YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2006-27

May 2006

The following findings were included in our audit report on the City of Piedmont, Missouri.

The city of Piedmont has experienced significant operating losses for the past four years in the Water and Sewer Fund.  The city's operating costs have increased over the past several years, while total operating revenues have not increased sufficiently to keep up with the increased costs.  To help offset the operating losses, the city transfers capital improvement sales tax and industrial development revenues to the Water and Sewer Fund, which totaled $189,841 during the four years ended June 30, 2005.   The Board of Aldermen have not taken any action on recommendations made from independent studies that the city increase its water and sewer rates.

The Board of Aldermen approved budget amendments to increase budgeted expenditures by $170,500 on June 14, 2005, at the end the city's fiscal year, and after the additional expenditures were already incurred.  These expenditures consisted of $21,000 from the Park Fund for two construction projects, $65,000 from the Water and Sewer Fund for capital expenses, $2,500 from the Fire Fund for equipment, and $82,000 for transfers out of the Industrial Development Fund.  Budget amendments made after expenditures have exceeded the budget do not allow for the budget to be used as an effective management tool.

In the annual audited financial statements, the activity of several city funds are combined into one fund called the General Fund, including the Capital Improvement Sales Tax Fund which is restricted by state law and should be reported separately.  Also, the city transferred approximately $173,700 of capital improvement sales tax monies to various city funds.  While it appears capital improvement expenditures are incurred in the various city funds, the city does not document how the expenditures of capital improvement sales tax monies transferred to other funds complied with state law.

The city does not reconcile the total gallons of water billed to customers to the gallons of water pumped.  City records indicate that from July 2004 to June 2005, 185 million gallons of water were pumped through the city's system, but only 85 million gallons were billed to water customers.  While the city accounted for about 70 million gallons of water not billed, it appears the city is still experiencing a significant amount of water loss.

Of the total utility accounts receivable of $65,044 at June 30, 2005, current month's billings totaled $27,200, delinquent amounts due from current utility customers totaled $12,806, and delinquent amounts due from customers no longer located in the city totaled $25,038.  The city has not officially written off this amount as uncollectible, and classifies the $25,038 as bad debts.  Some of these amounts have gone uncollected for several years.

The city also needs to improve utility system controls and procedures regarding segregation of duties, depositing receipts intact, and approval of billing adjustments.

Bids were either not solicited or bid documentation was not retained in some instances, including $11,700 for a police vehicle and $5,965 for excavating services at the city airport.  In addition, bids were also not solicited for $18,156 spent on parts and labor to repair pumps in one of the sewer treatment lift stations.  City officials indicated this was not bid because these were emergency repairs and the health of the community was at risk.  However, board minutes did not document these reasons.

The city does not maintain mileage, usage, or maintenance logs for any of the 27 vehicles and equipment it owns and expended approximately $41,447 in fuel costs during the year ending June 30, 2005.   Also, the city pays for gasoline that the Mayor uses in his personal vehicle.  The Mayor is not required by the city to report mileage or actual vehicle expenses he incurs for city business; therefore, the city has no assurance that the Mayor's gasoline expenses were entirely incurred for city business. 

The city incurred expenditures that do not appear reasonable and prudent uses of public funds, including: a "Christmas Greeting" advertisement, flowers for funerals of relatives of former city officials, and annual bonuses for employees for  a "job well done".

Also included in the report are recommendations related to fixed assets, property tax procedures, street maintenance, and the municipal court.

Complete Audit Report