April 12, 2024
A review of Bangor, Maine's ARPA bank statements led to a surprising discovery: missing interest. How did $500 disappear?

Recently, I stumbled upon a peculiar series of transactions in the September 2021 statement for the city of Bangor’s ARPA (American Rescue Plan Act) bank account.

Let’s break it down:

  1. The Sweep: On September 7, 2021, the entirety of the ARPA fund balance was transferred to another city account.
  2. Return and Credit: Three days later, on September 10, 2021, the full amount was returned to the ARPA account. A $1,008 deposit was added four days after that on the 14th. Per the Bangor City Manager, that was for interest earned for those three days.
  3. Unexpected Discrepancy: Using the bank statements and the known ARPA interest rate, I carefully calculated that the interest earned during September 2021 should have been $15,137.86. However, between the $1,008 deposit and $13,624.35 in interest paid by the bank… the city received only $14,632.35 – a surprising $505.51 shortfall.
  4. Seeking Clarification: I brought this to the City Manager’s attention, providing my supporting calculations. The response I received attributed the situation to a potential bank error.

Most of our accounts are zero balance accounts and are “swept” daily to a primary account.  It would appear around this period the bank inadvertently “swept” the funds to the primary account and the $1,008 represents the interest earned on the funds while deposited in the primary account.

Debbie Laurie, Bangor City Manager, February 20, 2024 via email

Sticks out like a sore thumb

The chart below shows the interest earned on the City of Bangor’s ARPA account across several 30-day statement periods. Normally, with a fixed interest rate and no account activity, each future statement should show a slightly higher interest amount than the previous one due to daily compounding. However, the September 2021 statement immediately stands out as an anomaly compared to the previous 30-day period. This raises the question of how such an obvious discrepancy could have been overlooked.

*August and May’s statements began with the 2nd day of the month, making them 30-day statements.

Lingering Questions:

If this was the result of a bank error, the bank didn’t make the city of Bangor whole after their mistake. Why only $1,008? How was that amount calculated?

While miscalculations happen, this incident – coupled with recent audit findings about the City’s financial oversight – raises valid questions about account management and transparency.

Excerpt from a March 21, 2022 letter to Bangor’s Management from the firm Runyon Kersteen Ouellette.

Importance of Accuracy

The $505.51 discrepancy may seem small in the grand scheme of things, but public finances require accuracy. While mistakes happen, having oversight controls in place is vital to catching these errors promptly. It’s worth noting that the City’s finance department has been vocal about staffing shortages for years. Perhaps this incident underscores the need for the City Council to prioritize ensuring the department has the resources necessary to manage funds effectively and prevent future discrepancies.

Excerpt from a March 21, 1978 letter to Bangor’s Management from the firm Peat, Marwick, Mitchell & Co. also addressing Bank reconciliations, and acknowledges “staffing problems of the City”.