A Lawrence auditor is helping the Sister Cities Advisory Board clean up its financial books after the all-volunteer committee failed to file required tax forms with the Internal Revenue Service in 2003.

No money went missing, officials said, but the state of the board’s financial reporting was such that City Hall earlier this year withheld nearly $10,000 in 2004 disbursements until the agency could resolve questions.

“The way it was presented to the board was, we weren’t going to get any more money until we met the city requirements,” said Graham Kreicker, the board’s chairman. He added: “It’s not that we owe the IRS money; we owe them reports.”

At fault, officials said: a cumbersome accounting system that had two treasurers overseeing three accounts.

“Having multiple people handle multiple accounts has made for decentralized accounting,” said Lisa Patterson, a city spokesperson and City Hall’s staff liaison to the board.

Auditor Tom Singleton has obtained two IRS extensions to file the 2003 forms. The board’s new treasurer — one man overseeing one account — is an IRS agent. And Kreicker said the board would hire professional help to keep the books straight in the future.

The incident has raised questions about whether City Hall is doing enough to train citizen-run boards.

“I think our boards in general, across this community, could use some instruction and in-service about leadership, boardsmanship and what work is required of you,” said City Commissioner Sue Hack. “And if that’s financial, we need to offer that instruction.”

‘Not in the habit’

Briefs: Reception to welcome students from Japan (7-19-04) Lawrence, sister city still on good terms (3-27-03) Lawrence still seeks Spanish sister (10-11-02)

The 13-member Sister Cities Advisory Board coordinates exchange trips and activities with Lawrence’s sister cities, Eutin, Germany, and Hiratsuka, Japan. It received $2,500 in 2003 from City Hall to help pay for young Lawrence residents to visit those towns, plus another $7,200 from the “bed tax” charged to guests in city hotels.

The board in 2003 also acted as a middleman, receiving $40,928 from travelers — 23 students to Japan, nine to Germany — to pay for the exchange trips abroad.

The IRS requires nonprofit agencies to file tax returns when they handle more than $25,000 in a year. Former Mayor Bob Schumm, a board member since 1998, said board members believed that since the travel money was a “zero sum” account — no profit was being made — the rule didn’t apply.

“When you throw that money in and commingle it with our other monies … you go over that $25,000 threshold,” said Schumm, who oversaw two of the three accounts.

‘Can’t fire them’

Filing of IRS reports is one of the city’s requirements for agencies receiving public money. And in March, City Hall told the board it withhold funding until action was taken.

Treasurer Jodi Simek resigned from the board in the spring after the matter came to light. Schumm remains on the board, but turned over his financial duties in July to board member Stuart Boley, the IRS agent, who combined the three separate accounts — for travel, scholarships and operating expenses — into one.

The IRS reporting, Kreicker said, should be finished by the end of the month. He said the program’s growth in recent years had made managing it a bigger burden for the board.

“Since they’re all volunteers, you can’t fire them for making the mistake,” Kreicker said of the board.

Schumm agreed.

“As you grow, the technicalities begin to outstrip the resources of the board,” Schumm said.

Training needed

Hack, perhaps Sister Cities’ most vocal supporter on the commission, said officials probably should reconsider the training they give to the city’s 38 citizen advisory boards.

“This is probably something for the commission to say, ‘We need to make sure the boards that handle money know what they’re supposed to do,'” Hack said.

Kreicker said he hoped the issue wouldn’t overshadow the upcoming sesquicentennial celebrations, when 90 visitors from Japan and Germany will be coming to Lawrence.

“That’s what we should be concentrating on,” Kreicker said. “This cloud — it’s something we ought to work our way through.”