By Chris Orlet,Record Managing Editor(Editor's Note: A complete copy of the audit is available by clicking here.)The city of Warrenton received a “good” rating from the Missouri State Auditor, according to a report released Tuesday.Speaking at Warrenton City Hall Tuesday evening, State Auditor Thomas Schweich said that in the areas audited, the overall performance of the city was good meaning that the audit results indicate the city is “well managed and well run with a few problems.”Added Schweich: “I usually find a lot more problems than I found here.”The few problem areas uncovered in the audit included real estate acquisition and planning, health insurance procurement, and restricted funds.In those areas, the state found “deficiencies in internal controls, noncompliance with legal provisions, and the need for improvement in management practices and procedures.”The Warrenton Board of Aldermen disputed a few of the report’s findings, particularly in regard to the health insurance bidding process, but said that most or all recommendations have already been, or will be, implemented.The scope of the audit was limited to the year ended June 30, 2012.Real Estate Acquisition and PlanningIn the category of real estate acquisition and planning the audit noted that in 2007, the city purchased 6.91 acres of land for $791,000 ($114,450 per acre) for construction of a recreational facility, but did not obtain an appraisal prior to making the purchase.The city planned to build a recreational facility on the property, but an associated tax issue needed to finance the construction failed on two separate occasions. The city did not develop a contingency plan for the land and had no alternative means to finance this project.In a second land deal, the city’s Industrial Development Authority borrowed $908,600 to purchase 30 acres in a neighboring city for industrial development, and the city signed a 15-year “lease” agreement with the IDA.After the purchase, the IDA determined it was too costly to develop the property and the project was abandoned. The city has not utilized the property and has no documented plans for its future use, but has begun making lease payments to the IDA so the loan payments can be made.At the completion of the “lease,” the city will have paid $717,000 plus interest to the IDA, and the IDA will own the property.“The two land projects were highly problematic,” Schweich said. “The lack of an appraisal was the real issue we found. That’s obviously a lot of money per acre.”Alderman John Cornell asked if the auditors had compared that price to similar acreage.“We are not real estate people,” Schweich said. “We look to see if the city is following the laws and standard practices.”Cornell then asked why the auditor kept saying the city overpaid if the state didn’t compare the price to similar acreage.“The price is important because the more you pay for something, the more obvious it is that an appraisal is needed,” said Schweich.State auditors recommended the board of aldermen obtain independent appraisals for future real estate purchases. In addition, the board was advised to develop plans for the use of purchased property and ensure adequate planning is documented and associated costs are considered for future real estate purchases.Health InsuranceProcurementUnder the category of health insurance procurement, auditors found that in 2011. the city failed to ensure all potential health insurance bidders had sufficient historical claims information to provide complete proposals. This failure favored the existing contractor, an insurance agency owned by then Mayor Greg Costello. The arrangement had the appearance of a conflict of interest, the report said, even though Costello abstained from the process. City officials also failed to adequately document the evaluation and selection process.“By not providing the same level of information to all potential bidders the city’s process was flawed,” said Schweich. State auditors recommended the board make sure all potential vendors are given the same opportunity to provide final bids in future efforts to procure health insurance. For all significant purchases of goods and services, the board should establish a formal competitive selection process which includes the reasons for selecting the bid.The board disagreed with some of the “factual representations” with regard to the bid process for health insurance in the report and maintains the 2011 health insurance bid process was fair and impartial.Restricted FundsIn the category of restricted funds the audit noted that the city transfers funds from its park fund to the general fund, but does not separately track parks and recreation expenses within its general fund. As a result, the city cannot be sure restricted park funds are being spent for the intended purpose, as required by state law.In addition, the city used $218,000 in recreational capital improvement funds to purchase a building that is partly used for non-recreational activities.“This commingling of funds cannot continue,” said Schweich. “This kind of separate accounting is not uncommon, but it is against state law.”The audit recommends the city determine if any park revenue funds remain in the general fund, and establish a separate accounting of these funds as required by state law.The audit also recommends the city determine the portion of grounds and maintenance spending used for recreation purposes and consider reimbursing the recreational capital improvement fund for any non-recreation portion of the Butler building purchase.Also, the city has not established a separate fund or accounting procedure to ensure law enforcement training receipts are expended only for local law enforcement training.The audit recommends the city establish a separate fund for law enforcement training fees, or properly track training fees within existing funds, to ensure funds are used in compliance with state law.While the analysis suggests that parks-related expenses from the general fund more than likely exceed the transfer made from the parks fund, without restricted funds being tracked separately it is difficult to determine whether monies restricted for parks are being used for the intended purposes.Schweich said the auditors looked into several other issue brought up by the petitioners, including employee contracts, tourism funds but found only minor discrepancies.Warrenton Mayor Jerry Dyer said that getting a good rating is a big plus. “Only a couple of cities audited last year got good ratings,” he said. Dyer said the things the audit said were broken can be easily fixed.Stan Shelton, who spearheaded the audit petition, said the audit showed that the city wasted $1.5 million that it probably will never recoup. “As long as they agree to change their ways they get a good report,” he said.As for the issue of insurance bidding, Shelton said, “I’d be upset if I had owned a company that bid and the process was found flawed by the auditor.”Audit Gives City ‘Good’ Rating