Petition audit report gives City of Seymour lowest possible rating

(From State Auditor Nicole Galloway)

Missouri State Auditor Nicole Galloway today released the findings of a citizen-requested audit of the city of Seymour, located in Webster County. The report found numerous weaknesses in the city's operations and financial condition, and gave a rating of "poor," the lowest possible rating.

"The successful petition initiative that led to this audit began with concerned residents of Seymour," Auditor Galloway said. "During our review, we discovered several areas with significant problems that need to be addressed by city officials. I urge them to take action, without delay, to restore public trust and to better serve the citizens of Seymour."

The audit found the city's utility operations, electric, water and sewer services, heavily subsidized the general fund of the city. The Board of Aldermen transferred substantial amounts from the three utility accounts to the city's general fund -- more than $560,000 in fiscal year 2017. These transfers represent the majority of operating income from the utilities and indicate that utility rates may be higher than necessary.

In addition, the City Administrator granted reduced utility charges or even waived the charges as economic incentives, without approval by the Board. A commercial business saved $28,000 by being charged a lower electric rate than it should have paid, in exchange for opening a new grocery store; in another instance, the city waived $1,000 in electric charges for a religious organization as an incentive for the organization to locate in Seymour. These types of exemptions reduce city revenues and could create higher utility rates for other customers.

The audit also found that under the city code, tax-exempt 501(c)(3) entities are not billed for monthly sewer charges. That violates Article VI, Section 23, Missouri Constitution, which specifically prohibits counties, cities or other political subdivisions from granting public money or things of value to any corporation, association or individual.

Despite the Board of Aldermen relying on transfers from utility funds to subsidize the general fund, poor budgeting practices led to the Board unknowingly approving deficit budgets for the general fund and library fund in fiscal year 2017. The audit found numerous internal control weaknesses, lax controls over disbursements, a lack of financial reporting to the Board, and a lack of monitoring by the Board.

Other problems were found, including disbursements being made from the wrong funds and lack of written contracts and competitive bids. The audit also found cash bonuses being paid to city employees and the Board allowing city resources to be used for private gain.

The audit includes several recommendations for the Board of Aldermen to follow to address the problems detailed in the report. The full audit of the city of Seymour can be found here.