A recently released report from the Office of Auditor of State highlights several areas where it is suggested the City of Colesburg seek advice from its attorney, including a handful of potential conflicts of interest involving a city official.
Done at the request of petitioners, the state auditor’s office performed a review of the City of Colesburg for the period July 1, 2017 to June 30, 2018.
The report identified several transactions between the city and city officials where review by legal counsel is needed.
Councilmember Tom Forkenbrock’s name came up several times, including involvement in a transaction for $5,863 in fuel and vehicle repairs conducted at Every Auto & Tire Center, which is owned by Forkenbrock and his wife.
Although the city attorney said the reason the City buys its gas and tires from Every Auto & Tire is due to the limited number of businesses offering these services within the city, no opinion as to the actual legality of the transactions was provided, the report states.
The report notes these transactions may represent a conflict of interest since they totaled more than $2,500 without being competitively bid.
The report also noted a $19,796 purchase of a Ford F350 from Welterlen Motors, which is owned by Forkenbrock. The purchase was approved Nov. 12, 2018, after the exam reporting period, documents state. The $19,796 figure represents a portion of the total purchase price of $36,906, due to a $17,110 contribution to be paid by the Colesburg Firefighters Association, documents state.
Although the City has indicated the Colesburg Firefighters Association sought comparable estimates for the purchase of the truck, the estimates themselves were not provided through the competitive bidding process in accordance with state code. Therefore, the report states, this also may represent a conflict of interest.
Finally, an $85,000 real estate sale to Forkenbrock’s wife was also included in the auditor’s report. The report again states this transaction may represent a conflict of interest because it was also not competitively bid and the amount exceeded $2,500.
The report notes all three of these potential conflict of interest transactions are related to Chapter 362.5 of the Code of Iowa.
“In accordance with Chapter 362.5(2) of the Code of Iowa, a contract entered into in violation of Chapter 362.5 is void,” the report states. “The City should consult legal counsel to determine the disposition of the transactions noted above. Future transactions with City officials or employees should be entered into in accordance with Chapter 362.5 of the Code of Iowa.”
The report went further into detail in regards to the building sale.
According to the report, the property, formally a medical clinic, was purchased from the Delaware County Memorial Hospital for $1 on May 3, 2013.
On Aug. 8, 2016, the City received an offer to purchase the property for $85,000 from Becky Forkenbrock, the wife of councilmember Tom Forkenbrock.
On advice of legal counsel, the city council passed a resolution to sell this property to Becky Forkenbrock for the aforementioned amount Oct. 10, 2016.
The resolution included language that allowed the City of Colesburg to keep its city office in that building rent-free for three years.
Following a public hearing Oct. 27, 2016, the property was eventually sold to Becky Forkenbrock June 16, 2017, for $85,000.
The audit report states that based on available information, they could not determine whether or not this was a fair exchange or represented an “arm’s length transaction.”
Based on discussions with city officials, the sales price was considered fair by those officials when based on prices of other commercial building sales in the area.
“However, no documentation was provided of comparable real estate transactions, and, as stated by the city clerk, comparables were limited,” the report states.
Additionally, the report states the sale of the building was not publicly advertised to comply with Chapter 362.5. The report suggests the city consult legal counsel to determine the disposition of the matter.
The review also found several inconsistencies regarding bank balance amounts. In one particular month the auditor reviewed, the total balance per the city clerk’s report was $761,162, which was $34,769 less than the calculated book balance of $794,527. Additionally, documents note the calculated book balance was $1,404 less than the bank balance of $794,527.
In June 2018, the calculated book balance of $795,931 exceeded the city’s general ledger balance of $780,372 by $15,559. The audit report states they were unable to determine the reasons for these variances.
In another area where the audit report suggests remediation, it states utility billings, collections and delinquent accounts were not reconciled throughout the year.
The report notes that water and sewer rates that were being charged did not agree with the rates approved in the City’s ordinances.
“The sewer and water rate charged of $5.02 per 1,000 gallons were higher than the approved rate of $4.65 per 1,000 gallons,” the report states.
The audit report suggests the City should establish procedures to ensure utility rates being charged agree with rates approved by the council, and that an independent person should periodically check to ensuring rates entered into the system are correct.
The audit report also suggested the city consult legal counsel in regards to several issues surrounding the sewer revenue bonds.
A complete copy of the report can be viewed at https://www.auditor.iowa.gov/reports/audit-reports/.