Auditors fault Monroe City contracting, financial controls

By Forrest Gossett For the Courier Post
Posted: Jun. 16, 2020 9:26 am Updated: Jun. 16, 2020 9:29 am

MONROE CITY, Mo. | Record-keeping lapses, poor contract practices and incomplete financial controls have been found in an audit of Monroe City's finances by the Missouri state auditor's office.

The full audit is set to be made public by the end of June after a nearly 18-month review of Monroe City that was sparked by a citizen petition to Missouri Auditor Nicole Galloway requesting an audit of the city in the fall of 2018.

The Salt River Journal was allowed to review the draft final audit report and last week a source provided a final set of responses from the city on recommendations to improve financial reporting and contracting responses in a document entitled “City of Monroe City. Missouri State Audit – Responses – April 2020.”

Significantly, the auditors have not discovered any financial irregularities in the city.

“I talked to the auditors several months ago and I was advised that there is no missing money that they could discover,” said Jerry Potterfield, who led the citizen petition drive to get the audit performed by the state.

Potterfield defeated incumbent Mayor John Long in the delayed Municipal Election that was conducted June 2.

“There are issues with misallocation of dollars and issues with contracting that come down to just common sense and due diligence,” Potterfield said. “Anytime you are around people and money, you had better have something in place to provide oversight.”

Potterfield said that the preliminary audit findings and responses have not yet been shared with him.

Long called the audit a “waste of taxpayers' money” when asked to respond to the recommendations on Friday morning, although he would not respond to specific issues raised by the auditors. According to city officials, Galloway's office says it will charge the city about $55,000 for the audit.

The audit was launched in early 2019 following a petition drive that was launched in the summer of 2018 after the city awarded a no-bid contract to PeopleService of Omaha, Neb., to operate the city's water system.  

Potterfield sought the audit because the city did not seek competitive bids to outsource water department operations. City officials said that they faced an emergency caused by a lack of skilled and certified workers that “compromised” Monroe City's ability to manage operations, creating doubts the city could maintain water service to residents.

Leading a long list of recommendations, auditors suggest that the city conduct a cost-benefit analysis for what they call significant management decisions.

In their response, city officials maintained their position that the water plant operations created an emergency that needed to be addressed immediately, and that the city did not have immediate access to other water sources, in particular, the Clarence Cannon Water District.

However, city leaders said they will work to adopt the audit's recommendations for future decision-making.

“The board understands the auditor's concerns and will conduct a cost-benefit analysis prior to significant management decisions being made in the future,” the city wrote in its response. “Since the audit, the city has passed a bond issue to construct a new sewer treatment facility. The city has also contracted with an engineering firm to evaluate the water treatment facility with regards to improvements that need to be made to maintain compliance. Once this study is completed, the city will be given an idea as to what type of funding will be needed to resolve the issues. This report will also provide the city with a cost-benefit analysis of the water plant; it is anticipated that this will be completed in October of 2020.”

Auditors also are critical of decades-long practices of accounting for the city's utility department, including the handling of transfers, billings, adjustments to bills, deposits, refunds and reviewing and investigating significant utility losses and establishing signed payment arrangements for utility customers who are in arrears.

Among other issues, auditors said that the city needs to better segregate accounting duties and “ensure a documented independent or supervisory review of detailed accounting and bank records are performed.” In its response, the city outlined several procedures that have been adopted to provide better oversight of financial and payroll records.

In the recommendations, the city was told to do a better job of following the Missouri Sunshine Law, issues that city officials say have been addressed since a Missouri Attorney General's investigation found that Monroe City likely violated the Sunshine Law over a period of several years.

“Since the city was also reviewed for Sunshine Law violations, the city has attended the required training,” wrote city officials in response. “The city has a much better understanding of what can and can't be discussed in a closed session. The city will set up Sunshine Law training as new mayor and aldermen come into the Council.”



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