Audit prompts discussion about raising utility rates

The City of St. James' annual audit came back without any major red flags, but there were still some issues brought before the St. James City Council Nov. 12, including one that will likely lead to increased utility rates.
"We were able to issue a clean auditor's report for the fiscal year ending April 30, 2013," said Mark Kean, of Kean & Company.
At the meeting, Kean noted that the city's governmental funds, which cover things like taxes, permits, fees, tickets, etc., cleared over $82,000 last fiscal year.
The St. James Municipal Utilities funds finished out the year with a loss of over $299,000, which brought the total revenue stream for the city to about $217,000 in the hole.
Kean and City Administrator Jeff Davis both attributed the loss in utilities to relatively mild weather, and Davis also mentioned rising fuel costs.
"Basically, electric last year at this time took a loss. And we already knew it would this year," Davis said. "The rates went up in April, and they may have to go up again this January. Our expenses have just not kept up with the costs in electric."
In April, utilities users' rates jumped up 3 percent.
Davis said he could not yet speculate how much the January rate increase may be. He said that would be up to the St. James Board of Public Works at its next monthly meeting. Once an increase is approved by the board, the increase will then be brought before the St. James City Council.
The rate increase should also help fund the debt services for the city's $6.7 million bond issue from 2010 to purchase a substation, which did not require a tax increase.
According to Kean, St. James Municipal Utilities is sitting on more than $5.5 million in reserves, but Davis said those funds should not be used to help with debt services or losses in other areas. He said the reserves need to be available should the city ever face any disaster that would require a substantial amount of out-of-pocket expenses.
There were a few other issues Kean alerted the council to that brought up some discussion.
One issue was the fact that the city's books contained "numerous errors," according to Kean's official report.
"Several material adjustments were necessary to agree key accounts to their underlying balances," the official report reads. "Material adjustments included adjustments to utility billing receivables, payables, cash balances, customer debt balances, inventory balances and other incorrect recording of transactions."
Davis and City Clerk Sarah Wheeler attributed the accounting errors to the city's new accounting software, which was put in place a year ago.
"Basically, what we ran across is that the acting system still has a ways to go," he said.
Kean recommended to the city that an outside accounting agency assist the city to keep the books correct on a monthly basis.
Davis said it is not uncommon for municipalities to use the end-of-year audit as the way to get their books 100 percent clean and in order, but having the outside help should make the city's books much more accurate, which will require less cleaning up to be done at the end of the year.
Another issue Kean brought up in his report was that "utility wages should be allocated to each utility department based on the time devoted to each department."
As it currently stands, Davis said it is difficult to do this since utilities workers may assist on any number of the city's utilities, and wages typically come out of the electric fund, as opposed to water, natural gas, etc.
Davis said this is something the city is currently looking into and hopes to implement in the near future.
Kean noted that the utilities department has also not completed a physical inventory in several years, and that this should be completed on an annual basis.
In other business at the council meeting, the council approved two ordinances related to the city's ongoing Safe Routes to School sidewalk project.
The ordinances, which Davis said were required by the Missouri Department of Transportation, state that, after work on the sidewalks is complete, the City of St. James will be completely responsible for them.
The council also approved adding two handicapped parking spaces in front of the St. James Police Department's headquarters.
With the former layout of the building, there were handicapped spaces located in the back parking lot, but there were none out front.
Now, since the actual front of the building is the primary entrance for the police station, city officials felt the need to have the spots located in the front.