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Marionville audit shows irregularities

Wednesday, October 13, 2010

A petitioned audit of the City of Marionville was presented publicly on Monday at Marionville City Hall. Irregularities were found in the way the previous city clerk and treasurer handled funds relating to herself. According to auditors, a lack of supervision by the Marionville Board of Aldermen contributed to the problem. Auditors identified $28,957 in unfiled federal payroll taxes and subsequent penalties and interest now due.

Irregularities came to light on June 25, 2009, when city officials learned Claudia White, former city clerk and treasurer, had not paid her sewer bill since 2004 and had cashed a personal check from city receipts without depositing a check to cover the balance. White had worked for the city since 1993.

White was subsequently terminated. A relative paid the $2,374 in White's unpaid sewer bills. A petition signed by 276 Marionville residents was subsequently circulated, asking State Auditor Susan Montee to audit the city's books. Montee, the team of three auditors who conducted the review, and Montee's Director of Communications Allison Bruns presented the review on Monday before an audience of around 50 residents.

"I thought the people were angry," said Bruns. "They were angry at what was going on, and no one detected it. The citizens were hearing for the first time about fraud and poor practice and oversight of their tax dollars. I would have felt the same way.

"There is a new mayor and obviously the clerk has been replaced," Bruns said. "I think the people were hopeful in the direction we provided for how to proceed."

Bruns said the audience asked questions for about 45 minutes. Most wanted clarification about details in the audit.

Clerk's personal bills

Auditors detected unsupported payroll checks, incorrect utility account information and unauthorized utility account adjustments to White's personal account. At one point, White had marked her sewer account as inactive.

White did not assess penalties against herself for not paying utility bills as proscribed by city policy. Penalties due on her account as of June 29, 2009, totaled $225,686.

Accounting shortcomings

The clerk/treasurer was responsible for most record keeping of the city. Auditors indicated the duties should be segregated to avoid having the same person conducting both functions.

"Despite becoming aware in 2009 of numerous unsupported transactions and manipulation of city records involving the former city clerk/treasurer," the audit stated, "the board has not yet taken sufficient steps to properly segregate accounting duties or implement effective supervisory reviews and monitoring procedures."

Aldermen agreed with the criticism and indicated cross training was in process. They agreed to look into getting a third party to help with accounting.

Payroll checks totaling $13,326 between 2004 and 2009 were found relating to additional hours over holidays and vacation leave, but no time sheets were found to accompany them.

Auditors also found some time records for employees were not signed. None of the clerk's own records were signed by a supervisor, the former mayor, over the last six months of her employment. Problems were found relating to vacation leave authorizations and records for several employees.

At the end of 2009, two aldermen decided to forego their payment of $60 a month for the year. According to the Missouri Supreme Court, "To permit public officers less compensation for their services than fixed by law would be contrary to public policy of the state."

Aldermen responded that they would install time clocks to document work hours and consult with legal counsel on payments to council members.

Comparing bills, payments

Auditors also found no checks were in place to compare utility use with actual billing. Sixteen customers were found to have not been billed correctly between 2004 and 2010. Preparing a use report to accompany sewer billings by an independent reviewer was recommended, as well as identifying delinquent accounts and cutting off service according to city policy. Auditors also found problems with sewer deposit records. They found sewer and trash rates needed to be reviewed again in light of inactive accounts and inaccuracies that had been discovered.

Aldermen indicated weekly reports of utility use are now being provided by Empire District Electric, the water provider, for review. Delinquent and penalty reports were also being provided for aldermen.

Procedural problems found

Auditors recommended other procedural adjustments, such as numbering business licenses and building permits, following up on outstanding checks and not skipping check numbers. In addition, bid procedures were not followed. Aldermen were not seeing a complete list of bills monthly, including payroll disbursements. Cell phone use was not monitored and fuel logs were not maintained. Tax money restricted for specific use was being deposited in the general fund without documentation for later separation.

Minutes for closed meetings were not specific enough to show how some issues were discussed.

On all these points, aldermen indicated they would comply with the recommendations and implement changes.

Cost of petitioned audit

The petition circulated calling for the audit stated the cost would be between $15,000 and $30,000. Bruns said the actual cost "far exceeded" the maximum because more work was required to document the legal improprieties. However, Bruns said it has been Montee's policy to stick to the specified rate on the petition. The auditor's office would absorb the balance.

A payment plan would be worked out with the city, Bruns added.

Charges against White had been dropped by Lawrence County Prosecutor Robert George pending the outcome of the audit. George's office indicated updated charges would be filed following the audit's presentation.

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