Report No. 2010-93
Complete Audit Report
Findings in the audit of the City of Deepwater
The city is in poor financial condition. The Board has failed to control spending, practiced poor budgeting procedures, and allocated some city receipts in a questionable manner. The General, Police and Grounds Funds had negative cash balances at December 31, 2009. Restricted funds have covered these negative balances in the city's checking account. Developing a long-term plan to operate within the city's available resources is necessary to improve the city's financial condition.
The city's capital improvement sales tax monies are comingled with other city funds and are not restricted for capital improvement related expenses. Additionally, the allocation of some city disbursements does not appear reasonable. The city paid $46,500 from the Special Sewer Fund for a tractor and backhoe, but does not intend to restrict the use of this equipment to only sewer related projects. Further the allocation of insurance, fuel, and employee costs to various city funds is questionable.
The Board's review and approval of disbursements is not adequately documented, and adequate supporting documentation was not retained for some disbursements. Better controls are needed over bulk fuel purchases, and the city does not have a formal written agreement with its attorney.
Accounting Controls and Procedures
There is minimal oversight and inadequate segregation of the City Clerk's duties, and receipt slips are not issued for monies collected by the City Clerk. Additionally, the City Clerk did not properly record a $25,721 transfer resulting in an understatement of the cash balance on the city's semiannual December 2008 published financial statement. The city maintains an excessive number of bank accounts and maintains several funds not required by state law.
City Collector Controls, Records, and Procedures
Duties related to receipts are not adequately segregated, and there is no independent review of the City Collector's work. Month-end reconciliation procedures for the City Collector's main bank account are not sufficient. Additionally, controls over property taxes need improvement, and controls over the recording of city receipts are poor.
Utility Controls and Procedures
Adjustments made to customer water and sewer accounts are not properly authorized or adequately documented. The City Collector does not reconcile the balance of the water deposit bank account to a liability list, and no financial information is provided to the Board regarding the activity of this account. The City Collector does not document a reconciliation of the total gallons of water billed to customers to gallons of water purchased by the city. Water and sewer service is not always shut-off in accordance with city ordinance when accounts are delinquent, and actions taken on delinquent accounts are not documented. The city has not performed a formal review of the water and sewer rates for several years. In March 2007, the city doubled sewer fees from $10 a month to $20; however, there is no documentation to support how the increase was calculated. Additionally, improper transfers were made from the Water and Sewer Funds to other city funds in 2007.
City Officials and Payroll Procedures
Several elected officials did not meet the statutory qualifications for holding city office when filing for election. According to city records, some city officials had unpaid property taxes on the last day to file for city office. The city has not established ordinances for compensation paid to city officials and employees or ordinances for the duties and terms of officials other than the duties of the City Collector. The city does not require timesheets be prepared or records of vacation and sick leave be maintained for employees, and city personnel files are incomplete.
Audits, Budgets, and Financial Statements
The city does not obtain annual audits of its water and sewer system. The city does not prepare and adopt annual budgets in accordance with state law, and has not developed a process to monitor budgeted to actual disbursements. Additionally, the city's published semiannual financial statements do not fully comply with state law.
Minutes and Ordinances
The city did not always ensure compliance with the Sunshine Law. The minutes of open meetings do not always document the reasons for closing the meeting or the specific section of law that allows for the closed meeting. The city did not comply with state law when members of the Board voted by telephone. The city has not adopted a policy regarding public access to city records. The minutes of city affiliated boards and committees were not always filed with the City Clerk. Additionally, several of these entities maintain bank accounts and receive donations; however, no financial reports are filed with the city. City ordinances are not complete and up-to-date. Additionally, the city has not adopted ordinances required by state law and/or needed to govern the city.
The city does not maintain complete and current records of capital assets. Also, property is not tagged for specific identification, and an annual physical inventory is not performed.
Complete Audit Report
Missouri State Auditor's Office