The Mosheim Board of Mayor and Aldermen voted Thursday to authorize Mayor Billy Myers to apply for a $500,000 Community Development Block Grant needed to correct "major deficiencies" in the town's wastewater treatment plant.

The resolution committed $56,000 in town funds as a "match," if the grant is received.

Cathy Walden, president of W&W Engineering, said Friday that if the grant is received from the Tennessee Department of Economic & Community Development, it will be used to add a filter to the Lick Creek Valley Wastewater Treatment Plant, which the town owns.

The filter would reduce the amount of nitrogen in the town's sewage effluent, or outflow, from the plant, she said.

Mickey Ellis, the town's accountant, noted that the town's sewer system had a net loss of $30,000 for the year, but the operating loss was "a little larger," since the town received a sewer grant during the year that increased revenue.

Ellis's finding, which was not discussed in the town board meeting, states that the sewer fund has "experienced a negative change in net assets for more than two consecutive years" and thus "meets the definition of financially distressed" in state law, and thus may be subject to actions by the state Wastewater Financing Board.

In general, state law requires that sewer systems operate on at least a "break even" basis each year.

The management response states that Mosheim has implemented two sewer rate increases and is otherwise working to correct issues of non-compliance.

The town raised its sewer rates in October, which will help revenue for the current year, but the increase did not affect the rates during the audit period.

Mayor Myers said the increase will provide about $1,000 more revenue per month.

Another increase could still be permitted under the resolution that allowed the first two, the board was told.

Ellis said the October rate increase will help the budget, but another factor is, "You guys spent a tremendous amount of money replacing pumps over the last couple of years," Ellis said, adding, "That shouldn't have to continue," since the pumps have a long life expectancy.

Ellis told The Greeneville Sun on Friday that he was referring in this instance to large pumps and related apparatus that were replaced and updated in the aftermath of the deaths of two of the town's sewer employees in a pump station at Exit 23.

He said engineers have said those pumps are expected to last many years.

Ellis reported that the increased rates and the lessened need for large pumps should improve the town's sewer budget.

"I think the year that ends this June should be a telling year to see how you're doing," Ellis told the Mosheim board.

Mayor Myers asked for a motion to approve the report. Attorney Keith Livingston said approval was not technically required, but after more discussion, Alderman Harold Smith's motion to adopt the audit report was approved.

On another matter, Ellis, the town's CPA, told the Mosheim board that a change in federal audit rules required that another accountant, Brian Price, be involved, in order to protect Ellis' own independence in the audit. "Bringing on Mr. Price solved those problems," Ellis said.

The addition caused the audit to take a little longer, but removed problem "findings" from this report.

Ellis complimented Town Secretary Peggy Wills and Town Recorder Kelle Lowery, and Price, for doing "an excellent job."

He said the audit report was free of negative findings, "other than the usual findings" regarding inadequate internal controls that are a function of the relatively small number of town employees.

In the letter that accompanied the report, Ellis noted that three conditions, or findings, that were reported in the 2008 audit have been corrected, but one finding in the report identified as lack of separation of duties, has not been corrected, and is a "material weakness" in Mosheim's internal financial controls.

The letter notes, "A material weakness is a significant deficiency, or a combination of significant deficiencies, that results in a more than remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the town of Mosheim, Tennessee's internal controls."

Ellis wrote, "Although the Town has several employees, one employee receives collections, records collections, prepares deposits and delivers collections to the bank for deposit without oversight or verification."

The effect of this practice, according to the finding, is "the danger that intentional or unintentional errors could be made and not corrected."

This finding is regularly cited by state auditors for small offices that handle money, and state auditors regularly acknowledge that it is difficult to fix in a small town.

Mosheim only has two employees at Town Hall, and Baileyton, for example, has only one, a situation that is not unsual in small towns in Tennessee.

Ellis recommended that the town, "To the extent possible, segregate the duties of preparing the bank deposit statement separate from the duty of posting receipts to customer accounts and reconciling monthly bank statements."

The town's response stated that Mosheim "has utilized additional personnel to segregate duties to the extent they deem possible and reasonable."

However, the audit report's "current year status" says, "This condition still does, and likely will continue to, exist."

Mayor Myers showed the board a copy of an incident report that Greene County Sheriff's Deputy Rick Williams found a four-wheel-drive vehicle stuck in a drainage ditch Sunday afternoon on the property where the historic Harmon Cemetery is located.

The report said the owner of the vehicle, Kenneth Armstrong, had told the deputy he "wanted to see if his four-wheel-drive worked."

The vehicle was pulled out of the ditch by a wrecker, but damage was done to the area that will have to be repaired.

Livingston advised the town to get an estimate on the cost of repairing the cemetery property, and he, as the town's attorney, would bill Armstrong for the damage. He advised the town not to do the actual repair work until that happens.

"If he doesn't pay, we'll take it from there," Livingston added.

Last month, Alderman Smith brought up the use of a city truck to haul crushed stone to the farm of J.W. Douthat in the McDonald community.

Mayor Myers said then that the town was paid for the stone, and he was not aware that using the trucks for that purpose was illegal, and would not do it again.

Town trucks regularly haul crushed stone to private driveways inside Mosheim, for a $40 per load fee, plus the cost of the stone.

Livingston was asked in January to "look into" the trip outside the city limits.

Near the end of Thursday's meeting, when asked what he had found out by Smith, Livingston said that after reviewing the situation, and the individuals involved, he found he had "too many conflicts ... from representing the individuals involved in other capacities" to be unbiased.

"I'd recommend, if you want to pursue it, that you find somebody else," Livingston said.

Smith said he believes that should be done, but no action was taken by the board.