Lawrence City Hall, 6 E. Sixth St., Thursday, July 7, 2016

The city has ordered an audit of its billing procedures after it was discovered that a business that owed the city “significant” sums may not have even been billed.

“We need to determine if there’s any inappropriateness about the process that occurred,” City Manager Tom Markus told the City Commission Tuesday.

Markus informed the commission that he is ordering an independent audit of accounts receivable to look at the issue. Markus said the problem came to his attention in relation to a particular account, but that he is concerned it may affect multiple accounts and go back “a number of years.”

“My suspicion and concern is that it may not just be an isolated incident, but it may be more than that,” Markus said. “And so we need to determine if it is a procedural problem for us, if other properties or invoices did not get invoiced and therefore the city was not reimbursed.”

Markus said the issue was discovered when a local business asked for a complete summary of all its outstanding bills with the city. He 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.

“We didn’t have strong evidence that they had been invoiced to begin with, and so that caused me concern,” Markus said. “The dollars, by anybody’s measure, were significant, and so there’s a potential dispute there.”

Markus told commissioners that he would not be providing more specifics until the audit is complete, because he does not want to “cast inappropriate suggestions or allegations towards a business that was going about their business.” He noted it may be the city’s error.

“I don’t want the public to start making those kinds of judgments,” Markus said. “I will report back when I know what I don’t know now.”

Markus said Finance Director Bryan Kidney originally brought the problem to his attention after the business asked for the summary. Markus said he has since authorized Kidney to hire an independent auditing firm to review the city’s accounts receivable.

“I felt like we needed to take fairly swift and direct action,” Markus said.

Markus said the audit would ensure that the city is properly collecting sums it is owed and that the city has adequate policies and procedures in place related to collections. Regarding delinquent accounts, Markus said the city needs to determine what statutes of limitation apply and if the city can charge interest for bills that weren’t paid.

The city is still assessing the scope of the payments for the business that was found to have significant delinquencies, and it does not have an estimate for how much is owed at this time, Kidney later told the Journal-World.

Kidney said the city has hired auditing firm RSM, which did a preliminary review last week. He said the audit will cover “miscellaneous billing” done by the city, which are bills outside of normal operations and don’t include utility billing or tax collections.

Miscellaneous billing includes various charges, including the purchase of cemetery lots, dumpster rentals, inspection fees, building permits and loan payments through the Housing and Neighborhood Development Department, according to the city’s website.

The city does not yet have an estimate of how many accounts will be audited or how long it will take for the audit to be complete, Kidney said.