With a new financial year approaching in January and city staff in the midst of correcting “numerous” accounting errors from 2017 and 2018, the Holts Summit Board of Aldermen first read an ordinance during its Nov. 8 meeting that would pass the city’s 2019 budget — a budget which is still under development.
The aldermen also scheduled a work session for Tuesday to continue work on the budget before its planned final passage in December.
“It may not be the prettiest thing, but we’ll have one,” City Administrator Matt Harline said. “We’re way behind schedule. I’m not comfortable; I’m not happy about it. I still don’t feel 100 percent. I mean, we haven’t audited 2017, so I would say there’s a reasonably good chance we’ll have to make a budget amendment adjustment in April or May when we get the audit back.”
Holts Summit’s 2018 budget was approximately $4 million and should not change significantly for next year, Harline said. The city does plan to purchase a flusher truck for its sewer department, give merit raises to city employees and incorporate a 2 percent cost of living adjustment.
Harline said the reason Holts Summit is behind in creating its 2019 budget is because it’s still working on getting exact numbers on its current finances, a process hindered by accounting errors made over the past two years. The city only recently figured out an accurate number for expenditures in 2017.
Multiple expenditures have been charged to the incorrect account, which has caused different accounts to be short on funds or have an excess of funds. To fix the errors, city staff is going “line by line, expenditure by expenditure.”
“Telling you what we spent in general fund versus street fund versus sewer fund is virtually impossible,” Harline said. “It’s getting closer. … I’m estimating by the end of January we’ll have a pretty good take on 2017. We’ll be able to get 2018 quickly.”
Harline said it’s possible funds are missing, but the city has found no evidence as such and any large amount would have already been detected.
During the past few years, Holts Summit also switched between three accounting softwares to keep track of the city’s finances. Harline said this has led to information being disorganized instead of in one centralized location, making it difficult to determine the city’s exact finances.
The city paid $3,000 in 2017 for Prairiefire, a software it’s no longer using. Instead, Harline said, city staff will be using QuickBooks, as it is more familiar.
To prevent the same errors occurring in the future, Harline said Holts Summit plans to change its chart of accounts, produce regular financial statements, and train more employees to improve oversight and management.
Harline said the accounting errors and decisions to switch accounting software were made by previous city staff, with himself and City Clerk Hanna Lechner taking their current positions within the past year.
Holts Summit’s aldermen also held a first reading of an ordinance Nov. 8 approving an agreement between the city and Azavar Audit Solutions. Azavar would not be auditing the city’s finances, but determining if Holts Summit has missed out on any tax funds due to changing boundaries.
Cities are owed revenue from taxes, such as property, sales or utility taxes, based off who lives within city limits. Harline said Holts Summit does not charge property taxes, but record keeping errors caused by changing boundaries can result in the city not receiving a share of other taxes charged inside its limits.
“In particular, somebody bought a car in Lake Mykee,” Harline said. “Does the Department of Revenue remember to send us sales tax for that car? … They may know that Lake Mykee is gone, but do they remember to send it to Holts Summit?”
Harline said Lake Mykee is an example of where funds may not have been sent to Holts Summit because it was recently annexed by the city, but mistakes could be found anywhere in city limits.
No resident would be charged additional taxes if any errors are discovered during the search, as the audit is over what has already been taxed.
Holts Summit will not pay Azavar anything per the agreement. Instead, Azavar will keep 45 percent of revenue generated through mistakes it discovers for the next three years and the previous three years.
The audit is also corrective, Harline said, in that any mistake discovered will be fixed so Holts Summit continues getting the tax revenue.