Taxpayer concerns lead to audit of area town

The concerns noted in the report and the responses received from the city made it apparent that the Board of Aldermen was not adequately monitoring the city, according to Montee. She added that the responses from the Board of Aldermen indicate the board members were unaware of various procedures and requirements. Because of the lack of accounting records and financial reporting, it is not clear whether the Board of Aldermen and Mayor are fully aware of the poor financial condition and outstanding debt of the city, Montee noted. She said that the board needs to take a more active role in city business and take steps to improve the financial condition, records, and internal controls of the city.

According to Montee's report, the city's total bank balance was $4,940 on June 30, 2008. Annual receipts from the city's major funding sources are estimated to be approximately $208,000 per year with an annual payroll of approximately $160,000. These funds only leave $48,000 to operate the water, sewer, and refuse services, along with funding the remaining operations of the city each year, according to Montee.

She added that the city has substantial outstanding debt totaling at least $229,000 at June 30, 2008, which includes $70,391 due to vendors, $38,238 due in payroll and unemployment taxes, a $30,207 balance on a fire truck loan, and $90,755 due on a sewer loan. Also contributing to the debt, various officials have loaned the city approximately $8,700, and the city does not have sufficient funds to cover water deposits totaling $15,750.

Montee noted that the city did not approve a budget for the year ended June 30, 2008, and the Mayor indicated a budget had not been approved for several years. Also the city has not published semi-annual financial statements or submitted annual financial reports, and does not obtain annual audits, as required by law, according to Montee.

The internal controls and accounting record of the city of Hayti Heights were also inadequate, as stated in Montee's report. Budget and financial records accounting for city funds, including receipts and disbursements, have not been prepared. In addition, bank reconciliations are not prepared and transfers between funds are not adequately documents, and as a result, there is no assurance all monies collected are accounted for properly, according to Montee.

No general ledger system, disbursement record or listing, or running cash balance is maintained by the city of Hayti Heights. For disbursements, the only record is bank statements, which simply show the check numbers and amounts, Montee noted. She added that the city has no accounting record indicating the amount of cash available at any time, which has led to several overdrafts and service charges. An incorrect rate is used to calculate and charge sales tax on water sales and amounts collected are not paid to the Missouri Department of Revenue as required, the State Auditor informed.

She added that the city clerk is responsible for all record keeping duties of the city and no person independent of the cash custody and record-keeping functions provides adequate supervision or review of the work performed by the City Clerk. Also city records are not well organized, and some records were missing or could not be located in a timely manner.

According to Montee, in May 2008, receipt slips issued exceeded amounts deposited by $3,129. Vendor receipts totaling $786 for cash purchase/payments were located, leaving an identified difference of $2,343, she added. Due to the lack of records, Montee could not determine whether these monies were used for cash purchases or were missing. Pre-numbered receipt slips are not issued for some monies received, according to Montee. The city does not indicate which receipts are included in deposits, reconcile the composition of receipt slips issued to the composition of deposits, or account for the numerical sequence of receipt slips or deposit monies intact, Montee noted.

A separate account for motor vehicle receipts, capital improvement sales tax monies, local law enforcement training fees, health property tax receipts, and water, sewer, and refuse receipts, have not been established by the city and the city does not maintain proper documentation to support transfers between funds, according to Montee. She added that water, sewer, and refuse receipts are deposited haphazardly into various checking accounts allowing restricted monies to be commingled and used for general operations of the city. The city does not maintain adequate records for water deposits or allocate disbursements and salaries between various funds, according to the state auditor. In addition, the city has not conducted a recent formal cost study to ensure rates charged for water, sewer, and refuse services are adequate.

Montee noted that controls and procedures over city disbursements are in need of significant improvement. As a result, there is no assurance all disbursements were properly handled, recorded, approved, or used for city businesses. She added that the board does not approve disbursements prior to payment of invoices, and adequate documentation is not retained for some disbursements. Blank checks are signed in advance and some purchases do not appear reasonable, according to Montee. The city reimburses the Mayor for gasoline expense on his personal vehicle without requiring the Mayor to account for city-related travel expenses, Montee added.

She continued by informing that complete personnel files are not maintained by the city for each employee. Adding that salaried employees and the Court Clerk do not submit time sheets, and records are not maintained of vacation, sick leave, and compensatory time earned, taken, or accumulated for each employee. The city does not appropriately file and disburse the required payroll taxes and withholdings, and payroll registers were not complete, according to Montee.

Adequate written agreements were not obtained for several loans from city officials and board approval was not documented, the auditor noted. She added that the Mayor indicated he lent the city $5,000 in April 2008 from his personal monies to pay back the amount of grant funds misspent by the city. The Police Chief currently does not pay for his water and sewer services as repayment for a loan he made to the city, according to Montee. The city failed to track the amount and length of time the Police Chief has not been billed for water and sewage services or the amount still due to the Police Chief. She noted that additional loans totaling $3,700 were made by the Police Chief and other elected officials.

Other findings in the audit report relate to maintenance plans for the streets, as well as the water and sewer systems, capital asset records, property tax records and procedures, ordinances, Sunshine Law compliance, and grant accounting. All reports are available at www.auditor.mo.gov.

These findings were the result of significant concerns expressed by taxpayers and a request by former Governor Matt Blunt. The objectives of the audit were to obtain an understanding of taxpayer concerns and perform various procedures to determine their validity and significance, determine if the city has adequate internal controls over significant management and financial functions, and determine if the city has complied with certain legal provisions.

The methodology included reviewing minutes of meetings, written policies and procedures, financial records, and other pertinent documents; interviewing various personnel of the city, as certain external parties; and testing selected transactions.

Glenn Campbell, Director of Public Affairs for the State Auditor's office, said that the audit has been delivered to the city and now been made public. The officials will offer a response to correct some of the issues but the issue reverts back to the citizens of Hayti Heights to hold their elected officials accountable.

"Hopefully our evaluation will help put a better government in place," Campbell said.