Auditors tell Lawrence City Commission to expect to find additional missing payments

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

The discovery of hundreds of thousands of dollars in missing billings and payments to the City of Lawrence may only be the beginning.

At the City Commission’s meeting Tuesday, auditors told commissioners that a more detailed review will likely find additional unsent bills and uncollected payments.

“We don’t know that we’ve captured the totality of everything that should be billed by the city,” said Christina Churchill, an auditor with RSM. “…Not everything is captured in any one place and department.”

The initial assessment of an audit of the city’s billing procedures conducted by RSM found that poor record keeping, insufficient employee training and a lack of oversight caused payments worth hundreds of thousands of dollars to go uncollected by the city.

The assessment found that at least 10 leases — of either city land or property such as communication towers — have missing billings or payments. The city doesn’t yet know the total value of the missing payments, but some of the leases listed are thousands of dollars per year and potentially have unsent bills dating back several years.

Churchill said the primary issue was a combination of staff turnover and a faulty data conversion when the city transferred to a new billing software system in 2013. She said billings that had consistent monthly payment amounts transferred over, but that they found some billings for leases and other contracts in accounts receivable did not.

“Most of the (billing) notifications were held on peoples’ individual calendars or in their Outlook notes, so when transitions happened it wasn’t necessarily transmitted well,” Churchill said.

City Manager Tom Markus ordered the independent audit of accounts receivable last month after Riverfront LLC asked for a summary of payments owed to the city. Markus said when staff in the city’s finance department went through the financial records, it appeared there were bills that may not have been sent out. The city believes that Riverfront owes about $287,000, though the property’s owner believes the amount to be significantly less.

Based on the findings of the audit’s initial assessment, city staff have entered into an agreement to have the auditing firm help verify that all city contracts are correctly billed. The initial assessment is expected to cost about $17,000, and the next phase is estimated to cost under $20,000, according to a city staff memo to the City Commission.

“The next phase is going deeper into our records and assuring that we aren’t missing other parts of our billing,” said the city’s finance director, Bryan Kidney.

In other business, the commission:

• Conducted a public hearing regarding the creation of two benefit districts — agreed to when the developments were platted — for improvements to Queens Road and the intersection of Sixth Street and Queens Road. Improvements to Queens Road are estimated to cost $4.85 million and the traffic signal $450,000, and city staff proposed that the adjacent benefit districts pay for all but about $350,000. Commissioners voted to defer to consider additional options, including changing how the money is assessed to those in the benefit district, expanding the district or increasing the citywide taxpayer share.

• Voted 3-2 (Herbert and Amyx opposing) to approve a proposal to rezone about 120 parcels in East Lawrence. Most of the properties are zoned for high-density, multi-dwelling residential but are currently single-family homes. Other properties are changing among multi-family, single-family, commercial or office to reflect their current use.

• Because of a lack of time, voted to defer a vote on whether to expand a fast-track incentives program beyond the city-owned business parks. The tax breaks and other incentives offered by the Catalyst Program encourage companies to build speculative industrial buildings in areas zoned for general industrial use.