YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2006-86
December 2006

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

Sewer user fees have not been reassessed since 2003 and both water and sewer user fees have been established without assessing the impact of a capital improvement sales tax on operations.  Voters approved a capital improvement sales tax in 1998 to help fund the sewer system and this tax was renewed in 2005 and can now be used to fund the water and sewer system, which were combined.  The proceeds of the sales tax were not taken into consideration when establishing the original sewer rate or when increasing water rates in recent years.  The city was unable to explain why this sales tax revenue was not used when calculating the new water rates. 

Water Fund monies totaling over $121,000, including over $65,000 from the Water Replacement Account, were transferred to the General Fund in 2004 without documented approval from the board.  No documentation exists explaining the reasons for these transfers and there is no documentation that General Fund monies were used in the construction of the sewer system, which is now combined with the Water Fund.  In addition, a replacement account has not been established for the combined Water and Sewer Fund as required by ordinance, and there are differences between the replacement amounts required to be funded by the ordinance and the amounts calculated when the original fee was established.

During 2004 and up until May 2005, the city provided cellular phones to five city employees and the police chief.  During 2004, the city paid approximately $3,000 to two different providers.  The April 2005 billing summary of the police chief's cellular bill provided to the city totaled $270 with only $65 related to the basic charge.  Details were not provided to explain overage and one-time charges and the city did not request additional information before paying the bill.

The city's budgets were not in full compliance with state law and a budget for 2006 was not adopted.  In addition, the city approved expenditures in excess of budgeted amounts for the Water and Sewer Fund by $29,132 during the year ended December 31, 2005 and no mention was made in board minutes as to why the budgeted amounts were exceeded.  There is no evidence that a periodic comparison of budget to actual activity is performed, which allowed the overspending to go undetected.    Additionally, the City has not published semi-annual financial statements nor filed some annual financial reports required by state law.   

City monies are not always deposited intact on a timely basis, bank reconciliations have not been consistently performed, and liability listings for court bonds and water deposits were not maintained.

Numerous closed meetings were held during 2005 and 2004 and while the open session minutes typically noted the meeting was being closed, the reason and vote were not always documented.  Minutes for many of these closed sessions were not maintained.

As of February 28, 2006, the city owed approximately $23,250 of overdue taxes to the Internal Revenue Service (IRS), which represented tax liabilities, penalties, and interest for prior years.  The 941 forms, Employer's Quarterly Federal Tax Return, were not filed timely during prior periods.  It appears the tax withholdings during 2004 and 2003 were used to fund General Fund expenditures due to cash flow problems.  The city has now paid all but approximately $800 of the past due tax amount, and has tentatively received an abatement of approximately $14,000 in penalties and interest from the IRS.  These problems appear to have been the result of inadequate supervisory review over payroll.

The state's portion of Crime Victims Compensation (CVC) and Peace Officer Standards and Training Commission (POSTC) fees collected by the municipal court have not been submitted to the state as required. As of March 31, 2006, POSTC fees totaling approximately $800 and CVC fees totaling approximately $5,700 were due to the state.   In addition, the city has not remitted the county portion of the Domestic Violence Shelter fees collected since January 2004, totaling approximately $3,150 as of March 30, 2006.

In the Municipal Court, receipts were not issued for some monies received, monies were not deposited intact or timely and ticket processing needs improvement.

Also included in the report are recommendations related to ordinances, property taxes, capital assets, and a street maintenance plan.

Complete Audit Report