Finance director flags years of misallocations, says city must tighten controls

Finance Director Monica Hofstetter told the City Council that prior budgets contained repeated misallocations and inconsistent accounting practices, hindering a clear fiscal picture for 2024 and 2025. She said the state auditor recommended fixing cost allocations and using a cost‑allocation equation rather than ad‑hoc percentages.

Hofstetter described several specific problems: payroll entries assigned to incorrect GL codes, enterprise funds being used to shore up operations, and grant reimbursements not billed on time. She said, "Every single employee had access to the vault ... They're supposed to be a custodian to the vault," and emphasized the need for stronger internal controls.

Staff outlined immediate controls: implement the purchase‑order module (two days of staff training scheduled), reconcile prior year balances so 2024 can be closed, and develop finance policies that allocate investment interest to capital and contingency accounts instead of routine operations. Hofstetter proposed setting enterprise‑fund reserves (minimum 45 days operating) and automatically moving excess to capital reserves.

Councilors pressed for documentation and audit trails; Hofstetter said Springbrook had reviewed some transactions and staff would need time to compile receipts and invoices to seek grant reimbursements (for example, for recent pool repairs). The contingency fund was noted as critically low — $13,346 — prompting several councillors to demand a plan to restore the rainy‑day balance.

The council did not take formal action at the workshop but directed staff to continue reconciliations, present corrected 2024 actuals when available and draft policy language for purchase‑order use and investment interest allocation prior to final budget adoption.