KANSAS CITY, Mo. — Missouri State Auditor Nicole Galloway’s office gave Jackson County a poor rating for its budgeting practices, according to a new report released Monday.
"Jackson County taxpayers deserve to see exactly where every one of their dollars are going, but budgeting practices and the way money was transferred between funds made that difficult," Galloway said in a statement. "The county needs better processes so that citizens can be confident all spending is appropriate and transparent."
The county “frequently” underestimated how much tax revenue would be collected and how much money would be in county-controlled funds, while overestimating expenses, which often resulted in massive over funding and a lack of transparency with how public money was allocated and spent, according to the report.
The state audit, which was requested by the Jackson County Legislature, found that the county’s general fund was projected to have a zero-dollar balance in 2018 but instead wound up with a $50 million at the end of the fiscal year.
Overall, the Jackson County budget projected to end 2017 with less than $8.5 million in its 32 funds, but actually finished with more than $114.3 million.
After projected to finish 2018 with less than $5.5 million in 31 county funds, Jackson County actually had more than $136.5 million in underestimated balances.
“As a result of poor budgeting, the county's financial position was significantly misstated,” according to the audit report.
Furthermore, instead of following state law, which requires a public hearing to deal with such undesignated fund balances, Jackson County simply transferred millions of dollars improperly from the fund balances, the audit stated.
More than $3 million was transferred without a public hearing in violation of state law in 2017 and 2018.
The audit also revealed more than $10 million in administrative transfers from Jackson County Executive Frank White Jr.’s office.
Such transfers are permitted, if the amount is less than $10,000, but the state auditor’s report found that from 2016 to 2018 “the majority ... were completed without proper approval or did not have sufficient documentation or explanation.”
The report also uncovered $3 million in “multiple-object-code administrative transfers,” which are designed to skirt the $10,000 cap on such spending.
The audit found instances when multiple transfers were used for a single purchase. Each transfer was below $10,000, but the aggregate exceeded the $10,000 threshold and likely should have been subject to legislative approval.
Jackson County consolidated departments in 2019, eliminating the need for such transfers, but auditors still “recommended county officials review and update the county code to ensure the necessity of administrative transfers,” according to Galloway’s office.
The Missouri State Auditor’s report recommends that Jackson County must do a better job estimating disbursements and year-end balances and take steps to avoid deficit budgeting for some funds.
The report also recommends that Jackson County stop paying departmental expenses — including insurance costs, sick leave, car allowances, phone bills, software maintenance, infrastructure and professional services (e.g. auditing, legal, lobbying, payroll, etc.) — from non-departmental appropriations.
The Budget and Transfers report also recommends the county end the illegal practice of transferring undesignated funds without amending the budget and having a public hearing as well as taking steps to tighten up administrative transfers.
The Jackson County Legislature expressed appreciation for the report and committed to implementing the recommendations in a letter dated Nov. 2, 2020:
“The County Legislature supports the report’s recommendations and is committed to continue taking actions to strengthen oversight efforts of county operations and internal controls through policymaking measures to establish best practice standards that fall within the County Legislature’s powers and duties of the existing Jackson County Charter.”
White also pledged to work with the legislature to ensure the “best practices” were adopted and followed in a letter to the state auditor’s office.
The Budget and Transfers report is the latest in a series of reports related to Jackson County, which also received a poor rating for its No-Bid Contract and Other Expenditure controls in September.
Galloway's office cited lax oversight of allocations and spending from the COMBAT Fund in April 2020.
