Report No. 2009-57
June 2009
Complete Audit Report
The following findings were included in our audit report on the city of Hayti Heights.
Given the concerns noted in our report and the responses received from the city, it is apparent that the Board of Aldermen was not adequately monitoring the city. The responses from the Board of Aldermen indicate the board members were unaware of various procedures and requirements. Because of the lack of accounting records and financial reporting, it is not clear whether the Board of Aldermen and Mayor are fully aware of the poor financial condition and outstanding debt of the city. The Board needs to take a more active role in city business and take steps to improve the financial condition, records, and internal controls of the city. In addition, there is no evidence the elected officials are providing the guidance and controls necessary to ensure the continuing operations of the city.
The city's total bank balance was $4,940 at June 30, 2008. Annual receipts from the city’s major funding sources are estimated to be approximately $208,000 per year and annual payroll is approximately $160,000, leaving only $48,000 to operate the water, sewer, and refuse services, and fund remaining operations of the city each year. In addition, the city has substantial outstanding debt totaling at least $229,000 at June 30, 2008, including $70,391 due to vendors, at least $38,238 due in payroll and unemployment taxes, a $30,207 balance on a fire truck loan, and $90,755 due on a sewer loan. Also, various officials have loaned the city approximately $8,700, and the city does not have sufficient funds to cover water deposits totaling $15,750.
The board did not approve a budget for the year ended June 30, 2008, and the Mayor indicated a budget had not been approved for several years. The city has not published semi-annual financial statements or submitted annual financial reports, and does not obtain annual audits, as required by state law.
Internal controls and accounting records of the city of Hayti Heights were inadequate. Budget and financial records accounting for city funds, including receipts and disbursements, have not been prepared. In addition, bank reconciliations are not prepared and transfers between funds are not adequately documented. As a result, there is no assurance all monies collected were accounted for properly.
The city does not maintain a general ledger system, disbursement record or listing, or a running cash balance. For disbursements, the only record is bank statements which simply show the check numbers and amounts. The city has no accounting record indicating the amount of cash available at any time, which has led to several overdrafts and service charges. An incorrect rate is used to calculate and charge sales tax on water sales and amounts collected are not paid to the Missouri Department of Revenue as required. The City Clerk is responsible for all record keeping duties of the city and no person independent of the cash custody and record-keeping functions provides adequate supervision or review of the work performed by the City Clerk. City records are not well organized, and some records were missing or could not be located in a timely manner.
In May 2008, receipt slips issued exceeded amounts deposited by $3,129. Vendor receipts totaling $786 for cash purchase/payments were located, leaving an identified difference of $2,343. Due to the lack of records, we could not determine whether these monies were used for cash purchases or were missing. Prenumbered receipt slips are not issued for some monies received. The city does not indicate which receipts are included in deposits, reconcile the composition of receipt slips issued to the composition of deposits, account for the numerical sequence of receipt slips or deposit monies intact.
The city has not established a separate accounting for motor vehicle receipts, capital improvement sales tax monies, local law enforcement training fees, health property tax receipts, and water, sewer and refuse receipts, and does not maintain proper documentation to support transfers between funds. Also, water, sewer, and refuse receipts are deposited haphazardly into various checking accounts allowing restricted monies to be commingled and used for general operations of the city. The city does not maintain adequate records for water deposits or allocate disbursements and salaries between various funds. In addition, the city has not conducted a recent formal cost study to ensure rates charged for water, sewer, and refuse services are adequate.
Controls and procedures over city disbursements are in need of significant improvement. As a result, there is no assurance all disbursements were properly handled, recorded, approved, or used for city business. The board does not approve disbursements prior to payment of invoices, and adequate documentation is not retained for some disbursements. Blank checks are signed in advance and some purchases do not appear reasonable. The city reimburses the Mayor for gasoline expense for his personal vehicle without requiring the Mayor to account for city-related travel expenses.
Complete personnel files are not maintained by the city for each employee. Salaried employees and the Court Clerk do not submit time sheets, and records are not maintained of vacation, sick leave, and compensatory time earned, taken, or accumulated for each employee. The city does not appropriately file and disburse the required payroll taxes and withholdings, and payroll registers were not complete.
Adequate written agreements were not obtained for several loans from city officials and board approval was not documented. The Mayor indicated he lent the city $5,000 in April 2008 from his personal monies to pay back the amount of grant funds misspent by the city. The Police Chief currently does not pay for his water and sewer services as repayment for a loan he made to the city. The city failed to track the amount and length of time the Police Chief has not been billed for water and sewage services or the amount still due to the Police Chief. Additional loans totaling $3,700 were made by the Police Chief and other elected officials.
Other findings in the audit report relate to maintenance plans for the streets, as well as the water and sewer systems, capital asset records, property tax records and procedures, ordinances, Sunshine Law compliance, and grant accounting.
Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov
