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YELLOW SHEET Office of the State Auditor of Missouri |
September 16, 1999
Report No. 99-76
Some problems were discovered as a result of an audit conducted by our office in response to the request of petitioners from the City of Callao, Missouri.
The City of Callao operates a combined waterworks and sewerage system, and accepts cash, checks, and money orders for payment of water and sewer services. The City Collector is responsible for billing, receiving, recording, and depositing the monies collected. A review of receipt and deposit records indicated that at least $5,561 of receipts from July 1997 through December 1998 were not deposited.
In addition, we were unable to determine the total amount of monies collected and undeposited for some time periods because certain records were missing including monthly reports of customers billed, deposit reports, billing stubs, meter readings, and back up information from the computer. As a result, additional monies could be missing.
The differences went undetected throughout this time period due to numerous internal control weaknesses, little or no independent review, and a lack of adequate record keeping.
The city's $1.85 property tax rate for 1998 exceeded the maximum authorized by state statutes. State law provides that a city's tax levy shall not exceed one dollar for general municipal purposes except by a two-thirds vote, and only for 30 cents for a period of four years at a time. There is no documentation the additional levy (above one dollar) has ever been approved by a vote of the people.
In addition, the Board of Aldermen does not hold public hearings on proposed tax rates or prepare ordinances establishing annual tax rates. State law requires each governing body to hold at least one public hearing prior to approval of proposed tax rates so that citizens may be heard.
The city does not investigate large water losses reported on the City Collector's monthly report. During the year ended June 30, 1998, the City Collector reported a total of 1,102,470 gallons of water loss. The loss ranged from 7 to 22 percent per month. In addition, the city does not reconcile the number of gallons purchased to the number of gallons billed from their supplier.
There is no oversight or adequate segregation of duties related to the city's utility system. The City Collector performs all functions related to generating monthly utility bills, receipting and recording utility payments, making credit adjustments, depositing money received, monitoring accounts for delinquencies, and initiating service shutoff orders.
The city's budgets for 1998 and 1999 were not complete and were prepared for only the Sewer Fund. Budgets were not prepared for the General Fund, the General Obligation Fund, the Debt Service Fund, the Repair and Replacement Fund, or the Water Deposit Fund.
The city has not obtained annual audits. The city's bond covenants and state law require annual audits of the combined waterworks and sewerage system.
In 1998 the city deposited $36,159 in water user fees into the general fund. The bond restrictions required those revenues be deposited into a separate fund. Currently, the city deposits only the revenues from the sewer system into this fund.
The city has not filed an annual report of financial activity with the State Auditor's office since 1989. State law requires the city to file a financial report with the State Auditor's office annually.
