(From State Auditor Thomas Schweich)
Findings in the audit of the City of Neosho
The city's financial condition has worsened due to decreased revenues, cost overruns, real estate purchases, golf course subsidization, and a failure to adequately monitor the city's budget and cash balances. At September 30, 2009, the General Fund balance was more than $1 million negative.
Accounting Records and Budgets
The city does not maintain accurate and complete accounting records and budgets, is not performing timely bank reconciliations, and is not comparing actual receipts and expenses to budgets. The city did not always submit annual financial reports to the State Auditor's office as required by law.
Real Estate Transactions
The city sold property to the Neosho R-V School District for almost $200,000 less than its appraised value without soliciting any other bids. The city also agreed to exchange services for land without appraising the land or calculating the costs of the services to be provided. The city spent nearly $400,000 to purchase properties for additional parking, but, because it did not plan for development costs, the properties remain unused.
The city spent $600,000 more than planned on the renovation of the civic center and did not effectively plan how the financing would be paid. The renovation project included 47 change orders, none of which were separately bid. The city paid an individual $12,690 to promote events at the civic center without soliciting bids or ensuring contract requirements were met.
Because the city failed to obtain a performance bond on the senior center renovation, it spent $135,313 to compensate subcontractors when the general contractor defaulted. The city also did not have a written agreement with a general contractor as required by state law.
The city failed to abide by its own procurement policy by not soliciting bids for several purchases. The city also did not periodically solicit proposals for services, such as golf course management and banking. Also, the city may have saved interest costs if it had used a competitive sale rather than a negotiated sale when selling certificates of participation in March 2010.
The city does not reconcile fuel used to fuel purchased or require mileage and fuel use logs, and records show a total fuel shortage of 1,375 gallons over a 3 month period. The Interim City Manager is allowed to use a city vehicle, but the value of commuting miles is not properly reported as compensation. The city did not always enter into written contracts and did not monitor contract compliance, so it overpaid a consultant $7,500 and did not properly bill the Neosho school district for its resource officer. Also, some contract terms were not adequate to ensure the city's needs would be met. The city spent nearly $11,000, to purchase items from a local business owned by the spouse of former Councilman/Mayor Werneke without seeking bids.
Payroll Controls and Procedures
Timesheets are not always signed and retained, and some employees are not properly compensated for overtime. The city is not properly and consistently managing the tuition reimbursement program and is not reporting reimbursements as taxable wages. Three retired employees retained city health insurance at the subsidized rate for several years after retiring.
Accounting Controls and Procedures
Accounting duties are not adequately segregated and there is no documented review of the Accounting Manager's duties or the Finance Director's wire transfer duties. Receipts are not always issued, the numerical sequence of receipts and batch numbers are not accounted for properly, and monies received are not deposited timely and intact. Business licenses are not pre-numbered and license and permit fees are not reconciled.
Utility System Controls and Procedures
Utlility revenues are used to subsidize General Fund operations, and the city increased utility rates without performing a cost analysis or rate review. The city does not reconcile gallons of water billed to gallons of water pumped, so unauthorized use or leaks could go undetected. The city also does not compare amounts billed for utilities to amounts paid and does not properly handle delinquent accounts. An independent review of any adjustments made to utility accounts is not conducted. Customer utility deposits are not reconciled to the deposit payable balance.
Closed meeting topics were not limited to those specifically identified in the open meeting minutes and allowable under the Sunshine Law.
Capital Asset and Insurance Procedures
The city is not properly managing its capital assets and unnecessarily carried insurance on vehicles it no longer owned.
In the areas audited, the overall performance of this entity was Poor.*
American Recovery and Reinvestment Act 2009 (Federal Stimulus)
The city was awarded a $7,758,719 Clean Water State Revolving Fund Grant for sewer system and wastewater treatment facility improvements, of which $4,348,772 was received and $4,789,246 was expended in fiscal year 2010. The city was also awarded a $58,640 Energy Efficiency and Conservation Block Grant for upgrades of the city wastewater treatment plant, but funds related to this grant were not received or expended in fiscal year 2010.
Complete Audit Report