State urges Hopewell to get financial house in order: 'This cannot continue'

HOPEWELL – If the city wants to keep its fiscal structure from burning down, then City Council needs to light a fire under whoever is deemed necessary to prevent further stress.

That was the message state Finance Secretary Stephen Cummings left with Hopewell lawmakers at a special meeting Tuesday night. Cummings and the accounting firm the state hired to plot strategy for Hopewell’s apparent lack of money-management controls came back to town about three weeks after delivering 27 recommendations to get the city’s books caught up.

“This is a five-alarm fire that’s been burning in my mind at a five-alarm level for a long time,” Cummings told councilors. “And it’s kind of become the reality of this environment. People, I don’t think, really feel like it’s a house on fire. This cannot continue.”

Hopewell was called on the carpet by the state Auditor of Public Accounts for not submitting required audits in a timely manner since 2015, including unsent audits dating back to 2018. Fingers have been pointed by some on council at previous city administrations for not stressing the importance of getting those records in on time, and it is because of that perceived laissez-faire attitude that Hopewell now finds itself unable to issue bonds for necessary capital improvements.

“We no longer have a bond rating. That means we have no money for capital expenditures,” Ward 1 Councilor Rita Joyner said. “You look around this city, and we have needs. We have desperate needs, and we cannot fund them at this time.”

Vice Mayor Jasmine Gore said that laissez-faire approach was also shared by some on previous councils, herself excluded. Gore said she helped push for greater attention to be placed on the need for timely audit submission but was stonewalled by some of her now-former colleagues.

“History matters, right? Especially now when people are paying attention to this now because as you said, this is an eight-year-old issue,” Gore told Cummings. “The fact of the matter is, some of us have been begging for help for a long time. That’s why I keep stressing that. I don’t want citizens to think we’ve been sitting on our hands.”

The accounting firm of Alvarez & Marsal was hired by the Youngkin administration to devise strategy for Hopewell to dig out of the piled-up audits. In addition to the lack of an established money-management plan, the firm also found that the city lacked both the staffing and the staff understanding of how to go about tackling the audits.

Those issues were evident in the fact that in going over the city’s records for the past decade, the firm was only given roughly 60% of the documents it requested because the others either could not be found or were never completed. In addition, the firm said Hopewell did not appear to have a control in place where the ledgers were balanced and closed monthly.

Some councilors claimed the reason so many of the audits went unfinished was because the city was relying on agencies outside the realm of direct city governance – the city treasurer and the school system chief among them – for providing the reconciliation info needed to finish the audits. That was not throwing shade on the present treasurer or school leaders, the councilors claimed, but rather those who preceded them.

Cummings said the easiest way to calm the current condition and curb future problems was, simply, commuication among all the parties involved.

Nancy Zielke, the managing director of Alvarez & Marsal, suggested the city set up two teams to address the audit issue. One team should focus solely on preparing the audits and the other on handling all the account reconciliations. When asked how long it could take to square up the audits, Zielke said the city currently had one person dedicated to the audits, and it was taking that person about four months to complete one audit year, so a team could probably do it much quicker.

The firm also recommended the city hire at least three more employees for the financial department. Zielke noted that Hopewell was relying on an outside auditor to prepare financial statements and typically “that is done by city staff.”

She boiled her company’s report down to four key points.

“Get caught up on your audits, address internal controls, put in place better planning [and] better oversight on reconciliation processes,” Zielke said.

Hopewell is in the waning stages of adopting a city budget for the 2023-24 fiscal year, and Cummings said something should be included in that budget proposal to immediately address the shortcomings found by the accounting firm. When it was recommended that the city dedicate some of its remaining federal American Rescue Plan Act funds toward paying for the additional employees, Cummings cautioned that unspent ARPA dollars could be affected by the debt-ceiling agreement being hammered out by the White House and congressional Republicans.

Bill Atkinson (he/him/his) is an award-winning journalist who covers breaking news, government and politics. Reach him at batkinson@progress-index.com or on Twitter at @BAtkinson_PI.

This article originally appeared on The Progress-Index: Youngkin administration urges Hopewell to act quickly on finances