YELLOW SHEET

Office of the State Auditor of Missouri
Claire McCaskill

 

December 28, 2000

Report No. 2000-131

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

During the period between December 1998 and January 2000, fines, court costs, and bonds received by the court totaling over $3,800 were not deposited to the court�s bank account.The monies that are missing represent cash receipts which were received and recorded but not deposited.These missing funds were not detected on a timely basis due to numerous internal control weaknesses, inadequate segregation of duties, and little or no independent review. 

The Court Clerk resigned in November 2000.Information gathered during our review has been turned over to the Pike County Prosecuting Attorney�s office and the Pike County Sheriff�s office. 

In late 1996, the city decided to construct a new water treatment plant rather than try to bring its two existing water treatment plants into compliance with new state Department of Natural Resources (DNR) regulations.Letters were sent to the owners of the two sites determined to be feasible indicating that the city was interested in buying one of the sites.The city rejected an offer from one individual of approximately $300,000 and accepted the offer from the second individual of $120,000 plus the old water treatment plant land (valued at approximately $32,000 by the Pike County Assessor). 

The city did not obtain a professional appraisal of the land prior to purchase.According to the Pike County Assessor, the estimated market value of the building and land, prior to the city�s purchase, was approximately $44,000.The disparity between this amount and the amount paid demonstrates the benefit of an independent appraisal to help establish the market value of the land. 

In January 1997, the city signed a contract for the land contingent upon the passage of the bond issue in April 1997.The bond issue passed and DNR approved the plans in October 1998.The city signed a contract with a construction company in February 1999.The contract for the purchase of the land for the new water treatment plan stated that the city would include a penalty clause in the new plant construction contract.Although the wording is unclear, it appears the clause would require the construction company to pay a $500 per day penalty if the new plant was not operational within 24 months of the passage of the bond issue.The contract the city signed with the construction company, however, did not include this clause, but instead included a clause providing for a $500 per day penalty if the construction was not completed within 455 calendar days of the date the contract was signed.In April 1999, based on the required clause in the land purchase contract, the former owner of the land requested that the city either vacate the old water treatment plant facilities or that the city pay rent for the use of the facilities.The city refused and the owner filed a lawsuit against the city in April 2000. 

In 1999, the city purchased a new city hall building for $100,000.During the year ended May 2000, approximately $34,000 was spent in renovations, including more than $7,000 in labor costs and $26,000 in materials.These expenditures were not planned for in the city budget.The renovations were authorized by the Mayor but were not formally approved by the city council prior to incurring the charges as required by city ordinance.In addition, there is no documentation that bids were solicited for this work and no contract was signed with the individuals performing the labor. 

In June 2000, the city started collecting late fees of two-percent of the delinquent balance each month on its water bills.The city has an informal policy that allows city employees to be exempt from paying these late fees. In addition, it is currently the city�s informal policy to allow city employees who normally operate city equipment to borrow the equipment during non-working hours for personal use.

Prior to April 1998, the city had a credit card to be used for miscellaneous city purchases.According to the current Mayor and the City Superintendent, the city previously had an informal policy allowing personal use of the credit card by city employees.Employees who used the card for personal use were supposed to either reimburse the city for the personal charges or pay the credit card company directly; however, the city did not track these personal charges to ensure reimbursement was received from the employees.Payments were processed without supporting documentation, approval, and documentation of purpose.In April 1998, the credit card was cancelled by the newly elected Mayor. Personal expenditures totaling $1,074 were charged to the card from June 1996 through April 1998; the City Clerk could not provide documentation indicating these were city charges.Only $204 of these personal charges have been shown to be reimbursed to the city.The City Clerk provided us with documentation showing reimbursement had been made in 1997 for an additional $267; however, this documentation was not legitimate and appeared to be falsified.The city indicates she paid $267 to the city and resigned in October 2000.  

The city does not have a written depository agreement with an investment firm or the banks requiring collateral securities to be provided to cover deposits in excess of Federal Deposit Insurance Corporation (FDIC) coverage.Certificates of Deposit are covered by FDIC Insurance up to $100,000; however, one CD exceeded the FDIC coverage by $8,000 at June 30, 2000.The city also has money market accounts that are neither insured or guaranteed by the U.S. government. 

The city does not have a formal bidding policy.The decision of whether to solicit bids for a particular purchase is made on an item-by-item basis.During the past few years, bids were either not solicited or bid documentation was not retained in several instances, such as for a street sweeper costing $95,444 or two backhoes costing approximately $87,000. 

The city does not maintain records to account for all property owned by the city.The city owns approximately 30 vehicles and has not adopted a formal policy regarding the use of city-owned vehicles, including policies which prohibit personal use. 

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Missouri State Auditor's Office
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