LANDIS — As the State Bureau of Investigation continues a probe of town finances, a March 25 letter from the Local Government Commission raised a litany of concerns about the budget for the 2017-18 fiscal year.

For the year, Landis’ financial problems included a general fund, water fund, sewer fund and light fund that were “inadequate to support ongoing operations,” according to the letter sent to the town by the commission, which is part of the State Treasurer’s Office.

The letter also details concerns about the cash position of the town’s funds and that former Finance Officer Ginger Gibson spent money without approval of the Board of Aldermen.

The commission recommended that two town employees with family ties to Gibson — Tara Johnson and Libby Ridings — be reassigned to nonfinancial work or placed on leave.

“We are not aware of any allegations of wrongdoing on the part of these individuals. However, out of an abundance of caution, until the investigation is completed, we urge the town to reassign these employees to other nonfinancial work or consider placing them on paid administrative leave,” said the letter, signed by Sharon Edmundson, director of fiscal management for the commission.

The Local Government Commission’s letter was sent to Mayor Mike Mahaley, the board, and Landis’ interim town manager and finance officer as well as to Marie Smith of the SBI and Landis’ auditor, Eddie Carrick.

Mahaley responded Monday, saying the town would not follow the commission’s advice. 

He said the town is confident both employees would not pose a risk to ongoing financial operations the SBI embezzlement probe, of which former Town Manager Reed Linn and Gibson are the subjects.

“We appreciate your concerns regarding our staff members who happen to be related to the former finance officer and acknowledge that there is a risk that some members of the community may object to their continued employment, despite no allegations or evidence of wrongdoing on their parts,” Mahaley said. “Regardless, we have no alternative positions in other departments to which they could be assigned.”

Interim Town Manager Kenny Isenhour said the commission was concerned when the investigation began but there would be no way for someone to tamper with evidence. He said the SBI is getting information directly from banks or through subpoenas.

Mahaley said in an interview Thursday he doesn’t believe in guilt by association and that he does not think it is in Landis’ best interests to let a couple of people go.

Regarding the “alarmingly low amounts of unrestricted cash resources for the town,” Mahaley said in the letter that the town acknowledges problems related to low fund balances or and unapproved disbursements. The 2017-18 audit said Landis had only $26,168 in its unassigned fund balance, which functions as a savings account, of the roughly $3.35 million in general fund expenses.

“As we develop our FY19-20 budget, the town is committed to making the necessary and proper changes to increase our operating fund balances,” Mahaley wrote.

Both Mahaley and Isenhour said they are focused on improving the savings account going into next year’s budget.

But it wasn’t just inadequate cash on hand that the Local Government Commission expressed concern about. In one case, the town didn’t appropriate money for debt service payments, the commission said. What’s more, the town received hundreds of thousands of dollars less in revenue than it budgeted across its many funds. In the light fund, for example, the commission’s letter said operating revenues were $555,717 less than total budgeted amounts

The commission also stated in its letter that the finance officer cannot appropriate funds without the board’s approval.

“The finance officer has no legally authority to expend funds unless there is board-approved appropriations of available funds to pay the obligations,” the letter stated. 

Mahaley also said in his letter the town will mitigate or prevent wrongdoing through board members being able to see transactions made by town employees.

The letter goes on to say the board should make budget amendments. At a meeting Monday, the Board of Aldermen approved a budget amendment, the first in this fiscal year and any recent year.

“Several changes regarding financial controls have been or are in the process of being implemented which will provide the board with unprecedented insight into the town’s finances,” Mahaley wrote.

Mahaley also said it is important the letter sent to the commission be signed by all the aldermen.

“Every board member signed it, which was a good idea,” Mahaley said.

Mahaley said he looks forward to receiving a good letter from the Local Government Commission, but he thinks the agency is pleased with the work the town and board are doing to get finances back on track.