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1 PAGE TEN I / THE CLINTON CHRONICLE, CLINTON. 8. C THURSDAY, OCTOBKE .1925 Bond funds on deposit were as follows: Bond issues of August 15, 1924: First National Bank Bond issues of June 1, 1925: Demand deposits: M. S. Bailey & Son $13,223.50 Commercial Bank 13,223.50 First National Bank 10,663.48 28.22 37,110.48 Time deposits: M. S. Bailey & Son Commercial Bank First Nation^ Bank $55,000.00 55,000.00 55,000.00 165,000.00 $202,133.70 . _ i \ / C^sh on han<J was verified by actual count, while a reconciliation be tween the balances as shown by the bank statements and the balances re flected by the books of the City was effected for all cash in banks, both general and bond funds.. Certificates of deposit, bearing interest at 4 1-4 per cent, covering bond funds on time deposit, were examined and all cash balances were_ found, to be as represented. NOTES RECEIVABLE: These were as follows: Date . June 3, 1920 June 4, 1920 June 4, 1920 Dec. 1, 1920 July 14, 1922 ' Maker V. P. Adair R. P/ Adair R. ^ Adair Marie M. Adair T. P. Burgess Aug. 15, lOlhTir. S. Blakely Aug. 27, 1924 T. J. Blalock Due Nov. 6, 1920 Nov. 6, 1920 Nov. 6, 1920 Mar. 1, 1921 July 17,1922 Nov. 15,1922 Nov. 15, 1924 Rate 8 7c 8 7c 8 7c 8 % 8 % 8^" 8 Vr Amount $ 31.45 172.54 ^22.72 47.41 37.50 54.32 36.00 $401.94 These notes were all examined by us, with the exception of ^ne signed by R. P. Adair for $22.72 and one signed by R. S. Blakely for $54.32. The first mentioned note was paid on - September 1, 1924 and the second was either? lost or misplaced, hence not available for inspection, &t the time we made our examination. < As the above statement indicates, this paper is all long past due and,' in our opinion should either be charged off or reserved against in full, as the possibility of collection seems very doubtful. No payments of any amounts to apply on these notes, with the exception of the one mentined in foregoing paragraph, have been received since 1922. ACCOUNTS RECEIVABLE on Schedule “1.” Paving assessments are listed in detail Interest has been computed to August 31, 1925 at the rate of seven per cent per annum, and in making these computations, the unpaid balances at September 1, 1924, were used as a basis and allowance given for all payments made during the current year. Light and water accounts receivable are shown as per your recojds and we found that nearly 32 per cent of the total were past due at August 31, 19^, as follows;^ ,; CITY LICENSES, 1923-1924: This represents license fees due the Town for doing business during the respective years and are as follows: * Name Year 1923 Year 1?24 Total Adams,' W. W. $15.00 $ 30.00 $ 45.00 Cask, Dave 12.00 12.00 Duncan, Chris 8.75 r 8.75 Holland, C. O. " 15.00 . r •, 15.00 Johnson, T. C. - J 10.00 10.00 20.00 Patterson, Sam (Barber) 12.00 12.00* Patterson, Sam (Undertaker) 35.00 35.00 Pinson, J. A. . 25.QP 25.00 Rook, l^ill, 5.00 5.00 s Tidwell, Bob 10.00 , 10.00 Carolina Life Insurance Co. 15.00 15.00 Pilot Life Insurance Co. • 1530 15.00 $67.00 $150.75 $217.75 • In our opinion, these license fees should be collected, immediately, as by not doing so', it appears that the businesses which pay their license fees are being discriminated against. Some of th^se debtors ha vet been allowed to do business for at least two successive years without paying a license fee and should this fact become generally known, it would probably tend to create some ill feeling among those businesses which h^ve paid their license fee when it became due. INVENTORIES: The inventories as shown were furnished us by the heads of the various deparlnjents of the Town and are supposed to be priced at cost or Estimated value. We have included fencing for cemetery which is priced at cost, undfcr' this caption, as it had not been, installed at August 31, 1925. PREPAID INSURANCE: This has been set up to represent the un expired value oOnsurance premiums paid up to and including August 31,1925. FIXED ASSETS: The values of these assets were established, for the most part, at the time of making a former examination and were placed upon the books at values agreed upoiV by Council, while-all subsequent addi tions have been included at cost. v The light and water plant and the sewerage system are shown at book values, which represent cost. ^ The light and water plant and sewerage system extensions have been built, partly from funds derived from bond issues which were floated for this purpose and partly from general funds as follows: Light and water plant extension: ‘ Expenditures made from bond , funds, per Schedule “6” $69,276.78 r Leas, Inventories of sup plies, etc., on hand yr.-j" Current month’s accounts Past due accounts: Considered good Considered doubtful f $ 264.57 1,027.41 ’‘-'5 $2,780.88 1,291.98 $4,072.86 The allocation of the above good and doubtful accounts was furnished us by the City Clerk arid Treasurer and reflects that Officer’s opinion of their collectibility. As shown above approximately 40 per cent of the total of this class of accounts receivable are considered doubtful of collection. In our opinion this is a very high percentage and we believe if applications are examined more closely before light and water services are extended, this percentage can be reduced considerably. It may be found practical to require a deposit to be made whenever such service is requested, with the understanding that such deposits will be applied against any unpaid balance at the time service is discontinued. In this way many of these past due balances could be eliminated, as we found that the majority^ot the past due accounts arose from people moving awwy without giving notice to the light and water department;—In such cases, had deposits been required, they could be applied against the unpaid balances. In any event, we believe this situation should receive early attention before losses from this source be come too large. . \ Miscellaneous accounts receivable are shown on Schedule “2” and con sist of charges made for supplies furnished, services performed, etc. Many of* these accounts originated in 1922 and practically all are past due. Many of them are with tradespeople with whom the Town is now doing business and whose bills they are paying currently, without any deduction being made to cover these accounts. Checks returned which were being held for Collection at August 31, 1925, are as follows: Date Signed By * Amount Oct. 31, 1924 W. P. Baldwin $ 34.00 Juy 11, 1925 Mrs. W. A. Dicus 9.78 Nov. 17, 1924 C. O. Holland 2.53 - Balance, 1924 D. W. Johnson 49.79 June 17,1925 D. W. Johnson 3.54 Nov. 14, 1924 T. C. Johnson 3.82 Jan. 26, 1925 T. C! Johnson 3.41 Feb. 28, 1925 T. C. •Johnson 10.00 Feb. 28,1925 T. C. Johnson 4.60 Jan. 17, 1925 L. D. Lokey ^ 35.00 ■w ~ ^ Expenditures made from general funds 2,873.00 $66,403.78 888.99 Total, per Exhibit “A” Sewerage system extension: Expenditures made from bond funds, pit Schedule “6” $29,700.00 Expenditures made from general funds 12,225*49 $67,292.77 Total, per Exhibit “A” • -SUMMARY . . _ Total disbursements made from bond funds Total disbursements made from general funds $«ff,925.49 $ 98,976.78 13,114.48 $112,0^1.26 As the foregoing indicates, the bond funds received for building these extensions have been practically exhausted, but we were informed there h still much more work to be done on these additions, payment for which will have to be made from general funds. * Street and sidewalk improvements are shown at book values, which includes $9,894.78 Expended for street improvement and construction during the current year. ^ N Equipment, is shown at inventory values, with the exception of office equipment-which is shown at the book figure. As has been the policy in the past, no depreciation has been considered on any of the fixed assets, with the exception qf equipment. In dur opinion the practice of not computing depreciation is very apt to prove misleading and we recommend that suitable depreciation rates and reserves be provided. SINKING FUND INVESTMENTS: No change has been made in sink ing fund investments since our examination made as of February 28, 1925, and these investments include the following: Lydia Mill notes and certificate? $ 8,500.00 ' City Hall Building ** ' 15,000.00 W. E. Owens, Property, Clinton, 43. C. 5,000.00 Prepaid insurance \ 19.72 # 19.7*2 Fixed assets: . Real estate l,775.t* 5,775.75 •4,000.00 • Light and water plant 117301.71 113,491.64 3310.Q7 Light and water plant extension 67392.77 ; $7347.72 30,045.06 Sewerage system ! 32,523.49 81344.54 678.95 Sewerage system extension 41,925.49 * 41,925.49 r*. Street and sidewalk improvements 265,014.41 255.U9.63 9394.78 Building’ on Musgrove street 12300.00 •12,500.00 "V Equipment 8,06138 7378.87 82.51 Sinking fund investments 1 28,50030 6350.00 22350.00 Notes payable Accounts payable !, Accrued Interest - Current liabilities Bonds payable Total liabilities Surplus _ * *r- $794,556.79 LIABILITIES $ 15,000.00 > v 10,041.37 6,699.72 $554,^44.05 $239,912.74 \ $ 31,741.09 535,000.00 $566,741.09 227,815.70 $ 36,521.74 1,365.17 4,643.94 $ 42,520.85 300,000.00 $342,520.85 212,123.20 ♦$ 21,521.74 6^6.20 2,055.78 *$ 10,779.76 235,000.00 $224,220.24 15,692.50 ’T £5} 4 <$N $794,556.79 $564,644.05 $239,912.74 GENERAL We found the following monthly salaries in effect at August 31, 1925: Administrative: J. F. Jacobs, Mayor $100.00 Mary Chalmers, City Clerk & Treas. 11030 C. C. Bailey, Alderman L. R. Stone, Alderman 6.00 1 . 5.00 ■ — r S. G. Dillard, Alderman 6.00 «. T. J. Blalock, Alderman 5.00 ~■ * . R. C. Collins, Alderman 6.00 J. P. Carter, Alderman 5.00 \ —Jr— Police: D. W. Mason, Chief George Holland Lewis Bagwell C. W. Weir . P. B. Ferguson G. C. Pitts, Recorder Street: - ' R. F. Adair, Overseer Water and Light Plant: O. T. Lawing, Supt. B. R. Aus^n J. R. Workman R. P. Adair Nathan Campbell $150.00 110.00 110.00 $240.00 110.00 110.00 25.00 615.00 110.00 J. N. Johnson, City Engineer J. W. Chavous, Asst. City Engineer $\60.00 100.00 110.00 90.00 60.00 I. ■ \ f 520.00 333.33 100.00 $1,918.33 $28,500.00 The Lydia Mill certificates were examined by us .and we found that interest coupons totaling $297.50, due July i 1925, liad not been presented for collection. At our suggestion this was done and we have included this interest as an item of income for the current year. In order to retire the various bond issues when they become due, the sinking fund at August 31, 1925 should total $60,582.53. As shown by Exhibit “A”, the sinking fund on this date aggregated only $28,500.00, leav ing an unprovided-for balance of $32,082.53. This, we believe, should receive attention and suitable provision made annually to care for the retirement of the several hnmi NOTES PAYABLE:^At August 31, 1925, the Town had outstanding We recommend that steps be taken at once ttf realize on all amounts due the Town. To do this, it will in all probability be necessary that the City Clerk and Treasurer be allowed an assistant, which, in our opinion, is practically a necessity at the present ^time. The accounting system of the Town should be thoroughly revised, as the method of accounting now in use is inadequate to its needs. It is not the aim of this report to outline in detail a complete system of accounts for the Clerk’s office or the Town, but merely to point out some of the deficiencies of the system now in use, and to direct the attention of administrative: officers to the advantages to be gained from a complete accounting system. TKe Town’s present accounting system is founded largely upon what is known as the “Cash Book” method of bookkeeping. This means that as a rule no transactions are recorded in the books except those relating to cash received and cash paid out; that the transactions are recorded only when fhe cash is received or when the cash is paid out. It follows, therefore, that the only statement representing operations which can be prepm^ed"" from the books is one which shows cash collected on one side and cash paid out on the other, or a much condensed statement of receipts and disburse ments. Che cash collected may represent part of the revenue of a prior period. Likewise, the payments may be for current expenses, etc., or they may be for expenses o^another period. There may be outstanding liabili ties which the books would not feh&v; or there may be uncollected bills and other items of revenue not shown on the books. As the accounts are now~~ kept, a correct balance sheet or operating statement cannot be prepared from the books>because the accounts are set up and.operated on the “Cash Book” plan. The Town’s accounts should be put on an accrual basis, for it is by this method only that all information regarding operating costs and reve nues can be*accurately obtained for the use of administrative officials. By “accrual” is meant the aggregate of the various sums accruing to the Town during a given period from ordinary sources, whether the same be collected during the particular period or not. And likewise, all expenses should be included whether paid, or due and not paid, or accrued and not due. The > From the foregoing, it will be seen that in some instances, several checks have been taken from the same person, when returned checks were still on hand from that person. While we were informed these checks would, in all probability, be made good, some of them are now nearly a year old without any payment being received. . *. - • ■ Whilq^we were informed that efforts were being made to collect all outstanding accounts, from our examination we could not see that these efforts were meeting with much success. Some old accounts have been col lected, it is true, but many more are becoming past due. As shown by Exhibit “A”, the Town has accounts receivable aggregating $13,485.96 and of this amount, more than $10,000.00 is past due. It can easily., be seen that had the Town been able tp realize on these accounts, borrowing would have been reduced, thereby reducing-its interest charges. In our opinion, all of the accounts receivable should-be carefully gone over and every effbrt made to collect them. If it is found that accounts with business houses are not paid in cash, we believe some arrangement could be made with those houses whereby the Town would be allowed to deduct the amount owing to them when settlement is made by the Town for any merchandise, supplies, etc., which it may purchase and as mtieh of the material consumed by the Town is purchased in Clinton, many of these accounts could be worked out in* a short time. REAL AND PERSONAL PROPERTY TAXES DUE: We have shown these unpaid assessments in detail in Schedules “3” and “4”; Schedule “3” showing unpaid assessments for 1924 while Schedule “4” reflects those of prior years, as follows: one note for $15,000.00, pa/able to Curtis & Sanger of New York City, bear ing interest at 4 3-4 per cent, due October 17, 1925. . L ACCOUNTS PAYABLE: This liability was set up by us to cover all outstanding accounts at August 31, 1925, and, in our opinion, include all liabilities of this nature existing op that date. ACCRUED INTEREST: Interest to August 81, 1925, has been computed on all bond issues, as well as notes payable and is reflected as a liability on xhibit “A.” - With the additional bond issues now outstanding the annual interest requirements of the Town will be considerably increased. The amount required by months $nd in total for the years 1925-1926 is as follows: 1923 $ 274.15 1922 175.19 1921 385.40 1920 ' - • 322.60 's’ $1,15730 These accounts are all past due and in the six months since March 1 1924, collections on 1924 assessments have been $264.78, while those on prior years have totaled only $28.30. From this it can be seen that these accounts should be closely followed up or liquidation of them will very likely not be made. It is manifestly unfair to those people who pay promptly to allow these accounts to run indefinitely and it is also very expensive for the taxpayers to have to pay interest charges on borrdwod .money, which- it would dot be necessary to borrow If accounts were paid promptly. (Continued on the Next Column) accounts of all mercantile and manufacturing enterprises of any size and importance are conducted on an accrual basis, and from the standpoint of tonservative accounting principles, municipal business does not differ there from. V. Date 1925— October 1 December 1 1926— January 1 February 15 April 1 June 1 July 1 August 15 Amount $ 30f00 5,875.00 5,750.00 2,500.00 300.00 5,875.00 3,750.00 2,500.00 \ ^ ~ $26,850.00 BONDS PAYABLE: We have shown these liabilities in detail in Sched ule “5”, which we believe will be self-explanatory. A brief, comparative sumnofary of the changes in the assets apd liabilities of the Town between August 31, 1925 and 1924 reflects the following: ASSETS August 31, August 31, 1925 1924 In addition tp a revision of the accounting system of the Town, includ ing its ramification,, such as purchasing^ etc., we believe the Town would find it advantageous to operate a budget. A -properly set up budget will give a complete forecast of what is proposed to be done during the year, and from an accounting point of view affords a most satisfactory method of,controlling expenditures. The affairs of the Town are now assuming such sizablq proportions that we believe eyery effort should be made to properly control them, which is practically impossible with the information now being obtained from the accounting records. .“v Very truly yotirs, , JOHN M. PALM & COMPANY, By John M. Palm, * * Certified Public Accountant. '4i 4 Increase or * Decrease Cash: On hand and in banks for general purposes $ 5,018.13 $ 3,650.06 Bond funds on deposit 202,133.70 67,6133& « $207,15133 $ 61363.32 Notes receivable 401.94 • 401.94 Accounts receivable 13,485.96 19,765.90 Real and personal property taxes 2,473.42 1303.60 City licenses 217.75 217.75 Inventories ; 8,411.17 * 1,48339 - f «. * Current assets $232,142.07 $ 84335.90 I 1,368.07 144.520.44 $145388.51 •6379.94 1,169.82 6,927.78 «» (Continued on the Next Column) $147,706.17 EXHIBIT “A” ♦ . * ( TOWN OF CLINTON •COMPARATIVE BALANCE SHEET , As At August 31, 1925 and 1924 ASSETS August 31, 1925 CASH: \ On hand and in banks for • general purposes., $ 5,018.13 $ 3,650.06 Bond funds qtkd*Posit 202,133.70 „ , 57,613.26 % August 31, 1924 n NOTES RECEIVABLE ACCOUNTS RECEIVABLE: •Paving Assessments— Schedule “1” $ Light A Water accounts Miscellaneous-^-Sch. “2” • Check! returned Advances to employees i. $207,151.83 401.94 $ 6136332 401.94 -e 7333.17 4,072.86 1,923.46 ‘ 156.47 $ 15396.94 2378.46 1324.71 85,79 180.00 13,485.96 (CONTINUED ON THE NEXT PAGE) 19,765.90