YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

August 13, 2002

Report No. 2002-56

The following problems were discovered as a result of an audit conducted by our office of the City of East Lynne, Missouri.

Our review of the city's utility records and procedures disclosed several concerns including: 

• The city issued a revenue bond in 1986 for sewer improvements.  The revenue bond covenant requires the city to establish several separate bank accounts and to fund these bank accounts with transfers from sewer operating revenues.  Instances of non-compliance with the bond covenant included  some required funds were not created by the utility department, utility funds were commingled, and the Sinking Fund was over-funded.

• As of December 31, 2001, the water fund had a negative cash balance and appears to be subsidized by the sewer fund.  Additionally, the water fund has a water deposit liability of approximately $13,000.
  
• Total gallons of water billed to customers is not reconciled to the total gallons of water pumped.  In addition, no comparison of gallons of water purchased to gallons of water pumped from the city's water tower is performed.

• There is no oversight or adequate segregation of duties related to the city's utility system.

• The city does not maintain adequate records of water meter deposits.

• The city does not perform monthly reconciliations of total billings, payments received, and delinquent amounts for water, sewer, and trash services.  At December 31, 2001, approximately $1,600 was delinquent from water, sewer, and trash accounts.

The city does not have a formal bidding policy and does not enter into or retain written contracts for all services.  Some payments were made prior to being approved by the board.  Some expenditures did not appear to be prudent uses of public funds.  Additionally, all check signers were not bonded, dual signatures are not required on checks, and timesheets are not submitted by some employees. 

Also included in the audit are recommendations related to budgets and published financial statements, restricted revenues, board meetings and records, conflicts of interest, ordinances, accounting controls, elected officials' appointments, and street maintenance.

Complete Audit Report