By Michael Schaffer - Managing editor
The state auditor March 14 released an audit of the city of Mystic for the fiscal year July 1, 2010 to June 30, 2011.
The most egregious error uncovered by the audit was the theft of nearly $2,000 by a sitting City Council person.
The audit states: "During the year, a City Council member assisting with utility billings made two unauthorized electronic bank withdrawals from the city’s account totaling $1,976 to pay a personal utility account. These payments were repaid to the City upon discovery by the City Treasurer."
The audit recommended the city "implement procedures to ensure all payments are supported and approved by the City Council and are for authorized purposes."
The city's response was "All payments are supported and approved by the City Council prior to disbursement. Bank statements are opened by the Mayor and reviewed for electronic transactions before the statement is provided to the City Clerk."
The state auditor's office accepted the city's response.
The audit uncovered the lack of initial listing of receipts, which prevents another person from looking at deposits to see if receipts were properly deposited. The city responded, which was accepted by the state, that "all customers are issued receipts and a copy is kept at City Hall."
The audit questioned the lack of supervisory review and approval of employee time sheets.
"Time sheets should be signed by the employee and the employee's supervisor," the audit states.
The city responded with the statement that "city employees fill out a timesheet approved and signed by the mayor and initialed by the city clerk before the paychecks are signed and disbursed."
The audit uncovered that detailed records of vacation and sick leave earned and used by city employees was not maintained.
"In July 2010, the City approved a payment of $176 to a City employee which appeared to be a vacation payout, but support for the payment was not maintained or reviewed," the audit contends.
The city responded "a monthly employee personnel and vacation time statement has been implemented and will be signed by the mayor and city clerk."
An individual with a city contract for water, wastewater testing and reporting of leak repairs does not outline his compensation, which prompted the audit to recommend a written contract outlining compensation and job requirements.
Mystic officials responded "the city now has an agreement on file for this contract employee."
Other issues are the lack of a formal written policy regulating the use of city credit cards, monthly reconciliations of books and bank balances, including investments and outstanding checks, that were not prepared for donations to the Mystic Fire Department.
"Prenumbered receipts were not issued for all collections," the audit stated. "Certain invoices, canceled checks, bank statements and meeting minutes were not retained."
The audit pointed out one individual has control over city receipts, disbursements, payroll, utilities, investing record keeping, cash, debt record keeping and all general accounting functions on the city's computer system.
Receipts, disbursements and cash for the fire department and cemetery association are controlled by one person.
Segregation of duties ensures internal controls are in place to prevent abuse and fraud.
The response to this audit finding was the city has implement controls to address the lack of oversight.
The audit faulted the way the Firemen’s Donation Account and the Cemetery Association Accounts were handled. It cited the lack of "monthly reconciliations of book and bank balances, including investments, were not prepared. A listing of outstanding checks was not always prepared each month."
The audit recommended the city do "monthly reconciliation of the book and bank balances" and "variances should be investigated and resolved timely. A listing of outstanding checks should be prepared each month. An independent review of the reconciliation should be performed and documented. Prenumbered receipts should be issued at the time of collection to provide additional control over the proper collection and recording of all money. All records, including invoices, bank statements, cancelled checks and meeting minutes should be retained."
The city's response, which was accepted, stated monthly reports and bank reconciliations prepared by the fire department which will be reviewed and approved by the council and the fire department "will obtain a pre-numbered receipt book for donations. All records, invoices, bank statements and minutes of meetings will be kept."
The audit uncovered questionable disbursements that may not meet the requirements of public purpose since the public benefits to be derived have not been clearly documented. The audit cited: Patty Cisler and a cash withdraw at bank for $75; Fareway Stores dinner for funeral of $14; and utility equipment company late fee of $59.
The audit states "The line to be drawn between a proper and an improper purpose is very thin." The audit recommended the council "should determine and document the public purpose served by these disbursements before authorizing any further payments."
The city responded the practice has been discontinued which the audit accepted
The audit under the category of business transactions found out that during part of the year, a council member served temporarily as the City Clerk and was paid $11 per hour for her time as the City Clerk.
"However, no written employment contract or support for hours worked was retained," states the audit. "Also, payments were not processed through the City’s payroll and were not subject to payroll withholdings. Additionally, the duties of City Clerk and City Council member appear to be incompatible."
The audit cites a chapter in Iowa code that states "elected city officer is not entitled to receive any other compensation for any other city office or city employment during that officer’s tenure in office.”
The audit recommended the city to consult legal counsel to determine the disposition of this matter. Also, employment contracts should be retained to evidence the terms of the agreement.
The city of Mystic, with the assistance of the city attorney, "will act on the recommendations presented to the City. Employment contracts will be retained in the future."
The auditor accepted their response.
The audit criticized the city regarding council minutes: Annual gross salaries were not published, the minutes lacked sufficient details, including identifying persons hired as well as the vote of individual City Council members.
The audit found an instance where the mayor hired a person to work part time, which goes against Iowa law that reads: "The council may appoint city officers and employees, and prescribe their powers, duties, compensation, and terms.”
The person was hired in September 2008 to "assist the City Clerk with various City duties. The City Council did not appoint the employee or prescribe the compensation, as required. The audit recommended the council should approve the hiring of all City employees, as required."
The city responded by saying, "All hiring of employees will be approved through the City Council," which the audit accepted.