State audit shows more than $325,000 missing from Village of Leawood

State Auditor Susan Montee issued an audit of the Village of Leawood in Newton County today that shows more than $325,000 is missing. The cover page for the report is printed below:

Monies totaling at least $325,564 are missing from the village between November 15, 2002 and October 16, 2008. In October 2008, the Village Chairman discovered copies of bank statements provided to the Board of Trustees by the former Village Treasurer were fabricated. These fabricated documents indicated the village had approximately $263,000 at August 31, 2008, but bank records indicated the village only had $978.

Village checks totaling $37,300 were made payable to the former Village Treasurer from the village's official bank account between November 15, 2002, and October 16, 2008. These checks were not approved by the Village Board and according to village officials, signatures on these checks were forged. Additionally, village funds totaling $290,433 were diverted into an unauthorized bank account (unknown to Village Trustees) between November 15, 2002 and October 16, 2008. Disbursements from this unauthorized account included checks totaling $286,660 issued to the former Village Treasurer, $1,604 for bank charges and postage, and $2,169 returned to the village.

According to bank documents the unauthorized bank account was opened in 1978 under an account named, "Village of Leawood, General Revenue Fund," with the former Village Treasurer's personal address listed for banking correspondence. Village accounting records have not been returned to the village by the former Village Treasurer, and records of financial transactions from the bank are only available back to November 15, 2002. As a result, over 24 years of financial transactions involving this unauthorized bank account are unavailable for audit.

It is likely more village funds are missing prior to November 15, 2002. Village officials are concerned that franchise fees of up to $299,840 received prior to November 15, 2002 may have also been deposited into the unauthorized account. Further, without accounting and bank records it is unclear if road monies from the Missouri Department of Revenue totaling $379,112 received between 1982 and November 15, 2002 were accounted for properly. After an investigation by the Newton County Sheriff's Department felony stealing charges were filed by the Newton County Prosecuting Attorney against the former Village Treasurer. The village did not maintain bond coverage on the former Village Treasurer.

Poor accounting procedures and a general lack of oversight by village officials contributed to the loss of village funds. The former Village Treasurer performed all accounting functions for the village. Missing funds were concealed when reports prepared by the former Treasurer were unclear, contained numerous errors, lacked significant financial information, and were unsupported by adequate documentation. Bank statements (fabricated to conceal unauthorized accounting activities) provided to the Board contained numerous errors and irregularities that were not identified by the Board. Additionally, the Board failed to adequately track and monitor receipts and disbursements.

The village did not maintain written agreements for contracted services or solicit proposals for snow removal and legal services. Additionally, adequate documentation was not always maintained for compensation paid, and compensation was not reported to the Internal Revenue Service.

There is no evidence the village prepared an annual budget, as required by state law, until 2009. The village has not submitted annual financial reports to the State Auditor's office, as required by state law, since 1986, and the village has not posted or published semi-annual financial statements as required by state law.

Controls over village property tax collections need improvement. Duties of the Village Collector are not adequately segregated, an annual summary of total property tax collections and delinquent taxes is not prepared for the Board to review, and the Board of Trustees has not turned the collection of delinquent taxes over to the County Collector as required by state law. Additionally, the Village Collector does not always deposit property taxes timely, and the Board of Trustees has not established the tax levy by ordinance or held public hearings on the proposed property tax rates.

The village did not adequately track state motor vehicle-related revenues and road projects. The village deposits all state motor vehicle-related revenues into its general checking account and does not separately account for these monies, as required by the Missouri Constitution. Village officials have not adequately monitored road monies received from village residents and road projects.

Procedures for conducting and documenting village board meetings need improvement. Board meeting minutes do not always include sufficient detail of actions taken and the Board of Trustees does not meet within the required period of time after the election of trustees as required by state law. Additionally, the Village Secretary, who is a member of the Board of Trustees, voted to appoint her spouse to fill one of two vacant board positions which may represent nepotism. Further, improvement is needed in organizing, retaining, and enforcing village ordinances, and a policy for retaining and transferring village records at the conclusion of an official's term should be established to prevent the loss of village documents. The village also does not have adequate controls to ensure information requests from the public are handled in compliance with the Sunshine Law.