YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

March 25, 1999
Report No. 99-19

Some problems were discovered as a result of an audit conducted by our office in response to the request of petitioners from Cottleville, Missouri.

Recommendations, as well as responses from the city, which correspond with the findings below are included in the audit.

During our review of Cottleville's Board of Aldermen meetings, especially closed meetings, we noted some of the following concerns. Formal written minutes are not maintained for closed meetings. Although minutes for closed meetings are not specifically required by law, minutes constitute the record of proceedings of the Board of Aldermen. Formal written minutes for closed meetings result in a better record of city transactions, proceedings, and decisions. In addition, minutes help the city demonstrate that closed discussions or business relate to the specific reason announced for closing the meeting pursuant to the Sunshine Law which applies to public meetings.

Furthermore, the board minutes and the meeting agendas do not document the specific reasons for going into a closed session. The tentative agenda and the minutes normally list litigation, real estate transactions, and personnel issues as the reason to go into closed session. While the board normally states three general reasons for going into closed session, the specific reason for going into closed session is not documented.

In August 1997, the city entered into a loan agreement with the Mayor's brother. The Mayor's brother agreed to loan, interest free, such sums of money to the city as the city may request during the years 1997 through 2000, not to exceed $500,000. In February 1998, the city borrowed $284,295 through this agreement to finance the purchase of the property to be used to build a city hall. This loan was entered into without a vote of the city taxpayers.

Article VI, Section 26(c), of the Missouri Constitution allows cities to incur debt by bond issue only after approval of two-thirds of the qualified electors voting thereon. City officials indicated that before the money was borrowed, legal advice was obtained and since the borrowed amount was less than the total estimated revenues for 1998, plus the unencumbered balance from the previous year, the loan was legal. However, much of the city's balance and anticipated revenue was already obligated for 1998.

The city paid an engineering firm approximately $302,497 and $209,174 for the years ended December 31, 1998 and 1997, respectively. This engineering firm designates an employee to serve as "City Engineer" for the city and provides services by other employees as needed. The city entered into a written agreement with this firm on December 18, 1986, which establishes various compensation schedules for the services to be provided. The city entered into several additional contracts with this firm during 1997 and 1998 for large highway/street projects. The city did not solicit proposals for these engineering contracts.

We recommended that the city solicit proposals for engineering services in accordance with state law and ensure payments to the engineering firm comply with the written contract.

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