Lawrence City Commission to review why city failed to bill $700,000 in payments

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

City leaders will soon have a clearer picture of why nearly $700,000 in payments to the city went uncollected.

At its meeting Tuesday, the Lawrence City Commission will receive the final report for the accounts receivable audit performed by RSM. The city ordered an outside audit of its billing practices in June after it was discovered that land lease invoices had not been sent to the Riverfront Plaza for several years.

Since that initial discovery, reviews by RSM auditors and city staff found a total of $690,000 in payments for land leases, building leases and other agreements that were not billed or paid. Those include about $256,000 from the Riverfront and $428,000 from Douglas County.

Auditors report that the lack of a comprehensive list of billings and billing procedures caused many of the errors. Billing schedules were largely tracked in city staff members’ email calendars, with staff individually emailing out invoices, according to the report. Auditors found some of those billing schedules weren’t entered into the city’s billing system or forwarded to others when employees left their positions with the city.

In addition to the audit, Finance Director Bryan Kidney said that since the missing payments were identified, there is more awareness of how much is billed outside of the city’s regular billing processes and greater scrutiny from staff.

“There really wasn’t a good process to make sure that there is nothing slipping through the cracks,” Kidney said. “Now, I believe we have a process in place to make sure that doesn’t happen.”

In total, there were 23 payment agreements that city staff failed to bill or billed for the wrong amount, according to a city staff memo to the commission. In addition to the Riverfront and county invoices, two building leases worth $2,006 and 19 airport hangar rents worth $4,008 were identified. Of the building lease shortfall, $2,000 was due to city staff not billing the Lawrence Arts Center. All but about $940 of the $690,000 has now been collected, with the outstanding amount due to an unpaid airport hangar rent.

In addition, an initial assessment of property tax reimbursements revealed that some reimbursements were not set up to be billed correctly, according to the memo. The city attorney’s office is currently reviewing whether any payments are missing, and that information will be provided to the commission once it’s available, according to the memo.

As part of the audit, RSM provided 25 recommendations to help the city improve its billing process, some of which the city has already implemented. Those include developing a comprehensive list of leases and franchise agreements, formalizing billing procedures and providing further training to billing staff. Kidney said the biggest change is that the city now has a staff member who is focused on those miscellaneous billings.

“I have a dedicated person in the finance department that goes through and makes sure that we are made aware of accounts receivable items in our agreements,” Kidney said. “I would say in the past that wasn’t really done.”

Due to limitations of the city’s current billing software system, the city can’t implement all of the recommendations, including the automation of billings and audits, according to the RSM report. The report says that is an ongoing issue that the city will need to address. Kidney said the finance department plans to make a budget request to purchase new software.

The City Commission will convene at 5:45 p.m. Tuesday at City Hall, 6 E. Sixth St.