After nearly $700,000 in billing errors discovered in 2017, city report says new system is preventing future mistakes
photo by: Mike Yoder
It has been more than two years since serious errors were discovered in the city’s miscellaneous billing process, and city officials say a recent staff review shows improvements made since have eliminated those errors.
Since then, the city has created a master list of the city’s more than $25 million of annual miscellaneous billings, which include lease payments, inspection fees, building permits, dumpster rentals and other agreements handled outside of the city’s regular billing processes. The city also now has a master list of all miscellaneous billings and conducts a review of those billings annually.
The first annual review completed entirely under the city’s new finance director, Jeremy Willmoth, was delivered to the City Commission at its most recent meeting. Willmoth said he feels the city’s new proactive approach would have prevented the billing errors that were identified in 2017, which resulted in the city failing to collect close to $700,000 in payments.
“That was the heart of the issue, was the left hand wasn’t sure what the right hand was doing in terms of who was responsible for billing,” Willmoth said. “Now that we’ve clearly identified the contracts, who the responsible party is, and they verify quarterly that they’ve done their billings, we haven’t missed any.”
Addressing the issues
A potential issue with the city’s miscellaneous accounts receivable process first came to light in 2017, after the owners of the Riverfront Plaza, which leases the ground the building sits on from the city, asked the city for a billing summary. City staff found that invoices had not been sent to the Riverfront since 2011, amounting to $256,000 in missed payments. The Riverfront is operated by Dan Simons, whose family formerly owned the Lawrence Journal-World. Former City Manager Tom Markus subsequently ordered an independent audit of the city’s billing procedures, which the city hired the accounting firm RSM to conduct. The results of the subsequent city staff review and audit found that there were 23 payment agreements that city staff failed to bill or billed for the wrong amount, amounting to a total of $690,000.
The RSM audit found that a lack of a comprehensive list of billings, billing procedures and quality controls caused many of the errors. Specifically, auditors found that billing schedules were largely tracked in city staff members’ email calendars, with staff individually emailing out invoices, and that 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.
The city’s miscellaneous billings included more than 7,000 accounts in 2019 and $25.3 million in charges, according to the 2019 Accounts Receivable Activity Report, which was provided to the City Commission on Feb. 18. Willmoth said the only changes made during the 2019 review period were due to rate changes, not errors. At the end of the year, about $63,000 in payments were delinquent more than 120 days, and Willmoth said per policy those amounts would be sent to collections. The full report is available on the city’s website.
Commissioner Stuart Boley, a retired tax auditor, said though the city faced public criticism following the errors in 2017, it was a step in the right direction because the city identified the billing problems and brought the issue to the City Commission. Boley said the 2019 review of miscellaneous accounts receivable breaks out important aspects of those billings.
“I thought they did a good job of actually addressing the areas in accounts receivable that have provided problems in the past,” Boley said. “It appears to me that they are paying attention, tracking things and dealing with them appropriately.”
Still, Boley said he is looking forward to seeing the results of the city’s 2019 financial audit, which is performed by an outside accounting firm hired by the city and covers all the city’s finances. The 2018 audit of city finances, also conducted by RSM, resulted in more than $60 million in changes and RSM found Lawrence lacked proper financial controls, as the Journal-World reported last year. The auditors did not make any finding that fraud had occurred and after making the changes auditors ultimately signed off on the city’s 2018 books as being accurate.
As part of the audit of the city’s miscellaneous billings, which was previously not included in the city’s annual financial audit, RSM provided 25 recommendations to help the city improve its billing process. Those included developing a comprehensive list of leases and franchise agreements, formalizing billing procedures and providing further training to billing staff. 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.
Boley also said he would like to see the city complete upgrades to its finance system and make sure the system is adequate for the city’s needs. He said a better system could also mean that the review process for miscellaneous accounts receivable is less labor intensive for staff. He said one of his priorities is to make sure the city provides funding for those software improvements.
The city’s 2020 CIP includes $600,000 toward an upgrade of the city’s finance system, but that would not cover all the funding needed for the upgrade, according to the city’s 2020-2024 CIP. Another $300,000 is scheduled annually from 2021 through 2024, amounting to an additional $1.2 million in those years. All funding beyond 2020 will have to be approved year-by-year as part of the city’s annual budget process and is not guaranteed.