The city of Blytheville's 2008/2009 state legislative audit is in the hands of 2nd Judicial Prosecuting Attorney Scott Ellington.
Late Friday afternoon, Ellington said he is reviewing the audit, evaluating it before determining how to proceed.
He is also awaiting the 2010 audit, which has not been completed.
Released in June, the 2008/2009 report showed the city owed the Internal Revenue Service $3,847,555 because of delinquent payroll taxes. The figure includes $2,805,320 in unpaid taxes and penalties and interests of $1,042,235, according to the report.
"Our audit procedures indicated that the offices of the Treasurer, City Clerk/District Court Clerk, and Police Chief were in substantial compliance with Arkansas fiscal and financial laws," the report reads. "Noncompliance with state law and accepted accounting practices was noted in the offices of the Mayor and Finance Director."
Barrett Harrison was the city's mayor at the time, and Faye Griggs served as its finance director. Harrison didn't seek a fourth term, while Griggs retired from the city in June.
"After finding out that information (the audit) and listening to the public who wants answers about what's going on, I took it upon myself to contact the prosecuting attorney, Mr. Scott Ellington," Blytheville Mayor James Sanders said Friday. "I reported to him that the people are asking for answers in this case and asked that he would look into this matter. I didn't make any request prior to that because, with anything, until there is some actual information, which came out in this audit, it's not proper to try to accuse anyone of any specific things. But based on those findings of responsibility, I then asked if he would look into that to determine what was the situation. We have been in touch on several occasions. He is conducting an investigation, but he has not continued because we are currently in the 2010 audit."
Sanders said Ellington contacted him in March, when the issue arose. Then, after the June City Council meeting, Sanders notified Ellington of the results of the audit.
Harrison has said he had no idea the taxes were unpaid until the Internal Revenue Service showed up at his new office, the Blytheville/Gosnell Regional Airport Authority.
He has maintained the Finance Department didn't tell him the city wasn't paying payroll taxes, the IRS never notified him, financial statements didn't reflect they were unpaid and the state legislative audit did not show it in its report.
Griggs has declined comment several times on the matter.
Did she tell Sanders how the money was spent?
"I went in to look to see if the money was there," said Sanders, who is entering his eighth month in office. "And it wasn't. I asked her where it was or if she had any idea. She said: 'didn't nobody steal it.' As far as making a statement to me about it, the statements had to be made to the investigators that were asking her the questions. I wasn't there when she was interviewed with them. That's the situation that everybody continues to ask. Their rights are protected and their interviews are done by the investigators. I wasn't there to hear what Mr. Harrison had to say. I wasn't there to hear what she had to say. That's it. That's between them. Mine at that point is to protect the funds that we have now."
The mayor said, like the public, he hasn't gotten any clear answers.
"I've said we should focus on the present, not the past," Sanders said. "However, that doesn't mean that I'm saying we should not be looking at the loss of those funds. Myself, I can't answer those questions that determine what happened to the money, but I can make this comment: it is not here. We don't have it in any funds here. I can also say after this administration found out about those things, I did contact the Council, advised them of the situation and we've been cooperating with the Internal Revenue Service. Myself, the city attorney (Mike Bearden) and the treasurer (Gary Perry) have been cooperating and trying to get as much information as we can to the IRS so that they can make whatever determination they need to make that will help us when we have to repay the taxes."
Blytheville has hired Memphis-based law firm Baker-Donnelson, which it hopes will help abate the penalties.
Sanders said the IRS has given him no timeline.
"This administration is focused on remedying the situation, not painting a picture that everything's OK," Sanders said. "We're trying to go to the root of the problem that caused that problem."
He pointed out the city now has procedures in place to prevent a similar issue in the future.
Sanders has also sought help from U.S. Sen. Mark Pryor, U.S. Congressman Rick Crawford, State Sen. David Burnett and State Reps. Charolette Wagner and Tommy Baker.
"When I make the comment about the city being focused, there are several hurdles that we still have to overcome," he said. "This was an unforeseen situation that presented itself. But we still, as a city, have to focus ourselves on building relationships within the community. We still have problems pertaining to crime. We still have problems of unemployment. We still have all of these other issues that we can't allow that to take a backseat to a situation that we have no ultimate control over. What we need to do is allow those people to operate in their realm. We need to stay focused on trying to build our community."
Sanders said the loss in population is a front burner issue that has been pushed to the back because of the tax situation.
Because of the 2010 Census results, Blytheville lost more than $400,000 in turnback funds the first six months, according to Sanders.
"That does sound bleak, but the positive side to the whole issue is, even though we have this loss and even though we have this tax situation, this administration has been able to pay its taxes," Sanders said. "It's been able to pay the payroll. We've been able to pay some bills. And we've still got this $400,000 loss. And I think that's significant. We've been able to do those things and work on the problems that still face us.
"This is a great Council I'm working with. They are a working Council. We hear them on the radio. We see them at meetings. They are talking to the public. They're staying focused on what is at hand. They're assisting me because they know there are a lot of mountains I have to climb. I appreciate them for the trust that they have to allow me to try to do something with this. I show my trust back with them because again I'm responsible for the city. They're out there taking it to the streets, trying to do all that they can to help the city and all of the citizens."
He added city attorney Mike Bearden and city treasurer Gary Perry have been working hard as well.
"Can I answer the questions what happened to the taxes? No. I wasn't sitting behind this desk," Sanders said. "That wasn't something I'm aware of. But we have been able to work with our city employees. These city employees have been great. They're out here working hard."
"They're doing everything they can with what little we do have," he said. "It's my duty and the Council's to do everything we can to make those things even better for them -- the working conditions that they have. We have to look at how we can better those conditions and salaries for them as time permits itself. ... We are doing what we can to make the city safer, to make it cleaner and to be more efficient. I believe we are on the right track towards that."
He said overcoming the $400,000 loss in turnback funds is an example of that.
"I see us moving in a positive direction," Sanders said. "We continue to examine. We're not done. It's not a situation where I need to focus on what happened in the past with those taxes. I can point a finger, no matter what gossip I could put out, that's only gossip and finger-pointing. The people who handle that, they have been contacted. They're working on it and when they've completed doing whatever it is that they do then we'll all know what's happened. Ours is to stay focused on ways we can make our city better."
mbrasfield@blythevillecourier.com