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University City Petition Audit Reveals Financial Mismanagement

Findings of U City petition audit were detailed at a public meeting Thursday night at City Hall.

The petition audit of University City reveals significant financial missteps by the City.

State Auditor Tom Schweich released the findings of the audit at a public hearing on Thursday night. 

The audit found that U City has more than a million dollars in uncollected trash service fees. As of June 2010, the audit found that the City failed to collect fees from 3,373 citizen accounts, totaling $1.6 million. "We expect U City to be more vigilant in collecting that money," Schweich said. He noted that the City has taken action to correct the problem by putting some residents on payment plans, but he said "we still think it's going too slowly."

The audit also looked at employment contracts, and found that the City paid former City Manager Julie Feier $97,400 in severance pay and that current City Manager Lehman Walker has the same clause in his severance package. The audit also revealed that if Feier's termination date had been just 8 days later, the City would have saved $28,600.

Schweich recommended that in the future, severance contracts be made, "not quite as favorable to the employee." 

The audit also found "$900,000 in unsupported allocations." However, Schweich stressed that it doesn't mean that people were cheating or that massive mis-allocations occurred, it just means that there wasn't adequate documentation. He said the City has vowed to improve the way time sheets are filled out.

When asked if the audit found anything illegal, Schweich said there were a couple of minor incidents. He said the audit actually highlighted the fact that the City's financial controls are such, that there could be opportunities for much greater mischief. "The first thing that has to be fixed are the financial controls. Once they are fixed, then we can tell if there is serious fraud going on."

According to the audit, U City paid outside law firms over $230,000 in fiscal year 2010, including $43,000 for City Attorney services, but never conducted an analysis to determine whether outsourcing legal services made financial sense.

Schweich said the most serious problem the audit uncovered related to the settlement of a discrimination lawsuit case. The City paid $146,000, including legal fees, to settle the case instead of only paying the $15,000 deductible, because it failed to notify its insurance company promptly. The mistake cost the City $131,000. "That's money, pretty much just thrown down the drain," Schweich  said. "In the private sector something like that would be legal malpractice." He said it was a clear error that didn't require any work to avoid. 

Former University City Mayor Joe Adams, who attended the public hearing, told University City Patch that when he inquired about the discrimination lawsuit, he was told it had been taken care of.  "I'm not a lawyer, I have to take the other peoples word that they were handling it."

Schweich said the audit found "a pretty serious issue" with meeting minutes and public records. "Missouri Sunshine Law is something that the auditor's office takes very, very seriously." He said the audit found six instances where the closed meeting rules and open meeting rules and Sunshine rules were not properly followed. "That needs to be corrected immediately," said Schweich.

In a tense exchange, councilmember Lynn Ricci told Schweich  she was "fully dissatisfied" with the audit. "I would rate the auditor's office with a 'C'" she said, referring to the grade Schweich gave U City.  She said the audit missed some very important matters. Ricci also voiced her displeasure at receiving the audit report an hour before the public meeting.

Ricci also lashed out at the state auditor concerning the delinquent trash service balance. "That $2 million grew for years before it was identified by this council. So, it's not on this council." 

Ricci went on to say, "The big crux for this audit was the transferring of budget funds without authority and you did not address that at all." At that point, Schweich interrupted her and said "this sort of attack mode is very common I understand at City Council meetings."

Schweich defended the audit findings. "Just because you don't like the results of the audit does not mean it was not a thorough audit."  He told Ricci to stop creating trouble and start fixing the problems. "What I'm asking you to do and other councilmembers to do, is sit down and fix these problems. Next question. Next question," he said.

In his closing remarks, Schweich said "the nice thing about this audit is that we didn't find anything that would be that difficult to fix."

After the public meeting, councilmember Ricci told University City Patch that she was very upset about the audit. She said she didn't feel it was thorough and worth the hefty price tag. "We spent $80,000 for them to do their job and in my opinion their job wasn't done."

Ricci felt the audit overlooked many important issues. "They didn't touch on meat. They touched on surface issues and I want meat to improve my city," Ricci said.

City Manager Lehman Walker said the City agreed with the various recommendations of the State Auditor. However, he noted that "these findings are based upon events which occurred under the previous Administration and previous City Council."

Former Mayor Joe Adams said he felt the audit report "was fair." When asked if the audit findings reflected negatively on his administration, Adams said "I don't really think so." He added "It wasn't as explosive as people thought." Adams said he knew about the trash rates and the fees and his administration was working to change that. 

Current U City Mayor Shelley Welsch said she thought the audit report was "a very good road map for what we need to do." She said it highlighted some very serious problems in the way the City has been run. She said this city council and city manager are committed to implementing all of the State Auditor's recommendations.  

Welsch said the audit did hold one big surprise for her. "I was unaware of how much money was coming into City Hall and  not being properly documented." She said that was "the biggest thing in this audit." She added "I was unaware as a member of council that our controls were so poor."

Paulette Carr, the chief petitioner for the audit, told University City Patch that was she was very happy with the auditor's report. She said "while it didn't touch on every single thing out there, it touched on the major issues."

She said she was pleased the audit report addressed the Sunshine Law discrepancies. "For me, the Sunshine Law is that interface between the citizen and the government and I want to make sure that we do have open meetings and open records."

An audit follow-up team will be back in a few months.

Barry April 08, 2011 at 05:18 PM
Thank you for a fair, well-written article that described the proceedings last night. Hopefully ALL the Council Members got the message that it's time to fix our problems rather than squabble over them.
Kim April 08, 2011 at 05:29 PM
I do not understand why Mr. Price has been twice-censured for his behavior and Ms. Ricci has not. It is fine for her to disagree with the audit findings, but her repeated inability to maintain a civil tone is becoming tiresome, as Mr. Schweich's remarks indicate. Also, Mr. Walker says that the audit results reflect the previous administration (which he served under for many years) but I was under the impression that the audit covered much of last year as well, after the current administration and council took office. Does anyone know what the actual dates covered by the audit were? The article references June with regard to trash bills, but did it extend beyond that? It wouldn't necessarily be relevant for everything, but certainly could be be for something like Sunshine violations.
Paulette Carr April 08, 2011 at 06:27 PM
One small correction to the article above: There is only one Chief Petitioner. All who signed the petition for the audit are petitioners of the audit... all 2800+ valid signers. Again, I would personally like to thank all who worked to gather signatures, and all who signed the petition. It is my great hope that the city will actually address and solve the problems identified. The time covered in the report is not uniform across all areas of finding. You have to read each section to evaluate what time periods were covered. The Sunshine Law issues covered the time period from June 2009 through October, 2010. That covers two administrations/two councils... 9 months of Mayor Adams administration and 6 months of Mayor Welsch's administration. The employment contract - Item No. 2 in the audit report covers both administrations as well. The report states, ""In July 2010, a new City Manager was hired and his employment contract contains the same severance package. The employment contract does not provide for a probationary period which would allow the city Council to terminate the employment without paying a severance package." Other areas addressed only covered FY2010.
Myra Lopez April 08, 2011 at 09:07 PM
Thank you Paulette I will make that correction.
Kevin Feely April 09, 2011 at 02:45 PM
Of the ten issues that the audit found only two cover both administrations items 2 and 8. The other issues pre-date the new council and mayor who were sworn in May 3, 2010. Mr Walker began working as City Manager in August 2010. None of the issues involve the Community Development Department, Which Mr Walker was director of until fall of 2009. The Auditor identified 10 issues "... which included, but was not limited to the (fiscal) year ended June 30, 2010. 1. Trash billing and collection. This is a problem that goes back many years. 2. Employment contract. The previous and current City manager have similar contracts. 3. Cost allocations and Administrative transfers. The problen goes back many years. 4.Legal Services. These issues go back to 1990's. The $146,000 failure to notify the City's insurances company of a lawsuit occurred in May 2009. 5. Parking Garage operations. This contract has not been reiewed since 1997. 6.Accounting Controls. The issues idintified in Fiscal Year 2010 go back many years. 7. Financial reports. Problem identified in FY 2010 goes back many years. 8. Records and open meetings. Issues idenified in FY 2009 go back many years. 9. Personal problems. Auditors notes a flawed salsalary survey done in spring of 2008. 10. Emergency Plan. The City did not have an emergancy plan until the fall of 2010. Thanks to Greg, Ellsi, Ed, Jan and the Audit team for my knowledge on this. Kevin Feely
Kevin Feely April 10, 2011 at 05:13 AM
Paulette is the Chief Patitioner and she did a great job organizing the petition. However the heavy lifting was really done by Lynn Ricci and Jan Adams and others who brought Paulette reams of information and the reasoning of why it was a problem. While I disagree with Ms Ricci about the amount of work that was done and the number of items in the final report. Ms Ricci wanted more for the City. Very different from Mr. Price who went after several council members for trying to clean up the mess the last several years has left us. The Audit is a good start but I dought it will be the last word on some of the items that did not make the State's final list.

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