The Town of Midwest has no written accounting policy, does not segregate financial responsibilities, had a possible conflict of interest problem with a construction contract with its mayor, lacks procedures that led to financial misreporting, and its utilities are not self-supporting, according to a new draft audit.

"Based on the procedures identified above, there were possible violations of the Constitution or State Statute identified (specific laws)," according to the June 7 letter from the Wyoming Department of Audit to the Midwest Town Council and Mayor Guy Chapman.

In a June 21 letter to the Department of Audit, Chapman said the town agreed with recommendations to fix the problems.

Chapman did not return a call seeking comment.

The auditors reviewed the books for the 2016-2017 fiscal year, according to the audit filed in the Natrona County Clerk's Office.

Their research compared revenues to the state and the Natrona County Treasurer, traced selected revenues from when they were received to when they were deposited, looked at supporting documentation and town council approval, performed bank reconciliation and verification, reviewed utilities, and reviewed the internal controls -- methods to ensure financial information.

The Department noted five areas of concern and recommendations to fix them:

 

Written Policies

"The Town did not have a written accounting policy and procedures manual," according to the audit.

With no policy, there could be no review of these policies: investments (required by state law); petty cash; mileage reimbursement; credit card; disaster recovery; and bonding, with two of the town's signatories not having surety bonds required by law.

The Department recommended the town develop an accounting policies and procedures manual.

 

Segregation of Duties and Oversight

"Having one individual with the access to the Town's money and responsibility to track the Town's money leaves the Town vulnerable to misappropriation of funds or errors," according to the audit.

The town council receives monthly reports, but its members didn't review unopened bank statements or performing a reconciliation to assure accuracy.

The auditors found three transfers totaling $63,226.60 that were recorded as revenues and expenditures; tested 33 expenditures and found 11 were missing supporting documentation; found two of the town's 17 employees did not have Internal Revenue Service Forms W-4 on file and four other Forms W-4 were incomplete; found similar problems with the Forms I-9 that verify employees are eligible to work in the United States; found no evidence to show the council approved reserves; and found it was unclear if the council officially designated the financial institutions used by the town.

The auditors recommended council members review bank statements; have another person verify deposits and take them to the bank; require documentation for expenditures; and have all IRS forms correctly completed.

 

Potential Conflict of Interest

The auditors found a potential conflict of interest -- a possible violation of state law -- with projects at the Town Hall and the Town Museum because the mayor's company did the work and there was no documentation on the process to select his business.

"Discussion with the Mayor and Clerk/Treasurer determined they were unsuccessful in obtaining bids from other companies. However, it was noted the Mayor did not involve himself in the discussion or vote on approving his company to perform the work but there is no mention in the minutes if he recused himself during the discussion."

The auditors wrote, "Internal Controls often refer to the control environment as 'the tone from the top', and is a critical part of proper governance," and recommended the council tell the public why a town's employee was chosen, why it was not a conflict, and why it was best for the town.

 

Annual Report

Midwest did not have the controls in place to accurately report its financial information on its annual report as required by law, according to the audit. Revenues were over-reported, expenditures were over-reported, cash reserve was over-reported, retired debt was under-reported, and outstanding debt was over-reported.

Midwest's inability to report the financial information appeared to a result of a lack of understanding how to fill out the report, so the auditors recommended town officials should work with its clerk/treasurer to learn how to fill out the report, and they should review the reports.

 

Utilities

Midwest apparently violated state law by not having its utilities be self-supporting, and it over-reported the revenue of the utilities by $185,195 -- money that belongs to the Salt Creek Joint Powers Board.

The auditors found inconsistencies in the accounting for utilities and problems such as the town not having a written policy dealing with past due accounts and shutting off water. "There should be a policy in place to avoid any perception of favoritism."

The auditors recommended town should conduct rate analyses to determine what rates need to be charged so their utilities are self supporting; evaluate its relationship with the Salt Creek Joint Powers Board; maintain a water depreciation fund; and develop policies about payment plans.