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City auditor wonders why City Hall didn't act more quickly on reported billing, accounting concerns
Did you hear about the time that ...
The city of Lawrence once got a $1,000 check in the mail and didn’t know why? It sent the check back to the company. The company then turned around and sent the check back to the city again, this time with a copy of a 1997 agreement proving that it really did owe the city $1,000.
Or the time the city in 2004 was owed about $1.2 million by Douglas County for its share of construction costs for a new fire station? For reasons that still aren’t clear, it took eight years for the payment matter to get resolved.
Perhaps you have heard that the city has hired an auditor to investigate concerns that the city’s accounts receivables department has not properly been sending out thousands of dollars worth of invoices for several years.
The two examples above, though, don’t come from that recent report. Instead, those were discoveries made years ago by the city’s own in-house auditor. There were other findings as well about how the city staff handles billings, cash and other financial matters. But none of those findings sparked a broader review, and now the embattled city auditor — the city manager is recommending his position be cut in the 2018 budget — is expressing some disappointment about that.
“I’m very glad they are working on this,” City Auditor Michael Eglinski said of the city manager’s decision to hire an outside accountant to review the city’s accounts receivables operations. “I’m a little frustrated that they didn’t work on it earlier.”
As concerns have grown about the city’s accounts receivable practices — thus far it has been discovered that the city had forgotten to send bills to a variety of companies that lease property from the city — Eglinski has compiled a memo detailing several instances where he previously raised concerns about the city’s financial practices.
Among the findings from past Eglinski audits:
• A $75,000 contribution that developers were required to make to the city’s affordable housing trust fund was collected past its deadline in March 2016. An invoice for the amount was only sent after Englinski inquired about it, he said. Eglinski reported that incident to city commissioners in a July 2016 audit.
• In May 2014, the city was due to receive a $460,000 payment from Douglas County related to infrastructure at the East Hills Business Park. But by July 2016, the county had still not received the payment, Eglinski found. City officials contend that they had not lost track of that issue, but rather were trying to decide whether to forgive the county of the payment. However, it is unclear why that issue wasn’t addressed in 2014, at the due date of the payment. Eventually, after Eglinski’s audit came out in 2016, the city waived the payment requirement for the county.
• The city failed to collect a $1,000 application fee from a development group led by Thomas Fritzel as part of the Rock Chalk Park project. The fee had been due in February 2013, but the city did not seek to collect until July 2014, after Eglinski made his finding in an audit that was presented to city commissioners.
• In a 2013 audit, Eglinski noted that in 2004 the city was due a $1.26 million payment from Douglas County for its share of the construction of Fire Station No. 5. The county shares in fire station costs because the stations also house the ambulance service, which serves the entire county. In the audit, Eglinski found that “the city never received the original payment and may have never requested it.” In 2012, the issue was still outstanding, and the city ended up receiving a $1.26 million credit from Douglas County. That credit was applied to the city’s share of the construction cost related to work at the Emergency Communications Center, which serves both the city and the county. It is still unclear why there was an 8-year gap in resolving the payment issue. As far as I know, the city did not receive any interest on the more than $1 million for the eight years.
• As part of his work on a 2014 audit, while looking for something else, Eglinski inadvertently discovered a situation where the city received a check for $1,000 from a company in 2013. The staff couldn’t figure out the purpose of the payment. The city kept the check for eight months before returning it to the company. The company then sent the check to the city again, this time with a copy of a 1997 agreement showing that the $1,000 payment was due to the city. I know, you want to know the company and what the check was for. Eglinski didn’t have those details immediately available, but I’ve asked for them.
Eglinski doesn’t raise these issues in a vacuum. He raises them at a time when the future of the city auditor position is in question. For the second year in a row, City Manager Tom Markus has recommended eliminating the position from the city’s budget. City commissioners last year rejected that part of Markus’ budget. They’re set to start debating the 2018 budget next week.
Eglinski points to his past findings as evidence that that position can alert commissioners to significant problems. However, he also acknowledges that despite the past findings, he did not make a recommendation that the city undertake a full-scale audit of its accounts receivables department.
Markus also noted that, and said that is one of the shortcomings of the city auditor position. It often finds individual problems, but does not do as good of job of finding systemic problems.
“He can make the argument that we should have surmised there was a larger problem, but the way the process is set up, he lists specific recommendations, staff deals with them, moves on and waits for him to reveal some other shortcomings,” Markus said.
Markus said he’s comfortable eliminating the auditor position because he thinks there are other ways to evaluate the city’s performance. He also noted that residents shouldn’t be confused that eliminating the position would eliminate the city’s annual financial audit. Eglinski is a performance auditor, not a financial auditor or certified public accountant. The city contracts with a financial auditing firm to conduct its annual audit.
Markus, who has been Lawrence's city manager since March 2016, said he's committed to finding such problems and correcting them. He notes that the city's finance director uncovered the current billing issues, and the city immediately made public the concern.
Unlike other city employees, Eglinski does not report to the city manager, but rather reports directly to the City Commission, which gives the position a unique amount of independence in City Hall.
Eglinski contends that his audits can and have been used to make systemwide improvements. But he said the auditor position could be improved if the city commission would create an “audit committee.” That would be a group that involves up to two city commissioners and several community members who have some expertise in either finance, public administration or other such subject.
“That group would help with audit topic selection and follow-up,” he said. “They would have more time to spend looking in detail at the audit recommendations.”