(From State Auditor Scott Fitzpatrick)A new report from Missouri State Auditor Scott Fitzpatrick gives officials in Stotts City a road map to improve governmental operations to better protect against potential waste, fraud, and abuse. The report, which gives a "fair" rating to the city, did not identify evidence of fraud, but found lacking controls and procedures make the municipality vulnerable to city funds being misused or stolen.
"There are many areas in which city officials need to do a much better job of not only improving oversight of their own operations, but also their compliance with state law as it relates to their budgeting process and their level of transparency," said Auditor Fitzpatrick.
"While the audit did not identify fraud, the city's lack of internal control creates significant risk for fraud to occur and go undetected. It's very important that city officials move quickly to implement policies and procedures to better protect the tax dollars of the residents of Stotts City, and I'm glad to see officials are already making that effort."
The audit report finds the city has inadequate accounting controls and procedures which include a failure to properly segregate duties and provide adequate oversight. The audit found 11 checks, totaling $3,921, that were signed only by the City Clerk even though the city has an unwritten policy requiring two signatures on all city checks. The report notes the failure to require dual independent signatures on all checks is a significant control weakness and may have allowed overpayments, improper use, and conflicts of interest to occur.
The audit report also finds the city does not fully comply with state law when preparing its annual budgets for the year ended December 31, 2024. The budget did not include a budget message, actual or budgeted amounts for the 2 preceding years, the actual beginning and estimated ending cash balances, a budget summary, or balances of the city's 2 USDA loans. As part of the city budget process, city officials have not developed a formal street maintenance plan, which officials indicated is because the city cannot afford street maintenance. The city has also failed to comply with state law by not publishing semiannual financial statements for the 6 months ended June 30, 2024, December 31, 2024, and June 30, 2025, and not obtaining annual audits of its waterworks and sewerage systems.
Other findings in the report include a failure to perform monthly reconciliations of total gallons of water billed to gallons of water pumped due to a water meter that's been broken for almost three years, inconsistent compliance with the state Sunshine Law and a lack of a public access policy, the lack of a records management and retention policy that includes electronic communication, and a failure by the city to maintain records of its capital assets including buildings, utility system infrastructure, equipment, and other property.
A previous audit of Stotts City was released in 2000. That audit, which was also petitioned by residents, found the city did not adequately segregate accounting and bookkeeping duties, did not prepare or adopt annual budgets, and did not have a formal bidding process. The report also found the City Clerk was only depositing a portion of the utility payments, and routinely cashed personal checks for herself and friends from utility receipts.
The current audit of Stotts City is available here.
The audit report finds the city has inadequate accounting controls and procedures which include a failure to properly segregate duties and provide adequate oversight. The audit found 11 checks, totaling $3,921, that were signed only by the City Clerk even though the city has an unwritten policy requiring two signatures on all city checks. The report notes the failure to require dual independent signatures on all checks is a significant control weakness and may have allowed overpayments, improper use, and conflicts of interest to occur.
Additionally, the City Collector processes utility billings, collections, and deposits without any review by the City Clerk, Mayor, or the Board of Aldermen. The city's procedures for receipting and depositing money are also inadequate. As a result, there is no assurance all money collected is properly receipted and deposited. The report also finds city officials do not prepare monthly bank reconciliations for any of the city's 9 bank accounts.
Another finding in the report points out city officials did not fully comply with state law when raising water and sewer rates. Specifically, the city did not perform a formal review, such as a cost study, of water or sewer rates. State law makes it clear fees can be increased if supported by a statement of costs that shows the increase is necessary to cover costs of providing the service. The city's revised sewer rate included a $10 increase to cover the cost of the petition audit conducted by the State Auditor's Office. The report notes no ordinances were passed to approve the increases, so the city does not have a document for citizens to access the approved rates.
"I understand the city has limited revenues and the cost of an audit is something that will put additional strain on their budget, but the way in which officials increased the utility rates on the people of Stotts City does not comply with state law and should be of concern to the citizens who are now stuck with a bigger utility bill simply because they wanted to make sure their government was operating accountably and transparently," said Auditor Fitzpatrick. "There are a number of areas throughout the report where city officials indicate they didn't comply with the law because of a lack of awareness, so I encourage city officials to get up to speed on all applicable state laws and make sure they are following them."
Another finding in the report points out city officials did not fully comply with state law when raising water and sewer rates. Specifically, the city did not perform a formal review, such as a cost study, of water or sewer rates. State law makes it clear fees can be increased if supported by a statement of costs that shows the increase is necessary to cover costs of providing the service. The city's revised sewer rate included a $10 increase to cover the cost of the petition audit conducted by the State Auditor's Office. The report notes no ordinances were passed to approve the increases, so the city does not have a document for citizens to access the approved rates.
"I understand the city has limited revenues and the cost of an audit is something that will put additional strain on their budget, but the way in which officials increased the utility rates on the people of Stotts City does not comply with state law and should be of concern to the citizens who are now stuck with a bigger utility bill simply because they wanted to make sure their government was operating accountably and transparently," said Auditor Fitzpatrick. "There are a number of areas throughout the report where city officials indicate they didn't comply with the law because of a lack of awareness, so I encourage city officials to get up to speed on all applicable state laws and make sure they are following them."
The audit report also finds the city does not fully comply with state law when preparing its annual budgets for the year ended December 31, 2024. The budget did not include a budget message, actual or budgeted amounts for the 2 preceding years, the actual beginning and estimated ending cash balances, a budget summary, or balances of the city's 2 USDA loans. As part of the city budget process, city officials have not developed a formal street maintenance plan, which officials indicated is because the city cannot afford street maintenance. The city has also failed to comply with state law by not publishing semiannual financial statements for the 6 months ended June 30, 2024, December 31, 2024, and June 30, 2025, and not obtaining annual audits of its waterworks and sewerage systems.
Other findings in the report include a failure to perform monthly reconciliations of total gallons of water billed to gallons of water pumped due to a water meter that's been broken for almost three years, inconsistent compliance with the state Sunshine Law and a lack of a public access policy, the lack of a records management and retention policy that includes electronic communication, and a failure by the city to maintain records of its capital assets including buildings, utility system infrastructure, equipment, and other property.
A previous audit of Stotts City was released in 2000. That audit, which was also petitioned by residents, found the city did not adequately segregate accounting and bookkeeping duties, did not prepare or adopt annual budgets, and did not have a formal bidding process. The report also found the City Clerk was only depositing a portion of the utility payments, and routinely cashed personal checks for herself and friends from utility receipts.
The current audit of Stotts City is available here.
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