Ordinances that settle long-term debts owed between Crestwood’s funds were approved last week by the Board of Aldermen.

Aldermen voted unanimously Aug. 24 to approve three ordinances that authorize an $814,185 non-cash transfer from the general fund to the park and stormwater fund; a $136,962 non-cash transfer from the general fund to the capital improvement fund and a cash transfer of $42,229 from the general fund to the capital improvement fund.

Their action addresses Crestwood’s internal balances — moneys owed to and from its three major funds — that accumulated in the city’s books for several years.

Finance Officer Douglas Brewer said that the long-term interfund balances date back to before 2006 when, according to the city’s previous independent auditing firm, while the funds were accounted for accurately, finance personnel didn’t “consistently” keep track of when moneys owed between funds were paid back.

In a November 2006 memo, auditors Schmersahl, Treloar & Co. cite as an example two internal balance analyses, one dated June 30, 2003 and the other dated June 30, 2004. While the first set of internal balances showed the city’s general fund significantly owed the capital improvement and park and stormwater funds, the second indicated that, a year later, several hundred thousand dollars had in fact been paid to those funds, the auditors wrote.

The firm recognized that “there had been fluctuations and that it would have been difficult to analyze each transaction or to re-search past years’ activities,” Brewer said.

“The auditors concluded that balances appeared to be fairly stated at Dec. 31, 2005,” he said. “They further explained that the manner in which previous Finance Office personnel paid back owed (moneys) was inconsistent.”

Brewer began reconciling the internal balances, also known as “due to/due from” accounts, on a weekly basis in conjunction with the 2008 city audit. Reconciliations were not previously performed, he said.

The ordinances approved by the board last week:

• Eliminate the $814,185 due to the general fund from the park and stormwater fund through a non-cash transfer that reduces the general fund’s assets and reduces the park and stormwater fund’s liabilities.

The park and stormwater fund will still be responsible for repaying the $600,000 transferred from the capital improvement fund to help make this year’s payment on the Crestwood Aquatic Center certificates of participation, as well as an expected transfer from the general fund next year to make the 2011 COP payment.

• Net the $179,191 due the capital improvement fund from the general fund with the $136,962 due the general fund from the capital improvement fund as part of a payment plan dating back to 2004.

The board in April 2004 approved an ordinance establishing a plan for the capital improvement fund to reimburse the general fund $901,323 over 10 years for certain administrative costs associated with the management and operation of the street reconstruction and maintenance program.

Officials determined $764,361 had been transferred to the general fund from the capital improvement fund since the ordinance was approved. They recommended the board subtract the remaining $136,962 from the $179,191 due the capital improvement fund and make a cash transfer of the resulting $42,229 to the capital improvement fund, thereby erasing that internal balance.

“While this is very confusing and it’s taken me a long time to wrap my arms around it, there’s nothing unusual we’re doing here and there’s certainly nothing below board,” City Administrator Jim Eckrich told aldermen at the Aug. 10 board meeting. “We’re trying to do this out in the open, trying to make the city’s books, in the long term, make a little more sense.”

Ward 3 Alderman Jerry Miguel told the board the issues with internal balances go back nearly a decade, when the city was grappling with financial and legal problems.

As the board’s most veteran alderman, Miguel provided city officials with additional information about previous administrations’ actions in an effort to resolve the internal balances issue.

A forensic audit of Crestwood’s fiscal 2001 and fiscal 2002 books was initiated in mid-2003 after city officials began an internal investigation into the accounting practices used by former City Administrator Kent Leichliter and former Finance Director Robert Wuebbels.

Auditors Brown Smith Wallace alleged “there have been a staggering amount of disbursements, improper journal entries and misrepresentations to the Board (of Aldermen) of the city’s financial position, authorized by Leichliter and performed by both Leichliter and Wuebbels, representing mismanagement of city funds and financial reporting errors,” according to the forensic audit report.

The city filed a lawsuit in November 2003 in St. Louis County Circuit Court alleging that Leichliter and Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city’s true financial condition to then-Mayor Jim Robertson and the Board of Aldermen.

Based on the forensic audit, the lawsuit alleged that Wuebbels, with Leichliter’s knowledge, “engaged in a complex scheme to manipulate the financial accounts of the city of Crestwood so that the city budget would appear to be in balance and that the city was operating in a positive cash-flow situation, when, in fact, the city was operating in a serious negative cash-flow situation.”

In January 2003, Leichliter filed a counterclaim against Crestwood contending the city breached an agreement to pay him salary and benefits through March 2004. He served as city administrator for nearly 25 years before retiring in December 2002.

The suit was settled in 2006 after the city agreed to pay the former city administrator and his attorney a combined $250,000.

Following the forensic audit, aldermen in October 2003 selected Brown Smith Wallace as the city’s independent auditors, and the firm restated the city’s fiscal 2001 and 2002 financial statements.

City voters in April 2005 rejected Proposition 1, a bond issue of up to $6 million which would have, among other things, reconciled debts the general fund owed other city funds.

“There was just a lot of stuff that happened back in the early 2000s,” Miguel said at the Aug. 10 meeting, adding the internal-balances legislation was “a matter of clearing the books from everything that happened in the past.

“And from this point forward then things are clearly accountable and the board can be held responsible for its actions here now in the past two years.”