The Lawrence Community Shelter is pictured in this file photo from 2012.

The Lawrence Community Shelter, which has already cut its number of staff, salaries and benefits because of a revenue shortfall this year, will have to do that again if it can’t fund a projected deficit for 2016, board members said Tuesday.

John Magnuson, a shelter board member, said the organization is currently seeking to hire a development director to coordinate fundraising and other revenue-generating activities. He said the board expects it will be able to fill the gap next year, but, if not, a contingency plan has been put in place.

“We’ve been at capacity all year. We’re not sitting there with empty space; we’re not overstaffed, not oversized,” Magnuson said. “That being said, we’ve talked to some staff and they understand if we get to June or July and we haven’t been able to improve our fundraising and grant-writing, we expect we’ll reduce salary and staffing expenses.”

Magnuson and board vice president John Tacha answered a few questions from the Lawrence City Commission on Tuesday after commissioners received an audit on the shelter.

City Auditor Michael Eglinski was tasked with looking into the shelter’s drastic revenue shortfall that earlier this year caused the organization to request emergency funds from the city of Lawrence and Douglas County. The city and county each gave about $50,000.

In his report, Eglinski noted that the shelter owed $37,000 in back payroll taxes to the Internal Revenue Service. The shelter board learned of the owed taxes in spring of this year, and they were paid in September.

Magnuson said Tuesday the back taxes were a mistake, and the shelter contacted the IRS about it.

“It wasn’t a situation where money was misallocated or money was missing,” he said. “It was somebody forgot to check a box when running payroll, and it got behind a little bit. We knew we were past due. There were no penalties because we engaged the IRS quickly.”

The back payroll taxes were not brought up in the shelter’s request for emergency funding. Magnuson and Tacha said that was because the taxes were paid with private donations and not city or county contributions.

The audit found that moving to a new facility in 2012, which expanded its number of overnight guests from 75 to 125, as well as fewer donations led to the shelter’s financial downturn.

Commissioner Matthew Herbert proposed the shelter seek funding from neighboring cities which those who use the shelter come from to stay.

Tacha said a high percentage of guests are from Douglas County, but some aren’t. He said the board would explore looking to other municipalities for funding.

“I know there’s a lot of neighboring communities that surround Lawrence that don’t offer the level of service we offer, if any service at all,” Herbert said. “We’re certainly serving their populations and getting no reimbursements for it.”

Eglinski recommended the shelter build up a reserve fund to help sustain the operation during times of low fundraising. He said the shelter had 23 days’ worth of cash on hand in 2014. The average for about two-dozen other, similar shelters was enough cash to run operations for 53 days.

Eglinski said that, when looking through the board’s minutes, he saw where the need for a reserve fund was mentioned several times throughout recent years.

Magnuson said it would be a two- to three-year project. Any extra money the shelter may have in 2016 would need to go toward its maintenance expenses, he said.

“Frankly, it’s going to be very challenging,” Magnuson said. “We’ve projected being light on some ongoing maintenance expenses; there’s nothing there if the furnace goes out or something like that. Step one, we need to address our structural deficit, and step two is that reserve fund.”

Tacha said the board is trying to find ways for it to have enough staff in place to safely handle the shelter’s population without going over on expenses.

The city’s “Housing Vision” calls for the organization to provide 125 units of emergency shelter, and cutting the shelter’s occupancy would not have much effect on the budget anyway, Tacha said.

Eglinski noted the expenses per sleeping space slightly decreased with the new facility.

“It was the city’s directive to have 125 people being able to be served,” Tacha said. “We wouldn’t be serving what the city asked us to do if we cut population.”

Herbert said at the end of the presentation that he did not “have a ton of confidence” that the shelter would not seek emergency city funding in 2016.

Commissioner Stuart Boley, who had joined the shelter’s board after their financial problems became known, said Tuesday he resigned from the position. He said the board did not need a commissioner involved now that the audit had been released and with the recent hiring of the shelter’s executive director, Trey Meyer.

“We generated a lot of good information; I don’t think my participation is necessary anymore,” Boley said. “I think the board has the opportunity to take the information that’s been provided and see what the path forward is.”

In other business:

• Commissioners approved on second reading the rezoning of the old Sunrise Garden Center property, 1501 Learnard Ave., to light industrial, allowing for the Sunrise Project and Central Soy Foods to locate to the area. City staff removed the possibility of a telecommunication tower and telecommunication antennae from a list of future uses for the land.

• Commissioners unanimously approved the city’s request to advertise for architectural services in the restoration project of Lawrence’s Fire Station No. 1, 746 Kentucky St. The restoration, which is funded as 2015 and 2016 capital improvement projects, is estimated to cost approximately $2.63 million.

• Commissioners unanimously passed a work plan for the city auditor. They asked City Auditor Michael Eglinski to look at the city’s financial condition, improvements to the city’s documentation of infrastructure projects, downtown parking, municipal court workload, overtime controls and how the police department workload would be affected by the opening of a proposed Douglas County mental health intervention center. Commissioners asked for the top priority to be a review of the city’s process for how it determines public incentives for development projects.

• Zoning and planning changes necessary for the development of the proposed KTen Crossing shopping center at the South Lawrence Trafficway and South Iowa Street intersection were deferred to a later meeting because Commissioner Lisa Larsen could not be in attendance Tuesday. Also deferred was the decision on whether to allow Massachusetts Street restaurant Jazz: A Louisiana Kitchen to install an outdoor archway.