photo by: Nick Krug

Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

For the third time since 2012, the Lawrence city auditor has cited a lack of control in the way the city manager’s office tracks payments, leading to some being late or going unreceived altogether.

This time the finding comes as city commissioners are considering eliminating the auditor position for budgetary reasons.

In a recent audit of Lawrence’s economic development incentives, City Auditor Michael Eglinski noted approximately $460,000 was due in May 2014 from Douglas County but the payment has never been received. Though there’s been discussion among city and county staff about it, the city’s elected officials have not voted on whether they wanted to defer the payment, waive it or order it to be paid.

Another payment, a $75,000 contribution to Lawrence’s affordable housing trust fund, was collected past deadline in March, and a bill for the amount was sent only after Eglinski inquired about it, he said. The payment was a requirement of developers of the Pachamamas Project, 800 New Hampshire St., who struck a deal to provide the money in exchange for public incentives.

“There’s a requirement for a payment, and it’s falling through the cracks, essentially,” Eglinski said. “The issue isn’t so much the amount specifically. To me the issue is having a problem where there is a deadline and a payment coming in, and we are not controlling that the way we should. The consequence of that could be really significant.”

Eglinski’s audit report was released Thursday and will be presented to the City Commission on Tuesday. The last of 14 recommendations in the report indicates the need for the city manager’s office to have payments related to economic development processed through the finance department and the city’s billing system.

“It’s a recommendation about using the billing system to have tighter control,” he said.

Eglinski has made similar recommendations twice before, the first in 2012 after an audit of the city’s cash-handling processes, and then in 2014 during an audit of the Rock Chalk Park project.

In the Rock Chalk Park audit, Eglinksi found city officials failed to timely collect a $1,000 application fee from a development group led by Thomas Fritzel and the Kansas University Endowment Association.

The fee had been due to the city in February 2013 as part of a request for industrial revenue bonds. After the audit was released in July 2014, then-City Manager David Corliss followed up on the issue and received a $1,000 check.

In a response to the newest audit, City Manager Tom Markus wrote that Eglinski’s recommendation had been incorporated into the city’s current practices. City Finance Director Bryan Kidney said billing and receipts for the city’s special taxing districts had once been done through the city manager’s office but were recently transferred to the finance department.

Missed payments

By resolution, a development group led by Mike Treanor and Doug Compton owed $75,000 by March 1 to Lawrence’s affordable housing trust fund. The payment was a stipulation approved by the City Commission on Dec. 1 as part of the group receiving a sales tax exemption on construction materials for their project.

On March 1, Eglinski could not find the payment in the city’s financial system. He asked about it, and a bill was entered a couple of days later. The payment was received March 8.

“It’s the same issue of somehow we were not getting a payment in a timely manner,” he said. “Would we have issued the bill if I had not asked is a question I cannot answer.”

Eglinski has been following the other issue — of $460,000 due from Douglas County — since the amount came due in 2014.

The amount stems from an agreement between Lawrence and Douglas County in 1989 that established how the governments would handle infrastructure costs at East Hills Business Park. The city funded water, sewer and street projects on the site.

When the parcels sold, the city was set to receive special assessments on the property. If they didn’t sell by 2009, the city was supposed to receive the special assessments attached to the property.

In 2008, just prior to the expiration, the Lawrence City Commission was presented the options of forgiving the $460,000, extending the payment deadline or asking that it be paid. Commissioners decided on a five-year extension and passed an ordinance establishing a new due date of May 2014.

“So, come May of 2014, there is an interlocal agreement and there is a city ordinance that make this payment due to the city,” Eglinski said. “We have not received payment.”

In August 2015, the City Commission waived $45,000 of the $460,000 in special assessments when Lawrence manufacturer Prosoco expanded to the Kinedyne building in the East Hills Business Park. At the time, no decision was made about the rest of the assessments, Eglinski said.

Kidney said staff is aware of the amount and is “planning on having that extended.” A deadline extension would require a vote by the City Commission.

“When that deferral ended in 2014, the city and county at the staff level continued to talk about how to take care of this outstanding assessment,” Kidney said. “It’s not a case of this money all of a sudden isn’t getting paid and we lost track of it.”

Eglinski said it was “important to have that conversation” at the City Commission level.

“The commission may well decide to waive those fees remaining, but that needs to be a conversation and a vote,” he said. “And the last time they did consider that, in 2008, they decided not to waive them.”

“This is a material amount of money. This is not a $5 parking fee or a $100 water bill that’s late,” he continued. “It’s been two years. It hasn’t been resolved.”

Auditor position up for elimination

Commissioners will hear a presentation from Eglinski on this recommendation — and 13 other recommendations related to the city’s economic development incentives — at their regular meeting Tuesday at City Hall, 6 E. Sixth St.

The audit report was released just two days after commissioners heard a recommendation in Markus’ 2017 budget proposal to eliminate the position of city auditor. Markus has said he’s recommending elimination of the position — along with eight other full-time positions and one part-time position — in an effort to balance the city’s budget.

In 2008, the then-City Commission established the city auditor position as part of city code. Three people spoke to commissioners Tuesday in favor of keeping the auditor position, noting the auditor was not under the supervision of the city manager, who proposed the position be cut.

According to 2015 city employee salary information, the city auditor is paid $91,738 in base wages.