Report No. 2010-155
December 2010
Complete Audit Report
Findings in the audit of the City of Willard
Park Fund Financial Condition
The Park Fund is in poor financial condition because the city did not adequately plan financing and operating costs of the aquatic center. The Board does not receive accurate financial information which would assist it in effectively monitoring cash balances and the financial condition of city funds. While the city estimated the costs to construct the aquatic center and obtained financing for construction, the city did not effectively plan how the city was going to make principal and interest payments for 25 years on the financing obtained. The city has had difficulty making the required payments on the Certificates of Participation (COPS) when due and the cost of operating the aquatic center was more than projected for the first operating season in 2009. As a result, the city borrowed monies from other city funds and obtained a loan from a local bank. It is unclear when or if the funds loaned to the Park Fund from the General and Water/Sewer Funds and the bank loan will be paid back. The Board failed to document its approval of changes made to the design and construction of the aquatic center and of a contract providing electrical services to the aquatic center.
Accounting Records
Accounting records maintained by the city were inaccurate, and as a result, account balances were not adequately monitored, and city budgets and financial statements were also inaccurate. In addition, as a result of poor record keeping, the city failed to make a loan payment to Greene County from the General Fund when due. Also, the city failed to monitor the General Fund checking account balances and issued 30 checks totaling approximately $81,000 when funds were not sufficient to cover these checks. As a result of the city's poor budgeting procedures, it is more difficult for the city to properly monitor receipts, disbursements, and cash balances throughout the year. Budget amendments for some city funds were not completed in a timely manner. The city did not submit an annual financial report to the State Auditor's office for the year ended December 31, 2009, and did not submit the financial report for the year ended December 31, 2008, until December 2009.
Procurement Procedures and Aquatic Center Financing
Although the city adopted a procurement policy in July 2009, the city did not solicit bids, advertise for bids, or document sole source procurement or emergency situations for numerous purchases made during 2009 and 2010. In addition, the city did not solicit bids before entering into a 10-year contract with a local vendor in 2009 to provide beverages for park department activities starting in 2012. While the city solicited bids for water tower maintenance and received two bids, it appears the city renegotiated with the high bidder and entered into a 10-year contract in 2009. The city did not document its evaluation and selection of engineering services for some water and sewer system, street, and sidewalk projects. The city has not conducted a selection process and solicited proposals for an independent auditor for several years. The city has not solicited proposals from various banking institutions for the deposit of city monies since 2005 and was charged various banking fees totaling $6,090 during the year ended December 31, 2009. COPS totaling $3,010,000 to finance construction of the aquatic center were sold in October 2008 through a negotiated instead of a competitive sale. In addition, the Board of Aldermen did not select the COPS underwriter or legal counsel competitively.
Accounting Controls and Procedures
Accounting duties are not adequately segregated. Although bank reconciliations are prepared, the Chief Financial Officer (CFO) did not adequately investigate and resolve unidentified differences. In addition, the CFO does not compare the bank balance of CDs and money market bank accounts to the book balances in the general ledger, and as a result, interest earned is not recorded. The city has not developed formal policies and procedures related to voided checks. The CFO does not record electronic transfers of payroll disbursements, payroll taxes, and employee benefits; transfers between bank accounts; and other activity on the accounting system on a timely basis. The city did not reconcile cash receipts to deposits or maintain the change fund at a set amount. Business licenses are not prenumbered, and there is no procedure to reconcile business licenses and building permits issued to fees collected and amounts deposited.
Utility System Controls and Procedures
Significant weaknesses were identified in control procedures related to the utility system. As a result of these weaknesses, there is less assurance all utility monies have been accounted for properly, and utility charges are set a the appropriate level. While the CFO periodically reconciles gallons of water billed to customers to gallons of water pumped, significant differences are not investigated. Independent approval of adjustments posted to the utility system and the justification and reasons for the adjustments are not adequately documented. The city does not perform monthly reconciliations of total amounts billed, payments received, and amounts unpaid for utility services including water, sewer, and trash. We noted several instances during the year ended December 31, 2009, where utility service was not disconnected for the Mayor and the Mayor's mother when their payments were delinquent and not made within 10 days. The city allows some customers who are delinquent on water, sewer, and trash bills to make payment arrangements; however, no signed written agreements are required. Utility deposits posted to customer accounts in the utility system are not reconciled to the deposit payable balance in the general ledger. The city has not performed a review of water and sewer rates for several years. Water and sewer rates charged to customers may not be set at a level consistent with the costs of providing the related services as a result of the Water/Sewer Fund subsidizing the General and Park Funds. The Mayor occasionally waives water and sewer fees for city residents in violation of city ordinance.
Other Findings
Other findings in the audit report relate to disbursements, payroll controls and procedures, restricted receipts, park department controls and procedures, meeting minutes and ordinances, and capital asset procedures.
Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov
