photo by: Nick Krug

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

City leaders will soon receive the annual outside audit of the city’s finances, which shows improvement over reports from recent years, when auditors red-flagged a key aspect of the city’s bookkeeping.

As part of the Lawrence City Commission’s meeting Tuesday, auditors with the firm RSM will present the audit findings and the 2021 Annual Comprehensive Financial Report to the commission. The audit provides information about the state of the city’s finances as well as the effectiveness and quality of the city’s bookkeeping.

In the city’s 2018, 2019 and 2020 reports, auditors found that the city had a “lack of internal controls over financial reporting,” meaning that the city’s processes for tracking its cash, assets and liabilities weren’t reliable enough to ensure that the city had accurate financial records. As a result, auditors had to make millions of dollars in adjustments to the city’s books each year — $63 million in 2018, $32 million in 2019, and $30 million in 2020 — before signing off on them as being accurate. Ultimately, once those changes were made, auditors gave the city’s financial statements an “unmodified opinion,” or a clean audit.

A city staff memo to the commission from Finance Director Jeremy Willmoth notes those past findings, stating that staff are happy to report that in the 2021 audit there were “no findings of significant internal control deficiency” and that auditors recorded no audit adjustments. Willmoth also reports that previously identified internal control and compliance issues with federal grants have also been addressed. He said that for 2021, the auditors did not have to charge additional fees, as had been the case in recent years due the level of adjustments.

Willmoth indicates in the memo that limitations of the city’s current financial system continue to require city staff to perform certain work arounds, which auditors have previously indicated should be avoided because they open the city up to risk. The memo states there are control measures in place and that the city is in the process of replacing the financial system.

“Even with this, I believe our team has worked diligently to improve all of these other findings, and they are to be commended for their exceptional work, given that we are also in the middle of replacing our financial management system, and have experienced some staff turnover in key positions within our team,” Willmoth states in the memo.

Willmoth, who began his position at the end of 2018, said following the completion of the 2019 audit that the underlying issues leading to audit findings were being worked on, but that addressing them would be a yearslong process.

The audit also includes eight highlights regarding the city’s finances. Those include that the city’s total net financial position increased by $15.76 million, which auditors noted was a significant increase over the prior year’s increase of $28,000. Auditors also noted that as of of Dec. 31, 2021, the city’s fund balance for the general fund was about $25 million, or 30% of revenues.

In other business, the commission will:

•Receive an addendum to the city manager’s 2023 recommended budget. The recommended budget included a proposal to close the Prairie Park Nature Center Building and transfer those staff to other positions within the city, which would have saved the city $337,000. As the Journal-World reported, dozens of people spoke out against the closure of the nature center, and some commissioners expressed interest in looking at alternative cuts. Commissioners also expressed interested in looking at alternatives to a proposed $100,000 reduction to contracted animal control services provided by the Lawrence Humane Society. A memo to the commission states the recommended budget has found alternatives to those cuts.

Specifically, the recommended budget will now keep the nature center open, but recommends the Parks and Recreation department work with community members to identify ways to reduce the subsidy of the program, which is currently 85%, and recover more of the center’s operating costs. The addendum also calls for reducing the Lawrence Humane Society contract by $35,000 instead of $100,000. The full addendum is available as part of the commission’s agenda materials. The commission ultimately decides on the city’s budget, and commissioners will hold the budget hearing on Aug. 23.

•Consider a resolution to put before voters the question of whether the city should transition to a system with a directly elected mayor. Commissioners discussed the resolution last week, and ultimately directed staff to bring back a new resolution before the Sept. 1 deadline to place items on the Nov. 8 general election ballot. Originally the proposed resolution included the question of whether city commissioners should come from geographic districts in the city, rather than the current system where all five commissioners are elected at large, but there was not enough support on the commission to proceed with that option.

• Consider initiating a text amendment to modify city code pertaining to eating and drinking establishments. As the Journal-World recently reported, John Brown’s Underground, which has struggled to adhere to the city’s limits on downtown alcohol sales, is proposing the city make changes to its code to essentially allow additional bars downtown under certain conditions.

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