Crestwood aldermen and city staff focused on the city’s finances, particularly the general fund, during a roughly three-hour work session Saturday morning.

Aldermen also briefly discussed the just-completed fiscal 2003 audit prepared by Brown Smith Wallace. Larry Pevnick of Brown Smith Wallace was scheduled to present the audit to the Board of Aldermen Tuesday night — after the Call went to press.

During the work session, aldermen reviewed and discussed the fund balances contained in the audit, learning that the city ended fiscal 2003 with an overall fund balance of $380,668 — excluding revenues from bond-like certificates of participation issued to fund the aquatic center and a new police station. Aldermen also discussed some “concepts” to help restore the general fund to financial health, but took no action.

Another work session will be conducted at 9 a.m. Saturday, March 27, at City Hall, 1 Detjen Drive.

While the general fund and the vehicle replacement fund showed negative balances as of June 30, 2003, the capital improvement fund, the parks and stormwater fund and the sewer lateral fund showed positive balances.

The audited figures presented to the board Saturday showed the city had fiscal 2003 expenditures of $9,353,115 with revenues totaling $8,454,967 — a shortfall of $898,148. Because the city began fiscal 2003 with a negative balance of $973,497, the general balance at the end of the fiscal year on June 30 was $1,871,645.

The Board of Aldermen voted in October to approve an ordinance selecting Brown Smith Wallace as the city’s independent auditing firm. Besides performing an audit for fiscal 2003, the scope of work to be performed by the firm included restating the city’s financial statements for fiscal 2001 and fiscal 2002.

Brown Smith Wallace is the same firm that performed a forensic audit of the city’s books for fiscal 2001 and fiscal 2002.

The forensic audit alleges that two former Crestwood officials violated the City Charter, numerous ordinances and their duties as fiduciary officers in their handling of the city’s finances.

In November, the city filed a lawsuit in St. Louis County Circuit Court alleging that former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city’s true financial condition to former Mayor Jim Robertson and the Board of Aldermen.

On Jan. 27, aldermen accepted the restated financial statements for fiscal 2001 and fiscal 2002. The restated financial statements for fiscal 2001 resulted in a general fund deficit of $204,072 instead of the previously reported positive fund balance of $45,928, while the restated financial statements for fiscal 2002 resulted in a general fund deficit of $973,497 instead of the previously reported positive fund balance of $132,334.

Aldermen discussed the general fund deficit of $1.871 million at length during the work session and learned from City Administrator Don Greer and Director of Finance Diana Madrid that $1 million of that deficit resulted from the board’s establishment of an internal service fund that was to contain $1 million.

However, as Brown Smith Wallace reported in the forensic audit, “The money earmarked for the internal service fund was never set aside other than in effect set up as a memorandum entry.”

In response to a question by Ward 3 Alderman “Bernie” Alexander, Madrid said, “The $1 million internal service fund is carried as an asset on the city’s financial statements. If the board chose to keep $1 million as that asset, the general fund would owe the internal service fund $1 million. If the board chooses to wipe off or eliminate that $1 million, then the general fund fund balance at June 30, 2003, would be a negative $871,000.”

In a memo he distributed to the board, Greer suggested several concepts for aldermen to consider solely for discussion purposes, including capturing prior years’ general fund overhead from the capital improvements fund and reviewing the current fee for merchant licenses.

“… The items that I have in my memo will address some concepts and ideas on things that I think we could use or should use …,” Greer said, noting, “The general fund is in trouble. The general fund has a very strong deficit position right now.”

Regarding the “concept” to capture general fund overhead costs from the capital improvements fund using the same formula as contained in the fiscal 2004 budget, Greer said, “I throw this out as a concept. I’m not recommending that you turn around Tuesday and say: ‘OK, there’s $2.2 million.’

“Nor am I suggesting in any way, shape or form that it (the capital improvements fund) owes $2.2 million. What I’m suggesting is there is justification for capturing overhead costs because of the capital improvements fund. If it were not for the capital improvements fund, we would not have had those costs. They were never captured previously and I think for a lot of reasons …,” Greer said.

Noting he was not being “critical,” he said, “When I read through the minutes and many of you were on the board at the time, you made a decision to be enormously aggressive about the street replacement program. Well, that’s why the tax was passed. That’s what the voters voted for and that’s what we want to do. And that’s what was done. It was done too aggressively — that’s my opinion — and we didn’t capture any of the costs associated with the increased costs to the general fund to support that program …”

Aldermen were divided over Greer’s concept. Ward 1 Alderman Richard LaBore and Ward 3 Alderman Don Maddox expressed concern that using current revenue to recapture past expenditures would reduce funding for the city’s street program. Ward 2 Alderman Tim Trueblood and Ward 4 Alderman Tom Fagan indicated they wanted to further explore Greer’s concept.

LaBore said, “Trying to capture funds from today’s capital improvements fund for yesterday’s expenditures, that’s going to be perceived as a movement of street program money to solve a fiscal problem and that’s not a message I want to be part of …”

But Greer later noted that staff has been reviewing ways to reduce expenditures and has determined that very little remains to be cut without reducing services provided to residents.

Noting that the capital improvement fund ended fiscal 2003 with a balance of more than $561,000, Fagan suggested that the city administrator’s concept was worth exploring and perhaps would not impact the street program.

“… I don’t see how we can get the general fund in the black without making some of these transfers or cutting services …,” Fagan said.