07/23/2024 - Jefferson City, MO
When officials from the Missouri State Auditor's Office first arrived on
the scene for an audit of the City of Excelsior Estates, they found a
municipality in total disarray with missing financial records, other vital city
records stored in a makeshift camper trailer made from the bed of a pickup
truck, and potentially hundreds of thousands of taxpayer dollars wasted by
improper payments made by the former mayor. The audit report released today by
State Auditor Scott Fitzpatrick details how a lack of proper oversight and
segregation of duties allowed the former mayor to improperly pay himself more
than $37,000, and potentially funnel more than $200,000 in city funds to
businesses he owned.
"Unfortunately for the people of Excelsior Estates, our audit
reveals a pattern of persistent mismanagement that has wasted an enormous
amount of their tax dollars with no discernible benefit for them or their
city," said Auditor Fitzpatrick. "It's unfortunate this was able to
go on for as long as it did but I'm glad we were able to shine a light on the
many problems that took place in Excelsior Estates as we try to make sure these
same mistakes don't happen in the future. I'm pleased to see the current Board
of Aldermen work with us in good faith to put our recommendations into place
and put the city on a better path toward being transparent and
accountable."
The audit began with a whistleblower hotline complaint to the State
Auditor's Office and a subsequent investigation. When the investigation
revealed a likelihood of wrongdoing, the city's Board of Aldermen approved an
ordinance to formally request an audit. The audit primarily covers the period
of time from January 1, 2014, through April 30, 2021, when Gary Fesenmeyer, Sr.
served as mayor and then as city administrator. Fesenmeyer resigned from the
position as mayor in December of 2019, but was retained as city administrator
and essentially performed all the duties of mayor until April 2021 when a new
mayor was elected.
During his time as both mayor and city administrator, Fesenmeyer
improperly transferred and issued checks from city funds in the amount of at
least $37,496 to himself and his two businesses, CAD Midwest, Inc. and Video
Sewer Inspection, Inc. (VSI). During the same period of time, Fesenmeyer also
paid himself and his two businesses approximately $306,000 with no supporting
documentation for approximately $202,000 of those payments. The audit notes
many of the payments were questionable due to their timing and the likelihood
they were for personal use. Fesenmeyer is also responsible for $798 in city
receipts that he collected but never deposited and are now missing.
The report also documents how the city paid Fesenmeyer's sewer business
(VSI) $269,367 from 2014 through at least 2021 while at the same time the city
repeatedly violated the Missouri Clean Water Law with multiple deficiencies
noted in the Discharge Monitoring report. The audit documents $14,390 billed to
the city by VSI for work that was not performed. When questioned about the fees
charged to the city, Fesenmeyer said, "I probably owe that back to the
city." After the city terminated the former mayor/city administrator and
discontinued use of his business, the city became compliant with applicable clean
water laws.
The audit also details how Fesenmeyer was able to make the questionable
payments to himself because of a lack of segregation of duties and adequate
controls, the absence of proper oversight, and poor procedures for
receipting, recording, and depositing money. The report notes how some Board members expressed
concerns regarding the payments, but failed to take timely action to address
them or provide independent and supervisory reviews over the transactions. The
audit points out the city's failure to properly store or retain numerous
financial records as city officials could not locate manual receipt slips, bank
statements, and supporting documentation for disbursements, including payments
to Fesenmeyer and his two businesses. The city stored some city records in
disarray in a trailer made from the bed of a pickup truck with a camper shell
on it.
Additionally, the Board did not review a list of bills or bank
statements and Board members signed checks without reviewing supporting
documentation. The city failed to obtain an annual audit of its sewer system
for 2018, 2019, 2021, or 2022, as required by state law. It also failed to file
annual financial reports timely or publish semiannual financial statements in
compliance with state law. The failure of Fesenmeyer and the Board to monitor
the city's cash balances resulted in the city incurring $500 in overdraft and
maintenance charges in the general bank account from July 2019 through April
2021. As of March 31, 2021, shortly before Fesenmeyer was terminated, the
general bank account balance was only $87.
Other findings in the audit include the improper
classification of some city employees as contract employees, advance payments
made to the part-time Billing Clerk in violation of state law and the Missouri
Constitution, adjustments made by the former mayor and city administrator to
customer sewer statements without obtaining independent approval or maintaining
adequate documentation to support the adjustments, and the city's failure to
comply with the requirements of the Sunshine Law.
The complete audit of the City of Excelsior Estates can be found here.
