back three years, and Kant referred to Mosher’s claims that the city was not in the black, and that the books weren’t properly kept, as “nonsense” and “foolishness.”

Kant also said recent awards given to the city and Fogarty from the Government Finance Officers Association demonstrated sound financial reporting practices by the city and its staff.

“The Certificate of Achievement for Excellence in Financial Reporting has been awarded to the City of Fairhope by GFOA for its comprehensive annual financial audit (CAFR),” the Sept. 17 GFOA news release stated. “The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting, and its attainment represents a significant accomplishment by a government and its management.”

The GFOA also awarded Fogarty an Award of Financial Reporting Achievement as the individual designated by the government as primarily responsible for preparing the award-winning CAFR.

The award for the city’s reporting for fiscal year 2007 was the first year that the city sought GFOA recognition, Fogarty said.

The information attached to the press release circulated by the city last month included the grading scale for the city’s report. It received “proficient” in all categories but one, and that “fiduciary fund financial statements” category was noted as “not applicable.” The only other grade given by GFOA on applications for recognition by cities is “needs significant improvement,” said Jake Lorentz, assistant director of technical services at GFOA. Fairhope did not receive any grade of “needs significant improvement,” according to the information provided by the city, which it obtained from GFOA.

“It’s typical that there will be some comments in addition to the grades,” said Lorentz, referring to comments made by GFOA, even where grades are deemed proficient. “One requirement for receiving the certificate the following year is to respond in writing to all the comments. We do expect implementation of those recommendations in the comments.”

Lorentz said the grading and comments information provided to the city was confidential and would not be released by GFOA. Fogarty’s office did not respond by press time to an e-mail request on Thursday to confirm whether GFOA had provided comments in its report to Fairhope and, if so, to release those comments.

Background on the departments and council’s role

State law mandates that a treasurer in a city the size of Fairhope be appointed by the council, and that the council bears ultimate responsibility for the finances and financial condition of the city, Roberts said. He also said it’s the council job to provide oversight and determine any necessary changes in how the treasurer’s office is run.

“There shall be elected by the council, at its first regular meeting or as soon thereafter as practicable, a city treasurer and a city clerk, who shall hold office until the next general election and until their successors are elected and qualified,” the statute says.

Until a few years ago, Fairhope’s treasurer position was combined with the city clerk position, city officials said.

The positions were split as provided for by Alabama law, and Wilson was appointed treasurer by the council. Wilson is a certified public accountant and was working as city accountant and reporting to Fogarty when she was appointed treasurer, a city employee said.

“Geniece (Johnson)’s job as clerk was becoming more and more detailed and plus the finances were so complicated,” said Councilman Cecil Christenberry. “Geniece was not a CPA. Nancy was hired. She was a CPA. Rose was not. The mayor and council felt it was important to have someone trained in that field to come into the system and support those very complex jobs.”

Christenberry said he was surprised to learn at the Sept. 25 forum of Kant’s separation of the financial duties.

“I didn’t know that the two jobs had been separated,” he said.

However, Council President Bob Gentle said the council was involved in setting up the financial and treasury departments.

“We appointed Nancy as treasurer,” Gentle said. “Her job was to oversee the finances. Rose’s job was to be the historian of what had happened. Nancy’s job is to handle cash flows, make projections and pay bills. They don’t work in a vacuum. They work together.”

Kant did not respond to a request for comment for this story, but Mosher said the current separation of duties that the statute gives to the treasurer’s position needs review.

“Of course we should always operate within the statute,” Mosher said. “It’s never been clear to me the relationship between (Wilson) and (Fogarty) or either of them to the council and mayor.”

Councilwoman Debbie Quinn does not remember the council being as deeply involved in setting up the system as it currently exists, as Gentle said.

“I don’t remember the council being involved in the separation of the duties,” Quinn said. “If it were, it was cursory. I do think it is an issue we should look at. I have spoken with the incoming council persons about some of the financial issues we need to address. We will be looking at several issues and coming up with some recommendations for the council.”

Quinn said she may recommend setting up a subcommittee of the council’s current Finance Committee to handle such issues.