Citizens who have concerns with City of Salem finances caused in part by almost 17 months of utility billing issues have two options to call on the Missouri auditor’s office for a state audit, according to first-year state representative Ron Copeland (R-Salem).
“I have been contacted by numerous individuals with concerns about the city’s utility issues,” Copeland said in a text to The Salem News. “I am currently looking into the issue and have contacted the Missouri attorney general and state auditor’s offices. The attorney general’s office was already aware of the issue due to the investigation of the Sunshine Law violation (filed by The Salem News in February against the city). The auditor’s office had no current complaints or knowledge of the issues.”
Copeland said he also spoke to Salem Mayor Brad Nash about the concerns of Salem residents.
Among the concerns:
• The City of Salem ended fiscal year 2020 with $3.9 million less in revenue than it budgeted for, according to unaudited figures supplied to The Salem News March 25 by the city after a Sunshine Law request made in October 2020. A story appears on page 1A of today’s issue and at thesalemnewsonline.com. The newspaper has additionally asked for financial information through March of this year to offer a clearer picture of more recent city finances.
• No audit has been conducted for the city’s 2019-20 budget year that ended in June of 2020. Normally audits are conducted by third-party CPA firms in the fall and delivered to the board of aldermen in December. Salem was late getting financial information to K Deluca Audit Services of St. James, the firm that performs the annual audit, paid for by the city. Deluca said last month she normally receives information for the audit in October and tries to complete it by December, meaning the time frame for the June 30 completed audit is already over three and a half months behind. Deluca in an email Monday wrote, “I am working with the city to complete the audit. I do not have an estimated completion date at this time.”
• The City of Salem’s cash position dropped $1.5 million from Dec. 31, 2019 to Dec. 31, 2020, according to a financial report from the city sent to The Salem News in March. Salem had cash and investments of $6.3 million as of Dec. 31, 2019, and by the end of 2020, that number dropped to $4.8 million, according to the City of Salem Combined Statement of Revenues, Expenditures and Changes to Fund Balances. That is a drop of 24 percent in one year.
• Complicating Salem’s financial issues is the firing March 8 of longtime city clerk Mary Happel, who handled city finances. No reason has been given after Nash recommended the termination and aldermen voted 4-0 to accept his recommendation. The firing came on the heels of the city not printing public notices of semiannual financial statements for two years. The statements are required by state statute and city ordinance.
• Much of the shortfall in budgeted revenue in 2020 is due to utility billing issues that have plagued the city since going to a new, computerized water and electric monitoring system in November of 2019. The system was purchased from NexGrid for $1.34 million and has wreaked havoc with cash flow. The city has run months behind in billing on two different occasions.
The unclear financial picture, lack of an audit and firing of Happel have many Salem residents uneasy about the financial state of the city.
There are two ways the state auditor’s office can conduct an audit of a municipality.
Whistleblower Hotline. Concerns for the financial condition or illegal activity with any government entity, including city governments, can be reported by citizens through the state auditor's Whistleblower Hotline, according to information sent to The Salem News by Copeland. Citizens can call 800-347-8597 or concerns may be submitted online at auditor.mo.gov/hotline. The information can be anonymous.
Petition audit. The auditor’s office may also be called on to audit any political subdivision of the state if enough qualified voters of that political subdivision request the audit through a petition, according to Section 29.230 of state statutes.
The political subdivision – a city, school district, taxing district, etc. – audited through the petition process is responsible for the cost of the audit. Petition signatures must be from registered voters who live within the boundaries of that political subdivision. The person who submits the petition and signatures to the auditor's office must be a property owner or resident of the political subdivision.
A petitioner would need 288 signatures in the process to obtain a state audit for the city of Salem. The number of signatures needed is figured by the number of votes cast in the last election for governor. If 1,000 to 4,999 votes are cast, the number of signatures needed is 15%, or a minimum of 200.
A total of 1,916 city residents voted in the 2020 fall election, according to information supplied to The Salem News Friday by Dent County Clerk Angie Curley, translating into the 288 signatures needed.
Recent examples of an audit through the petition process is the city of Fairview, located in Newton County, and Belton in Cass County.
“My audits examine how public resources are used, detail any concerns about how government operates and make recommendations on how taxpayers can be better served,” auditor Nicole Galloway said in a recent press release about petition and Whistleblower-obtained state audits.
Galloway encourages residents with concerns or knowledge of illegal activity to reach out through the Whistleblower Hotline.
Since 2015, the audits have resulted in 77 criminal charges against public officials. Galloway said if you notice any corruption or abuse of power at the state or local level, it can be reported.
“The petition audit process allows citizens to demonstrate that they want to be engaged in ensuring government accountability at all levels,” Galloway said. “The petitioners can be certain we will take their concerns seriously as we complete independent and thorough reviews of the operations and finances.”
Also, the state auditor’s office is required to audit county officers at least once during their term, as near the expiration of the term of office as possible. State statutes also call for an automatic state audit of county collectors if they leave office for any reason before their term expires, due to the fact there are so many financial responsibilities that come through their office. No similar state statute exists for municipalities, even in a case such as Salem’s, when a city clerk is fired. City clerks handle much of a city’s finances.