Ozark's growing pains revealed in audit

Ozark is a city going through a classic case of growing pains, according to State Auditor Susan Montee.

Montee released the results of a yearlong city audit, launched by citizen petition, at a May 19 presentation in Ozark.

While there are several issues that need to be addressed, Montee said that none of the problems in the report rose to the level of fraud or other criminal activity.

"What we found was a lot of risk areas," she said in her presentation. "Usually if we find real problems, we'll find fraud, and we didn't find that here."

Proper paperwork

Most of the risk factors are related to documentation, including a lack of formal bidding for some services worth more than $5,000, as stated in the city charter, and lack of proper appraisals for certain land purchases.

One example: the $1.5 million paid by the city's Parks and Recreation Board for 58 acres of land to house the Ozark's $11 million sports and community center, completed in 2008. Montee's report said the city failed to have the land appraised before making the purchase.

The report says an appointed committee recommended the purchase, but no minutes were kept during committee meetings to see how they determined the purchase price.

"Good business practice requires major real estate purchases be formally and independently appraised to ensure a reasonable price is paid," the report states.

The report also found some lax practices in relation to credit card usage and cash collection. One issue in particular was inadequate procedures to record some payments received and the method of payment - one of the specific issues that led to the theft of more than $1.2 million from Springfield's municipal court between 2000 and 2005.

The redevelopment project

Some of Ozark's issues were tied to the Finley River Neighborhood Development District, the city's first major redevelopment project.

The audit was critical of the city's method of requesting development proposals. After contracting in 2005 with Springfield-based Hagerman New Urbanism to create a redevelopment plan, which Hagerman completed, the city then requested proposals from developers to implement the plan.

While 70 firms requested information, only one submitted a proposal: Finley River Development LLC, owned by the same principals as Hagerman New Urbanism. The city then executed an agreement with Finley River Development, even though its proposal did not meet some of the minimum requirements in the RFP - including having a letter from a financial institution ensuring that financing was available.

"The very thing that setting up those minimum requirements was supposed to protect against ended up happening," Montee said. "They were unable to get financing, and the agreement was ultimately terminated, and litigation resulted."

The city has since repurchased the land Hagerman owned and settled the suit, costing taxpayers $855,000.

Additionally, Montee said the Land Clearance for Redevelopment Authority, created to oversee the declaration of blight in the Finley River district, has not filed a required annual report since September 2005.

She also said the project has been marred by delays and lack of sufficient funding, which could create financial hardships on the city.

Resolution

Despite the problems, Montee said she was impressed with the way the city has responded to the items in the report, adding that many of them already were being addressed before the audit began.

"When we come in and find things that we think should be done a different way, we work with the city as we go along, and ... you'll find the city has already made some of the changes," Montee said. "It shows that our recommendations are being taken seriously."

The audit process cost about $60,000 to complete, Montee said, but because the state had given a cost estimate of $20,000 to $30,000 before beginning the audit, the city will only be charged $30,000.

Ozark City Administrator Steve Childers said the audit was a worthwhile process. The city already is working on a comprehensive employee manual and has adopted an internal control policy to handle some of the issues presented, he said.

"It's a risk analysis," Childers said of the audit. "For the most part, we can tighten up the ship and implement policies and procedures where they weren't before. We're implementing an employee manual, and we've adopted an internal control policy."