YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2000-57
July 19, 2000

Some problems were discovered as a result of an audit conducted by our office in response to the request of petitioners from the City of Marston, Missouri.

The city of Marston is in poor financial condition as a result of various factors.� Numerous internal control weaknesses, lax controls over expenditures, and inefficient management practices have been identified and discussed in more detail throughout our report.� Because of the poor financial condition, the city has used over billings from a federal grant program to fund normal operating expenses.

The city received federal assistance from the U.S. Department of Justice under the COPS program for three additional full time officers which increased the number of city officers to four.� Since March 1995, the city has received grant awards totaling $80,007.� Under the grant provisions, the city was required to provide 25 percent of the cost of employing the additional officers until the grant expires on September 30, 2000, in addition, to continuing to provide 100 percent of the cost of employing the original officer.

The city received reimbursement totaling $64,270 for the period January 1997 through September 1999.� During this time period, the city employed two or three officers (including the original officer) but included the salary of the original officer in the reimbursement request.� Because the grant agreement required the city to fund 100 percent of the first officer, excess disbursements of approximately $37,000 were claimed.

The Board of Aldermen should contact the applicable federal grantor agency to resolve this issue.� In addition, the city should ensure future compliance with all federal regulations.

As noted by the city�s auditor during his annual audit for the year ended December 31, 1998, loans, personal purchases, water bills and tap fees, and tractor rental fees were made to former Police Chief James Fortner and former City Collector Bridget Fortner (his wife) during the two years ended December 31, 1998.

The city�s auditor identified $4,391 in improper transactions of which $4,060 was reimbursed to the city through salary withholdings and repayments by the Fortners.� The repayments included $1,349 from Alderman Phillips on behalf of the Fortners.

In addition, there were salary overpayments totaling $2,815 to the Fortners during the two years ended December 31, 1998, that are not included in the above amounts.� These salary overpayments and improper transactions occurred and were not detected because of the lack of authorization and review of payments by the board and the practice of signing checks in advance.� Although city checks required two signatures, the former Mayor routinely signed checks in advance allowing the former City Collector, Bridget Fortner, to negotiate the improper transactions and salary overpayments.� The employment of Bridget and James Fortner was terminated by the city in February 1999.

For a number of years, the city has made transfers between the various funds when monies are needed to pay bills.� This appears to have been a regular part of the city�s operations with no consideration given to restricted monies.� During the year ended December 31, 1999, transfers totaling $35,098 were made from restricted funds ($30,361 from the Water and Sewer Fund and $4,737 from the Street Fund) to the General Fund.� These restricted funds should not be used for general purposes.� Although it appears the city paid back the restricted funds with its one cent general sales tax monies, the city should refrain from transferring restricted monies in the first place.� In addition, 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 purposes.

It is essential that the city account for the various revenue sources and properly allocate expenses to the various funds.� Allocation of expenses is necessary for the city to ensure the water and sewer rates are sufficient to cover the costs of providing the service without generating profits to subsidize other city services.

The city does not prepare or adopt annual budgets.� Semi-annual financial statement s have not been published and annual financial reports are not submitted to the State Auditor�s office as required by state law.

The city has no formal bidding policy.� Supporting documentation was not available for several payments to vendors.� The board does not review related invoices and supporting documentation prior to signing checks.� The city does not reconcile all bank accounts and does not have adequate procedures established for the petty cash fund.

Accounting and bookkeeping duties are not adequately segregated.� Receipts are not recorded or deposited in a timely manner.� Time sheets and leave records are not prepared and maintained on a regular basis.

Utility accounting and bookkeeping duties are not adequately segregated.� Adjustments to utility accounts are not approved by the board.� The number of gallons of water billed to customers is not reconciled to the number of gallons of water pumped by the city.

Complete Audit Report