YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2006-64

October 2006

The following findings were included in our audit report on the Village of Butterfield, Missouri. 

The Village of Butterfield is in a declining financial condition as a result of overspending, inadequate oversight and monitoring by the Board of Trustees, numerous internal control weaknesses, and lax controls over expenditures. 

The village prepares annual budgets; however, they are not complete and are not used to monitor the village's financial position.  The board has not periodically compared budgeted vs. actual results, and actual expenditures exceeded budgeted amounts in several funds.   

Procedures have not been established to ensure expenditures are properly allocated among the various funds benefiting from the expenditures and to ensure restricted revenues are expended only for their intended purpose.

The Village Clerk transferred $12,000 during 2005, from the Water and Sewer Funds to the General Fund without the board's approval.  The transfers were made to pay back a portion of the $15,000 originally transferred to the Water and Sewer Funds to cover expenditures.  There was no documentation indicating the amounts from the General Fund were to be treated as loans and there is no documentation of the board's approval for these transfers.

The Village Clerk is responsible for all record keeping duties of the village.  There is no documentation the Village Chairman or other members of the Board of Trustees provide independent reviews of the work performed by the Village Clerk.  Additionally, village checking accounts require two signatures on checks; however,  nine checks for transfers of funds between accounts totaling $17,207 were issued with only the Village Clerk's signature.  Also, the village does not account for the numerical sequence of receipts and backup disks of the accounting information systems are not prepared and stored at a secure off-site location.

The village maintained 11 checking accounts as of December 31, 2005, and does not effectively monitor the bank account balances as there was $48,499 in eight non-interest bearing accounts.  Also, the village has not bid banking services and does not have a written agreement with its depository bank.

The village did not have a formal bidding policy until December 27, 2005.  During the year ending December 31, 2005, bids were either not solicited or bid documentation was not retained for some purchases and adequate supporting documentation was not available

for 31 percent of expenditures reviewed.  The Board of Trustees does not review and approve the payment of village expenditures prior to the disbursements being made, and complete mileage logs were not maintained for vehicles.

The village operates a water and sewer system that provides service to approximately 164 customers. The village's financial statements reported operating losses in 2004 through May 2005, then in June 2005 the Board of Trustees raised water and sewer rates by 114 percent.  There was no documentation to support how the board calculated the significant rate increase. The rate increase generated operating gains between July and December 2005, at which time the board lowered sewer and water rates by 20 percent, again without documenting or performing a formal review. 

The village does not perform monthly reconciliations of amounts billed, payments received, and amounts remaining unpaid for utility services including water, sewer and trash, and there is no supporting documentation or independent approval of credit adjustments made to utility accounts. 

The Village Clerk collects and maintains a listing of deposits received with the amounts being deposited in the meter deposit account.  As of May 31, 2006, the village's listing of meter deposits totaled $7,170; however, the balance in the meter deposit account was only $6,780, resulting in a $390 difference.

Also included in the report are recommendations related to meetings and minutes, personnel policies and procedures, financial reporting, capital assets, and municipal court controls and procedures.

Complete Audit Report