By Jared McNett, Mason City Globe Gazette

 

On Feb. 19, the office of Iowa Auditor Rob Sand released five separate reports covering specific city, county and commission activity across the state.

One of those five was a periodic examination of Kensett that looked at a one-year stretch from July 1, 2018, to June 30, 2019, and what it found in that time are a number of issues it is asking the Worth County town to address. Twenty-two findings, in fact.

At issue for city officials of Kensett was how they segmented duties, how certain banking practices were lacking, how disbursements exceeded budgeted amounts, whether or not certain government transactions represented a conflict of interest, city clerk reports not being prepared and city council meeting minutes not being published in accordance with Iowa Code.

In summarizing the issues at hand, Sand’s release said that: “The City Council has a fiduciary responsibility to provide oversight of the City’s operations and financial transactions” and that this oversight is typically defined as the “watchful and responsible care a governing body exercises in its fiduciary capacity.”

The issue with separating duties came up first in the auditor’s list of issues with Kensett government practices, and it’s one of the more sizable chunks of the report.

According to the report, it is ideal for one individual to have control over each of the following areas: cash, investments, receipts, disbursements, payroll, utilities, journal entries, transfers and debt. That said, the report did make sure to note that because of Kensett’s relatively small size — its population is 260 people as of 2017 — separation can be difficult with a small number of employees. Still, the report argued that the city should review its procedures to make sure internal control is as strong as possible.

Multiple, direct financial issues were noted in the auditor’s report including: balances not lining up, funds not being transferred by proper procedure and deficit balances being run.

The report found that, as of June 30, 2019, the city had deficit balances of $16,310, $53,233 and $17,112 in the Special Revenue, Road Use Tax Fund and the Enterprise, Water and Sewer Funds, respectively (its 2020 Fiscal Budget totaled about $5.8 million). Its recommendation for the matter, which was not detailed, just said that “The City should investigate alternatives to eliminate these deficits in order to return these funds to a sound financial position.”

It did have more to speak to with proper fund transference and how that could mitigate certain issues.

According to the audit’s findings, one approved transfer from the General Fund to the Special Revenue, Road Use Tax Fund to address past balances was approved for $274,414 but the actual amount transferred was $413,638. The auditor’s report then recommended that the City should make sure to approve all transfers by resolution prior to the actual transfer. “The resolution should include a clear statement of the reasons for the transfer, each fund involved and the amount,” the report stated.

As for balances not lining up, the report recommended that Kensett officials should make sure to reconcile bank and investment account balances with the general ledger on a monthly basis and to resolve any discrepancies in a timely fashion. It went further to say that, when doing such a reconciliation, lists of outstanding checks should be prepared and kept for all accounts and that an independent person should look over those reconciliations and sign off on them.

The City of Kensett worked with the four-team auditing group and, based on the report, provided the relevant materials needed to conduct the investigation.

Kensett’s government includes a mayor, five council members, a city clerk/treasurer and an attorney. None of them responded to calls made and messages left for the story.