Auditing complaints against the city of Fulton

Independent auditors, state weigh in on one woman's petition to review city's finances; Segerson claims improper billing, spending part of hidden agenda

Kathy Segerson continued to address her concerns with the city at the Fulton City Council meeting May 13, arguing the planned $7 million public works campus was a waste of money that could be better spent elsewhere.

Though she approached the council alone, saying everyone she invited to join her felt the council would not listen to them, Segerson said she was not alone in her suspicions that have led her to file for a petition audit from the state.

"I think - these are my suspicions - that hangars for the airport are in here somewhere (in this $7 million)," Segerson said. "We need money for our streets, for an alternative school. You're about to spend $7 million when there are streets here with potholes the size of cars."

Segerson has been circulating a petition to have the city audited by the State Auditor Tom Schweich's office, citing her concerns with the city's transparency and spending activity. She said she has about 300 of the 494 signatures needed to trigger the audit.

Though officials with the state auditor's department say their audit typically probes deeper into city financial practices, the city is audited annually by independent auditing firm Williams-Keepers LLC.

The Fulton Sun spoke with Williams-Keepers and reviewed several public documents.

About both audits

For the past several years, Fulton's Comprehensive Annual Financial Report (CAFR) is built around findings from an audit by Williams-Keepers, based out of Columbia and Jefferson City. Certified Public Accountant Stephen C. Smith spoke with the Fulton Sun about what his firm does.

"Basically our whole audit is directed toward giving an opinion on the financial statements and if they're using fairly stated financial principles," Smith said. "What we do in the purest sense, is the city has books and records that cover several different funds - electric, water, gas, road and bridge, so when we do a city audit, we're essentially auditing the presentation of larger funds ... and (giving) an opinion."

Should Smith's firm find something out of place by error or fraud, they would note the discrepancy and report an opinion on it publicly. That CAFR is available for public review at City Hall.

Spence Jackson, spokesman for Schweich's office, listed many of the same areas of focus for a state petition audit, but said the main differences were "we go a little bit deeper."

"Usually we try to be more comprehensive, but (if the petitioners are) asking us to look at specific issues, we'll try to look at that to reduce the cost to the city by not looking at everything if there's a specific concern," Jackson said. "Having said that, we reserve the right to look at that decision ourselves, we won't look at just that if we get in and find there are more problems."

The state is required by law to fulfill an audit if a petition is completed by a number calculated from voter turnout within the audited political jurisdiction at the most recent gubernatorial election. If completed, the audit would be paid for with city tax dollars.

The state does not provide an estimate on the cost for each audit until it is underway, but they can cost several thousand dollars.

Claims vs. facts

During interviews and at last week's council meeting, Segerson has made a number of statements and raised several concerns regarding city finances and use of funds. The Fulton Sun, using publicly-available documents prepared by various independent firms, has attempted to research and verify these claims. Segerson's statements and the results follow:

1. The annual CAFR is only a fiscal audit and does not cover state or federal grants

"This is a fiscal audit, not to see how federal and state grant moneys are spent," Segerson told the council, echoing concerns she's raised in prior Fulton Sun interviews.

While it's true that Williams-Keepers' audit does not look at grant money every year, it does so more often than not. If the city receives more than $500,000 per year, his firm completes what is called a "single audit," which reviews between 30 and 50 percent of those grant funds depending on circumstances.

In the 2012 CAFR (the most recently-available audit, as Williams-Keepers is currently completing its audit of the 2013 fiscal year), the single audit begins on page 83. That year, the firm looked at airport improvement program grant funds and found on page 88 that "no significant deficiencies" related to internal control or grant compliance were found.

"I think the city has a pretty good track record overall," Smith said. "There might have been a few compliance issues through the years but nothing to the extent they would have expected the city to pay back grant money."

2. Hangars are hidden in the $7 million public works campus

An itemized budget drafted by independent Jefferson City architect firm Architects Alliance, Inc. doesn't suggest so, and city officials actually believe the campus will come in up to $2 million below budget.

For services such as plumbing, windows and doors, wiring and other expenses total up to an estimated $7.2 million - already down from the first estimate of more than $9.5 million given in December.

"The engineers and architects don't want to be low-bid," Fulton Director of of Administration Bill Johnson said. "I believe these numbers are inflated, an example being the heating and cooling system of the administration buildings."

The architect's firm's estimated budget lists mechanical heating, ventilation and air conditioning for the main office building at about $379,000 for the upper floor and $115,000 for the lower floor. Johnson said by consulting councilmen Lowe Cannell and Richard Vaughn, who both have experience in air conditioning, the city estimates that cost will come in $60,000 lower once the project is bid for construction.

Johnson added that while it is impossible to know and there are other items such as a fueling station that are not included in this preliminary budget, he hoped to get the project done closer at $5-6 million. The project will be funded partially by budget contributions and in part by a lease-purchase agreement that will let the city pay off the expense over time without rate or tax increases.

3. Williams-Keepers' audit is less reliable than a state audit

The state argues its audit is generally more thorough, but Smith said his accredited, licensed independent firm is no stranger to telling cities news they might not want to hear.

"Even if we were inclined to look the other way, our ethics and our desire to continue to be licensed would oblige us to report," he said.

4. My bills are too high and couldn't be told why

"I don't feel like they've been completely open with us exactly how much of an expenditure went towards this or that," Segerson told the Fulton Sun for an April 15 story. "It'd get to where (each month) I'd have another $300, $400 bill and they couldn't tell me why. I went in with receipts and they couldn't match up. I think the city as a whole's representatives need to be transparent for others to see."

Smith said his firm does not look at information so finite as each individual user's bills, but they do look at the reported and actual year-end totals for funds collected on utility bills. For those numbers to match, he said, the overwhelming majority of users must have been billed correctly.

Williams-Keepers' published opinion in the 2012 CAFR states for that year that "in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information" and that applicable cash flows for the year "ended in accordance with U.S. generally accepted accounting principles."

City officials have said they felt Segerson, a two-time council hopeful who has been outspoken about problems she has with her own utility bills, is driven by a vendetta.

"I think she is misleading the citizens saying we never audit or the citizens won't see the results," Councilman Steve Moore said later at the meeting, adding he hoped to avoid city tax funds being used to pay for an audit "for one person's grudge against the city."