Franklin City manager flags accounting gaps, recommends forensic audit and short‑term budget fix

City Manager Rosalind Oglesby told a joint session of the Franklin City Council and the Franklin City Public Schools that an internal review uncovered accounting and reconciliation problems that must be addressed before the city’s audits can be completed.

Oglesby said auditors had certified a beginning cash balance that had been used by some school auditors but that liabilities and multiyear projects — notably roof and HVAC work — make the number misleading. “What I did know was that the city had a a financial credit rating, the double a, by, Moody's,” Oglesby said in the presentation summarizing what she found after 301 days on the job. She said the city’s financial system is operating on a cash basis in places and lacks fund restrictions in others, which has caused revenue and expense timing mismatches.

The manager told council she had issued an RFP for a forensic audit that would look back five years and include federal grants; the work would require roughly a half‑million dollars, she said. “To do the forensic audit, it's gonna cost about a half $1,000,000,” Oglesby said, describing the cost estimate provided by respondents to the advertised RFP.

City Treasurer Donna Babb described how the city codes EDIs and holds school receipts in a zero‑balance account before allocating them to school ledger lines. She warned that separating school and city pooled cash without clear operational rules could create months when the schools would be unable to make payroll: “There will be times they won't be able to make payroll,” she said, explaining the bank and coding mechanics that currently keep the schools afloat.

Council members pressed for a single reconciled figure for alleged overspending. Oglesby said the city’s internal review shows items that must be reconciled and that some numbers the schools have used for their budgets are unaudited and therefore unreliable. Several council members urged rapid action: Council Member (functional) said, “Something needs to be done about this tonight,” arguing for accountability and a joint approach to fixes.

As immediate steps, council approved budget amendments on the consent calendar. The body voted to accept $1,037,314 from the Virginia Department of Behavioral Health and Developmental Services for the city's children's centers and to amend the FY26 operating budget to move $757,540 from the unassigned general fund balance into FY26 appropriations to correct accounting mismatches related to the children's center revenue presentation.

Oglesby said other remedial actions under way include advertising for a forensic audit, hiring interim and contract staff in finance, and seeking assistance from the Virginia auditors of public accounts. She also recommended forming a joint committee of city and school finance staff to examine a joint bookkeeping approach and improvements to the general ledger. The city manager said some fiscal problems stem from staff turnover and legacy processing choices, and she emphasized the need to finish the FY24 audit before some final conclusions could be drawn.

What happens next: council directed staff to continue the forensic‑audit procurement work and to develop the joint committee approach; the FY24 city audit remains open and will be a gating factor for further reconciliation and any additional policy action.