Report No. 2011-90
October 2011
Complete Report
Findings in the audit of the City of Howardville

Building Lease
The city leases the Public Safety and Service Building from the non-profit Howardville Development Corporation (HDC). At the time the city entered into the lease, the HDC Board of Directors consisted of the then mayor and two aldermen, and these individuals continue to serve on the HDC Board. Since the inception of the lease in 2006, the city has paid approximately $10,000 to the HDC for building operation and maintenance and there is no evidence any of these monies have been used for this purpose. Under the terms of the lease, the HDC is responsible for insurance on the building and is responsible for maintenance and utilities to the extent the HDC has funds available. The city has paid all insurance, maintenance, and utilities since April 2008, and the HDC has not provided financial information, as required, to enable the city to determine if HDC funds are available. The city deeded the land on which this building is located to the HDC for $10 and, even though the city will pay the full cost of the building, the city does not get ownership of the building at the end of the lease. In addition, the lease agreement does not contain a clause to allow the city to cancel the lease, which may violate state law prohibiting long-term debt without voter approval.

Accounting Controls and Procedures
Accounting duties are not adequately segregated, and accountability over city receipts and deposits is inadequate. The city does not always abide by its dual signature requirement on city checks, and formal bank reconciliations are not performed. Several checks were filled out and signed but not distributed or processed by the bank, some voided checks were still on hand and only marked "void" in pencil, and the city does not account for the numerical sequence of checks. The city did not properly retain some records, and officials authorized to sign checks were not bonded, exposing the city to risk of loss.

Accounting Records and Financial Reporting
Some accounting records are not accurate and are not reviewed by the Board of Aldermen or other city employees. The city does not prepare budgets for any city funds, publish semi-annual financial statements, submit annual financial reports to the State Auditor's office, or obtain annual audits of its sewer system, all of which are required by state law.

Payroll and Related Matters
Timesheets were not always signed by employees or reviewed or signed by supervisors. The city does not maintain records of vacation and sick time earned and taken, and it appears the former city clerk was paid for unused leave which did not comply with city policies. Personnel files are not maintained or are incomplete for some employees. The city classifies some maintenance workers as independent contractors rather than employees, but it does not maintain adequate justification for this classification. The city advanced former Alderwoman Johnson her October 2009 compensation resulting in her being overpaid $75.

Disbursement and Related Matters
The city did not solicit and/or advertise for bids, as required by its procurement policy, and disbursed monies to charitable organizations without receiving adequate documentation of the services provided. The city has no written agreement with its bank and has not solicited proposals for banking services. The city does not always prepare or retain monthly disbursement lists, and for 60 percent of the disbursements reviewed the city could not locate invoices or other supporting documentation. The city paid invoices without requiring proof of receipt of goods or services, did not mark invoices as paid, and paid over $300 in interest and fees because a payment was late.

Sewer and Sanitation Services
The city has no written agreement with the public water supply district regarding the collection of sewer and sanitation fees. The city does not maintain separate accounting records for each individual sewer and sanitation customer and does not have procedures to bill delinquent accounts, assess delinquent penalties, or shutoff service for nonpayment.

Restricted Monies
Monies restricted for certain use, including motor-vehicle, law enforcement training, and State Emergency Management Agency monies, were deposited in the General Fund and not tracked separately. Therefore, the city could not determine the amount of monies in the General Fund required by law to be restricted for specific purposes. In December 2009, the city transferred over $10,000 in sewer fees to the General Fund to cover general operating costs, but sewer fees are restricted for operation of the sewer system and cannot be used for general city operations.

Meeting Minutes and Ordinances
Meeting minutes were not maintained in an orderly manner or a centralized location and could not be readily located. Open meeting minutes do not document the reason for closing a meeting, the law allowing the meeting to be closed, or evidence of votes taken. Ordinances are not complete, up-to-date and maintained in an organized manner, and the city has not adopted ordinances establishing the compensation for city officials and employees.

Capital Assets and Vehicle Use
The city does not maintain records for its capital assets, did not carry insurance on some city assets, does not tag assets for identification, and does not conduct annual physical inventories of its assets. The city does not maintain fuel and usage logs for its two city-owned vehicles and does not reconcile fuel use to fuel purchases to ensure the vehicles and city-purchased fuel are used appropriately.

In the areas audited, the overall performance of this entity was Poor.*

American Recovery and Reinvestment Act 2009 (Federal Stimulus)
The City of Howardville did not receive any federal stimulus monies during the audited time period.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov