By MIKE ANTHONY

Executive Editor

Crestwood officials view the results of a state petition audit as an affirmation of the improvements and changes that have been made over the past two years to resolve the city’s financial problems.

The results of the state audit, which primarily covered the fiscal year ending June 30, 2003, were presented last week by Tom Kremer of the State Auditor’s Office. The state audit was the sixth audit of the city conducted since 2003, including a forensic audit of Crestwood’s finances.

“The city of Crestwood is in poor financial condition,” according to the state audit, which cited some of the findings of the forensic audit commissioned by the Board of Aldermen in 2003 and performed by Brown Smith Wallace.

“Due to questions raised by the new city administrator in 2003, the accounting firm of Brown, Smith, and Wallace LLC was engaged to perform a forensic audit of the city of Crestwood for the years ended June 30, 2002, and 2001 at a cost of $42,370,” the audit states. “This forensic audit concluded that transactions authorized by the former city administrator and former finance officer represented mismanagement of city funds and presented misleading financial information to the board. As a result of the audit findings, the city restated its financial statements for 2002 and 2001.”

Among other findings of the state audit and the city’s responses:

• Numerous technology items were purchased without proper bidding. Technol-ogy items totaling approximately $37,500, and $115,572 were purchased during the years ended June 30, 2003, and June 30, 2002, without proper bidding or approval by the board. The city had not established written policies documenting the required approval for purchases.

Recommendations by the state auditor included ensuring all purchases are bid in compliance with city policy, and establishing formal approval requirements for all city purchases and develop procedures to ensure the required approval has been properly documented for all expenditures.

In its response, the city stated, “The mayor, Board of Aldermen and city staff concur with the observations contained in the aforementioned findings. While we are pleased that the state auditor confirmed what the current administration discovered and corrected beginning in December 2002, we find it extremely disconcerting that the auditor has not clearly delineated their observations with regard to timeframes. The manner in which the auditor has chosen to present their findings creates confusion rather than clarity.”

The city’s response also notes that City Administrator Don Greer began drafting a purchasing policy in December 2002 — shortly after he was named city administrator — and details the steps leading to the board’s adoption of the purchasing policy in May 2004.

The city’s response also states, “The city understands the auditor’s unwillingness to accept this policy prior to adoption by the Board of Aldermen; however, the examined record made available to the auditor and discussed on numerous occasions reveals a distinct change in administrative policy that the auditor has chosen to ig-nore.”

• The city did not monitor the profit or loss of the aquatic center, the audit states. The Finance Department did not adequately monitor receipts of the Parks and Rec-reation Department. Passes to the aquatic center and community center are not prenumbered, thus the Finance Department cannot compare the number of passes sold to the receipts for the year, the audit states.

Recommendations by the state auditor included requiring reports on the profit or loss of the aquatic center to be prepared and filed with the board for its use in approving pool rates, and ensuring procedures are established by the Finance De-partment to adequately monitor revenues received from the Parks and Recreation Department.

In its response, the city states, “The current administration has completely revised the manner in which all Parks and Rec-reation revenues and expenditures are monitored and recorded. This administration found the inappropriate ‘netting’ of revenues against expenditures and the lack of expenditure control with regard to these systems. As the state auditor has seen, these issues, together with appropriate monitoring of the aquatic center profit or loss, has been revised and implemented.

“The city recognizes the recommendation of the state auditor with regard to pre-numbering aquatic center and community center passes and will implement this recommendation in 2005.”

During an interview with the Call last week, Greer, Mayor Tom Fagan and Direc-tor of Finance Diana Madrid discussed the results of the state audit.

Asked what he considered the most significant finding of the audit, Fagan said, “I think sometimes the most significant finding is what wasn’t found, to me. The state auditor stated that the city is in poor financial condition … I am a positive person. You know they talk about is the glass half empty or half full? I always like to say the glass is half full. You have to be positive, but you also have to be realistic and we have had financial problems and difficulties. There’s no doubt about it. What’s exciting to me about the state audit is that it affirms, I think, what this administration has done in terms of making changes as to how the city conducts its business. And the residents should have a great deal of gratitude to Don Greer and Diana Madrid and our staff for the hard work, for the changes that were made prior to the state auditor coming in and suggesting changes be made.”

Greer said, “I guess my reaction to a certain extent would be the same thing. I think the most significant finding is the report itself. The report itself confirms what, you know, when you and I sat down a year and a half ago almost and you asked about the state audit, I said I welcome the state audit. I’ve never had a problem with an auditor coming in … We’ve been through six audits in 18 months. Find any city that’s gone through that. Find any staff that’s survived that because I’ve contended all along that what is going to be discovered that the city of Crestwood, the staff and the board, and we’ve had a courageous board for the last couple of years, have taken this situation very seriously and they’ve worked very hard. How many work sessions have we had in the last two years? How many work sessions did the board have two years prior to that?

“That’s where I think you’ve got to start asking yourself some questions. How public is this city today? How public was this city two years ago? If you can make an objective comparison in what you see today and what you saw at a time prior to where we were, then you recognize and realize this administration welcomes the state audit,” the city administrator continued. “That’s fine. What did they say? … I thought they did a very fair and thorough presentation. I don’t agree with several of their points. This board, the mayor and the Board of Aldermen are elected by the public to represent them and make decisions for them. Some of the questions that were asked last night are very clearly designed to continue some kind of disdain, I guess, for the way things are going.

“But look at the facts. That’s all I say. Look at the facts. Look at the numbers. We’re in better financial shape today than when we took over. We’re making progress. This didn’t occur overnight. It’s not going to be fixed overnight, but we have good leadership, we have a board who is committed, most of them, to moving forward,” Greer said, praising the work of his staff.

“I have the best staff that I’ve ever had the pleasure to work with,” he said, adding, “We have the right combination of things going on. We have an informed, attentive Board of Aldermen. We’ve got a mayor who is out front in support of what’s going on and works hard to make that known, that what we’re doing is the right thing. We have a staff that’s dedicated to running the city efficiently and effectively and being responsive to the community.”

Noting the progress that has been made, Greer said, “… We even have the state auditor acknowledging the fact that we made changes. That’s nice. That’s an affirmation that somebody else sees the work we’ve done … How do you prevent our history from re-occurring? I think we’ve es-tablished that we have a more informed board. You provide information. You make that information available publicly so people can ask and debate and question. That’s what makes local government work so well because it is so accessible.”

Madrid noted, “The internal controls are in place. There’s proper segregation of duties.”

Greer said, “We’ll never be done, but …”

Madrid said, “The improvements won’t be as vast as we’ve been through in the last two years.”

Of the state audit results, Greer later said, “Overall, this is an affirmation, one more affirmation of how hard the city’s been working over the last couple of years.”

Fagan interjected, “And that things are being done properly now.”

Greer said, “That’s right.”

Fagan said, “I was thrilled with the state auditor’s comments and his responses to the questions. It was readily apparent to me that some people who posed questions (to Kremer) had an agenda and were attempting to use the state auditor to further their agenda and unfortunately for them, the state auditor’s responses will not allow them to further their agenda … The other thing I was extremely happy to hear is that he said there may be some differences of opinion and just because the state auditor has an opinion concerning a particular issue, doesn’t necessarily mean they’re right.”

During his presentation March 10, Kremer said that the concerns of the petitioners representatives of his office met with will remain confidential.

That’s unfortunate, Fagan said, as he be-lieves those who collected the bulk of the signatures had a political agenda.

“… I think the people who petitioned for the audit and were the ones expressing those concerns ought to explain what their concerns were to the citizens of Crest-wood,” he said. “It’s easy to hide behind the veil, but for the city to go through this for it to be a benefit to everyone, I think the people who petitioned this ought to explain what their concerns were and not pick and choose, but to explain what all of them were.

“I used the words sword and shield a couple of (Board of Aldermen) meetings ago, and, unfortunately, I think this was more of a sword to the city, not in the right way, but as a political agenda,” Fagan added.

The State Auditor’s Office will charge the city $23,800 for the audit. The city’s total cost for the audit will exceed $42,600, according to Madrid.