YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

The City of Greenwood is in poor financial condition as a result of inadequate oversight and monitoring of fund balances, improper budgeting practices, and improper uses of restricted revenues.� The cash balance has been declining for years and at June 30, 2003, the city�s General Fund cash balance was $(50,006).� While budgets are prepared, they are not used to monitor the city�s financial position and periodic comparisons of budgeted and actual receipts and disbursements are not performed.� Increases in General Fund receipts have not kept up with the increases in disbursements the past several years.� During the fiscal years ended June 30, 2002 and 2001, the city�s disbursements exceeded receipts by $298,430 and $202,600, respectively.� The board must continue to monitor the financial condition of the city and develop a long-range plan which will allow the city to reduce its disbursements and/or increase receipts to operate the city within its available resources.

The city accounts for all general and operating expenses from one bank account, which combines the General Fund, Sewer Fund, Park Fund, Street Fund, Fire and Ambulance Fund, and Hydrant Fund.� It appears the city is using some of these restricted funds to pay for general operating expenses of the city.

In four of the past six years the city has paid more for the processing of the sewerage than it collected from customers.� In addition to paying for processing and collection, the city incurs charges for salaries, repairs and maintenance, and administration which must be paid from the proceeds of the Sewer Fund.� According to the audited financial statements, the Sewer Fund had a loss of ($53,352) in fiscal year 2002, before any transfers in.

The reserves of the Sewer Fund have been depleted over the past several years paying for repairs and maintenance of the system, as well as bond principal and interest payments.� The Sewer Fund borrowed $113,193 in fiscal year 2002.� While the city raised the sewer rates in March 2003 to $37 per connection, the amount borrowed has not been repaid as of June 30, 2003, per the city clerk.� In addition, the city has not established an Operation, Maintenance and Replacement Account, as required by city ordinance.

The city has not adequately segregated duties of city personnel and does not provide adequate oversight of work performed.� Improvement is needed in the controls over cash handling and access to computer programs and data files is not adequately restricted.� In addition, property tax revenues are not allocated to the various funds appropriately, and some motor vehicle-related revenues were deposited to the General Fund instead of the Street Fund.

The city�s budgets need improvement and are not prepared in accordance with state law.� While deficit budgets were approved for the General Fund and the Sewer Fund in fiscal year 2003, such deficits were caused by the city failing to include the beginning fund balance with the anticipated revenues for comparison to estimated expenditures.� Additionally, some funds are not properly budgeted, and the board of alderman, not the park board, prepares budgets for the operations of the municipal parks.

Park funds totaling $125,698 were transferred to the General Fund without the approval of the Park Board.� The city�s attorney provided a written opinion that the city could transfer monies from the restricted fund because the money originally came from the General Fund and the Park Board is only an advisory board.� Per a review of the ordinance establishing the Park Board, it appears this board is an administrative board, with exclusive control of the expenditures of all money collected to the credit of the Park Fund.� Because these funds were transferred without the approval of the Park Board and were previously received by the Park Fund, it appears questionable that the Board of Alderman had the authority to transfer these funds.

A formal bidding policy was not adopted until November 2002, expenditures requiring advance board approval were not always approved, and several expenditures did not appear to be prudent uses of public funds.� In addition, supporting documentation was not available for some expenditures and the city financed several loans for periods of more than 12 months without a vote of the people.

The Board of Aldermen apparently violated city ordinance by investing $11,000 with a local investment firm, who employed one of the former aldermen.� While the board minutes indicate that he voted for investing funds with this firm, the monthly investment reports for June 2001 through December 2001 listed the former alderman as the representative for this account.

Complete Audit Report