DALLAS – Yukon, Okla., has been using a $1.3 million bond fund to pay operating expenses and does not have enough money to pay its bills for the rest of the fiscal year, officials said.
"In October 2015, approximately $1.3 million was taken from bond funds that were meant for capital improvement to pay for general expenses without the council's knowledge," according to a news release from the city. "Capital improvement bond funds are only to be used for capital improvement projects."
The city's fiscal year ends June 30.
Rated AA-minus by Standard & Poor's, Yukon appears to have about $6.9 million of outstanding bonds after a refunding in August 2015. The bonds reach final maturity in 2026. The outlook at the time of the issue was stable.
The accounting firm that gave the city a clean audit on its comprehensive annual financial report for the 2015 fiscal year is FSW&B. The firm is working with the city and the forensic accountants.
The city said there may have been inaccuracies in past audits for the city, and that the 2015 audit will need to be reissued. As a result, the 2015-2016 budget is inaccurate, according to the news release.
"Upon discovering some of the financial issues, the city of Yukon hired a forensic accountant to assess its current financial condition," according to the news release. "The accountant advised that the city's 2015 financial statement incorrectly states the city's financial condition."
According to a press release from FSW&B reported by Oklahoma TV station News9.com, the accounting firm called the statement from the city "both premature and materially inaccurate."
"Due to a personal conflict between the former City Manager and the Mayor, it appears that the Mayor or someone within the City Council is trying to use a scorched earth tactic rather than allowing time to make a transition between the old accounting consultant and the new consultant," the statement said.
"We have been working with the new municipal consultant along as has the former municipal accounting consultant to identify the areas where the City has concerns and to provide information that would clarify the situation. We would ask that before additional misinformation is promulgated throughout the community that additional sources be contacted to confirm the situation and the representations that have been made rather than take the misleading information that is circulating as propaganda as absolute truth."
Attempts by The Bond Buyer to reach Derrell White, the managing partner for the firm, were unsuccessful.
The CAFR was posted on the Municipal Securities Rulemaking Board's EMMA website in December. As of Tuesday morning, that was the city's last posting to EMMA.
The news release reported that, although purchases in excess of $25,000 are required to go out for competitive bid, city employees were directed to go against city ordinances and recommend purchases without any competitive bids.
Yukon used series 2015 bond proceeds to refinance the city's series 2004, 2005, and 2006 GO bonds for debt service savings. The original bonds were rated A3 by Moody's Investors Service, which withdrew its ratings in 2015.
Citi underwrote the 2015 deal. BOSC, Inc. was financial advisor.
At the time of the refunding, S&P described Yukon's debt and contingent liability profile as "very strong."
"Total governmental fund debt service is 5.5% of total governmental fund expenditures, and net direct debt is 22.4% of total governmental fund revenue," its analysts said. "Approximately 91.5% of the direct debt is scheduled to be repaid within 10 years, which is, in our view, a positive credit factor."
