Council, accounting firm to meet this afternoon

The Neosho City Council will meet at 4 p.m. today in a special session to discuss hiring a Joplin accounting firm to review city financial records.

Neosho Mayor Jeff Werneke and Acting City Manager Dave McCracken have been in contact with BKD, formerly Baird, Kurtz & Dodson, about getting assistance with the city’s financial records.

Werneke told the Daily News Friday morning the council would review, and likely approve an agreement with the accounting firm during this afternoon’s meeting. He said the body may also set a cap on the cost of accounting services BKD provides.

“I’m thinking around the $10,000 mark,” Werneke said. “But the council make think we need more or less. That’s my starting point.”

The accounting firm will be looking at bank account records from Oct. 1 to Jan 31, as an audit was conducted by Davis, Lynn & Moots, a Springfield-based accounting firm which provides annual audits of the city.

“On one side, we’re fortunate that all of the work has been done up to that point, and it may not be that far out,” Werneke said. [BKD] will provide the council up-to-date information. It’s not a takeover of the department.”

Werneke said with the dismissal of Robert Blackwood, city finance director, on Jan. 26, there is only one person, Daphne Pevahouse, working in the city finance department at this time. Pevahouse, the former city accounting manager, was named acting finance director after Blackwood was fired by McCracken.

“She wasn’t the lead person,” the mayor said. “And trying to pickup in the middle of all of the scrutiny, she needed some help. It’s not like we’re shoving everybody out. BKD will be somebody with municipal accounting experience.”

Werneke said before he and McCracken began discussions with BKD, he heard from five “completely different” sources in banking and finance who recommended the firm. As BKD provides professional services, the contract does not have to be let out for bids, the mayor said.

According to a Feb. 1 letter from BKD to McCracken, the firm outlined their services and responsibilities under the agreement. These include:

•  Reconciling bank accounts from Oct. 1 to Jan. 31;
•  Analyzing certain general ledger accounts related to the bank accounts;
•  Preparing adjusting journal entries based upon the above analysis which require management approval.

“This engagement is not intended to be an audit, review or compilation of financial statements in accordance with standards issued by the American Institute of Certified Public Accountants,” the letter stated. “Accordingly, our firm name should not be associated with your internal financial statements.

“This engagement is not designed to prevent or discover errors, misrepresentations, fraud or illegal acts, and you agree we have no such responsibility. Because of the limits in any internal control structure, errors, fraud, illegal acts or instances of noncompliance may occur and not be detected. Also, in the future, procedures could become adequate because of changes in conditions or deteriorations in design or operation. Two or more people may also circumvent controls or management may override the system.

“We have not been engaged to provide an opinion with respect to the effectiveness of your internal controls or the degree of compliance with your policies and procedures or applicable laws and / or regulations.”

The company will use information furnished by McCracken, city employees and city representatives, as well as info from generally recognized public sources.

“We are not responsible for the accuracy and completeness of the information and are not responsible to investigate or verify it,” the agreement letter states.

Part of their services will include a review of the city financial plan prepared by Jan Blase, who was suspended as city manager in a unanimous council vote on Jan. 25.

“I wouldn’t say they will take that and go through it page by page or say it’s correct,” Werneke said.

Werneke said BKD would review the plan and determine if the city is in better, or worse, financial shape than when the plan was released on Jan. 15.

“It will be updated as well as verified,” he said.

Blase and Blackwood have been charged with official misconduct as a result of a fund transfer from the city’s “bed tax,” the hotel / motel tax designed to promote tourism, into the general fund to make city payroll and to pay other city bills. A total of $204,666 was transferred from the “bed tax” fund to general revenue. This transfer prompted Mayor Pro Tem Richard Davidson to file a complaint, which launched an investigation by the Newton County Sheriff’s Department. The two were charged Wednesday, with arraignments originally set for Feb. 22. However, on Thursday, the arraignments were postponed until March 1.

Blase has asked for what amounts to an appeals hearing, but a date has not been set. Under the city charter, the council has 25 days from the time Blase was notified of the decision to remove him from office to conduct the hearing. Going by the calendar, an appeals hearing must be held on or before Feb. 21.