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What do we tell the taxpayers?

By Carolyn Kahant for TaxpayersWatch



    According to their actions to date, the Kerr County Juvenile Board's answer to that question is: Only what the taxpayers can figure out for themselves. What with the juvenile board's unwillingness to explain their lack of oversight, and the commissioners court's reluctance to demand an explanation from them, the taxpayers are left in the dark.


      At a commissioners court meeting in November, Commissioner Buster Baldwin said he was still waiting for the juvenile board to explain to commissioners and taxpayers how the facility got into such a  financial predicament. Holding up a memo citing the former director Tanna Brown's last paycheck as $11,000, he said "That's a management problem. We went through all of these problems, spending taxpayers' money, and still we don't have a solution."

     Judge Pat Tinley, chairman of the juvenile board and the commissioners court, responded, "That information has been available. It's available to (everyone). If you haven't had information, it's your own damn fault."


     Commissioner Jonathan Letz said he and fellow commissioners had no idea about the problems until two weeks before they were asked to appropriate funds for the lease payment.


     Commissioner Bill Williams allowed he had asked twice for information, then added he thought it "highly unusual" that it could be read in bond journals that $800,000 of reserve funds disappeared, "but it wasn't made public to Kerr County taxpayers." 


 Forensic audit proposed


     Since November, a special forensic audit that would give some answers was proposed by Williams. The Kerrville Daily Times on December 29 quoted Williams as saying "It is time to find out how $800,000 was spent out of the KCJF's coffers (and unaccounted for)  within a two-year period of time." To do that, he suggested there be an independent audit performed on the facility for the 2002, 2003 and 2004 fiscal years.


     County Auditor Tommy Tomlinson offered to provide the information from the county's regular yearly audit, but Williams said "that audit" did not provide the depth needed for a "clean slate." "It does not give you the nitty gritty," Williams said, adding "Fiscal details have been missing." Commissioner Dave Nicholson agreed, saying a general audit didn't provide the information the Court was seeking, and "I don't learn very much from that."


     After Tomlinson gave the issues he believed had a negative impact on the profit or loss of the KDF, he said "2001-02 was the high point of our reserve ... at the end of 2002-03 (the facility had) a negative $189,000 in net assets."


     Williams asked what Tanna Brown did to accomodate the loss of funding: "What steps were taken?"


     "I don't know", Tomlinson replied.


The "Letz" report


     Though the idea of a forensic audit was favorably received in newspaper editorials and letters to the editor, it has not yet materialized. A problem, say the commissioners, is finding an audit firm willing to take on such a "hot potato" ... politically speaking.


   So the "hot potato" continues to be batted around. At the May 9th Commissioners Court meeting, Jonathan Letz passed out his draft of a management discussion summary, which will become the opening page(s) of the 2003-04 Kerr County Audit. He wanted input from the others as to how to create content.


   The following is taken from the transcript of the meeting. It has been edited to remove non-essentials. You may access the complete transcript at www.co.kerr.tx.us .


LETZ:  My personal feeling is, the taxpayers deserve an explanation by this Court as to what happened (at the JDF), but I'm not sure how to do that, because we haven't done a whole lot of investigation, and what we have are discrepancies, basically. We have the State saying funding wasn't cut. We have the juvenile board saying things were done -- changed, and I don't know how we reduce all that to ... the summary format that is factual, which is what I think our obligation is under that.


WILLIAMS:  With respect, then, to the JDF ... there remain more questions unanswered than there are thus far affirmative answers to put in here. So, would it be your sense ... that we highlight certain questions that ... there still hasn't been satisfactory or sufficient light shed on these questions to arrive at any ironclad determination?


LETZ:  All it basically says (now) is that ... in September we received a notice from the Hill Country Facilities Corp. that they weren't going to make bond payments, and then shortly after that we took action and said we're not either. Well, I don't think that's enough of an explanation as to what ... ended up costing the taxpayers a whole bunch of money.


WILLIAMS:  We know ... that we purchased the facility at a discounted amount from the bondholders, and we issued debt to cover that purchase. Okay ... those are three things we know. What we don't know definitively is, how did we get into that pickle? ... how do we address that?


JUDGE TINLEY (to Letz):  Do we not know what the revenues were? (Affirmative) Do we not know what the expenses were ... month by month? (Affirmative)


LETZ:  (Reading from last year's report) "Because of the increases in demand for services, the KCJB approved an addition to the facility to increase capacity to 75 beds. Funding for this project was sale of 5.4 million in lease revenue bonds."  So... we expanded the facility because demand was up, and we went from that to going bankrupt.


WILLIAMS: I don't know the answer, but what I do know is that there are innumerable questions regarding the efficacy of management and its neglect, denial, or otherwise with respect to this facility. And those things could have been -- might have been or may yet be ferreted out if we were to go to an independent audit. I also know that the audit firm that does the County's annual audit didn't take any great pleasure in wanting to pick up this tar baby.


JUDGE TINLEY: I think the numbers are there as to what happened ... that revenues in "X" month of the previous year were such-&-such, and the current month were whatever lesser sum they are. The numbers are there to speak for themselves, and you can track those numbers so as to clearly indicate the basis for the non-appropriation.


WILLIAMS: Yeah, things went south, Judge.


JUDGE TINLEY:  Yeah, sure. Absolutely.


WILLIAMS: But doesn't that pose a question mark in your mind, why?


JUDGE TINLEY: ...if you want to get into a whole bunch of what-if's, you can do that, but that's not generally how auditors and other bean-counters work.


LETZ: ...but why did revenues drop so much? That's the question. This is our opportunity to explain to the public, which is to me the taxpayers, and also to the bond rating companies ... this is what we think happened. 'Cause we took a hit on this, too, financially in our ratings ... not as bad as we thought it was going to be initially, but ... that type of people will read this, and ... I don't think we can just gloss over it.


    (Here there was a break in the discussion, which then picked up again.)


 BALDWIN:  Back to your juvenile thing, I don't see it any other way, Jon, than to -- Bill made a little outline early in his talk about, you know, at such-and-such point, the corporation decided they couldn't pay their bills and passed it on to the County, and the County said no.  I mean, that's the only thing you can say, because there is no definitive statements to make in between.  There is no reasons.  We've fired some pretty good shots across the bow trying to get those answers, and they're not forthcoming.  I don't know if there is such a thing, to be honest with you.

JUDGE TINLEY:  Well, we've got the numbers. You can track the numbers, and when you get to the point in -- in late August, early September where the nonappropriation occurred, we know what the numbers were then.  They were available to the Juvenile Board.  Based on that, they gave notice of nonappropriation, and -- and the dominoes started falling.  Tommy?


COUNTY AUDITOR TOMLINSON:  I might give you one suggestion, Commissioner.  On the T.J.P.'s web site it lists all the juvenile facilities in the state, and it tells you what the capacity is for each one for a given period.  And ... it tells you what percent of that capacity they use.


 WILLIAMS:  What percent of what?

TOMLINSON:  It'll tell -- it gives you a detailed breakdown of each facility in the state, every one of them, and it tells you when the facility was built, what kind of money they used, if it was state money or bond money.  It will tell you how many beds are available, and it will tell you how many --

JUDGE TINLEY:  Occupancy rate.

TOMLINSON:  How many residents were there for the year.  And I did a cursory review of that information about, oh, probably six or eight months ago, and I think if you'll get into the detail, it will show you that state average that the -- that the percentage of occupancy-to-capacity statewide for '03/'04 was about 45 percent.  There are some facilities in the state that had less than 40 percent occupancy. And it tells you what each facility charges per day, the minimum and the maximum. 

BALDWIN:  Did you say the average was about 45 percent?


TOMLINSON:  That's what I remember.

BALDWIN:  That really makes me feel good about owning that thing out there, I can tell you. That's really exciting.

WILLIAMS:  That's not where we are.

TOMLINSON:  And, I mean, that's about what our average was during that time period.  And so  -- I'm just suggesting that might be a place to get some general information of trends about  juvenile facilities in the state of Texas for that year.

LETZ:  All right.  Well, this will be back at our next meeting to hopefully approve.

JUDGE TINLEY:  Thank you.




The final report


     Commissioner Letz presented the final draft at the regular court meeting on June 13. He took Judge Tinley's advice and let the numbers tell the story. Though disappointing to TaxpayersWatch, it was praised by the court as an "excellent job" on a "difficult subject." Was it considered excellent because it gave no explanation at all? It states the Kerr County Juvenile Board approved taking on $5 million in debt to build an addition to the facility and pay off the existing mortgage of $1,947. It lists the bare-bones facts of the non-approriation of funds for the lease/bond payments by both the board and the court, and points out that the court did not receive a "full explanation" of the problems from the board.


      Thus, it has none to give? TaxpayersWatch is weary of the Commissioners pointing at the juvenile board's unwillingness to incriminate themselves as reason for they themselves to remain silent. We're not sure who the juvenile board members are accountable to, but the commissioner's are accountable to the taxpayers. And the taxpayers deserve more than they have been given so far.


     This is a case of the "elephant in the living room": Everyone knows it's there but are loathe to speak of it. For example, the charges of abuse and neglect that finally surfaced, appeared in the newspapers in January '04, and were finally substantiated by the Texas Juvenile Probabion Commission. Or the earlier loss of the substance abuse program that caused the termination of most or all of the therapists and other professionals, and can only be attributed to egregious actions by Director Tanna Brown. These had a negative influence on the reputation, and therefore the revenue, of the facility. Was Brown ever seriously confronted, before being channelled into a low-key job with Judge Prohl? 


     The biggest elephant in the room is Judge Pat Tinley himself, who was privy to all the secrets of the juvenile board and presides sphinx-like over the business of the commissioners court. We wonder how the commissioners could have remained so in the dark when Tinley was sitting right next to them all along. Could they not ask, and could he not answer, some simple questions? No doubt he has scruples about mixing up the business of the two bodies, but still, it seems rather farcical.


    So we have no special forensic audit. We have no explanation in the county audit. Taxpayers still have no answers for why so much of their money was lost or foolishly wasted. We await another day, that seems less and less likely will ever come.   


     One unrelated sentence caught our eye. The report described proprietary funds as "When the County charges customers for the full cost of the services it provides ... to outside third parties." The financial activities of the KCJDF come under proprietary funds, otherwise known as "business activity". Why then do we not charge other counties the full $140 per day that it costs us to house and treat their juveniles? If this is untenable in the existing market structure, then Kerr County should not be in this kind of business

TaxpayersWatch for Kerr County
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