Office of the State Auditor of Missouri
Claire McCaskill


June 7, 2001

Report No. 2001-46

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

Inadequate oversight and monitoring by the Board of Aldermen, inadequate records and procedures, and improper uses of restricted monies have all contributed to a serious financial situation for the city. 

On January 31, 2001, the city had a deficit of $112,000 in its operating funds.The city had $22,621 in the general bank account and $35,677 in unpaid bills.The city owes $4,069 to the U.S. Department of Justice for excess grant reimbursements and owes approximately $78,000 in debt service property taxes to the city�s debt service fund, and�� the city should be holding approximately $10,000 in refundable water and trash deposits on behalf of its customers.In addition, the city needs to incur approximately $7,000 in net expenses to finish some flood damage projects. 

For the year ended June 30, 2000, the city combined all of its operating revenues and expenditures into one fund.Revenues for water, sewer, and trash fees are restricted for providingthe related services.The city may be using some of these restricted revenues to pay for general city operating expenses. 

The city prepares annual budgets.However, the budgets have not projected the estimated balances of the city�s general and operating funds, and the Board of Aldermen has not periodically compared budgeted and actual revenues and expenditures. 

The city has not completed some FEMA projects to repair 1997 flood damage to the city.It appears the city made more repairs and spent more money than required on some of the projects that have been completed.The cityneeds to complete the projects by November 2001 at an estimated cost of $19,000 and obtain an additional $12,000 in state funding available to them upon completion of the projects.

The city has levied and collected excessive amounts of debt service property taxes, and the city has spent approximately $78,000 in debt service taxes on city operations.State law requires debt service taxes be used only to pay principal and interest on general obligation bonds, and the city needs to transfer $78,000 from the general operating fund to the debt service fund. 

The city has not adequately documented its water, sewer, and trash rates to ensure these user fees are established to cover the costs of providing these services.In March 2000, the board voted to lower water rates based on an analysis that indicated revenues exceeded expenditures.However, the analysis apparently did not include depreciation and replacement expenses, and indicated that two water pumps needed to be replaced at a cost of $35,000.Additionally, because the city does not track fund balances, it is unknown if there was a positive balance in the water fund at the time that the analysis was completed.The city has apparently not reviewed the adequacy of sewer and trash rates for several years. 

During the time period April 1998 through January 2001, the mayor received at least $5,936 from the city for mileage, meals, and equipment reimbursements, and compensation in addition to his official compensation.In addition, the mayor�s wife and son received a total of $425 for services provided, and a company owned by the mayor received $4,602 for services provided.Supporting documentation could not be located for several of these payments, and bids for services provided by the mayor�s business could not be located.The Board of Aldermen needs to ensure that it documents its approval prior to making payments to related parties, and that adequate documentation of all expense reimbursements is obtained.In addition, the board should review the payments to ensure they represent legitimate city expenditures and determine if any amounts should be reimbursed to the city. 

During the year ended June 30, 2000, city employees purchased items for personal use with city monies.These items cost approximately $860 and included chairs, paper products, printer stand, tool chest, and various office products.These expenditures were reimbursed to the city through payroll deductions over several weeks, resulting in the city providing its employees with interest-free loans on the personal purchases.In addition, some of the invoices for these purchases did not include sales tax.State law requires sales taxes to be paid on personal purchases.The city should discontinue the practice of allowing employees to purchase personal items with city funds. 

Vendor invoices or other supporting documentation were not retained for some expenditures.Some of these expenditures included $25,000 for street repair, $3,200 for water system maintenance, $1,715 for the purchase of radar equipment, $1,548 for repairs to the city�s backhoe, $700 for repairing water leaks, and $500 for the purchase of police uniforms and supplies.Documentation for the majority of these expenditures has subsequently been located by the city.All expenditures should be supported by paid receipts or vendor invoices to ensure the obligation was actually incurred and the expenditures represent appropriate uses of public funds.

Complete Audit Report

Missouri State Auditor's Office