Several small Arkansas municipalities could lose thousands of dollars in state aid if they fail to submit required water and sewer audits by this summer, State Auditor Lea Kurtz confirmed Thursday.
The warning came during the Legislative Joint Auditing Committee meeting at the state Capitol, where officials detailed the consequences facing cities that have not completed the mandatory financial reviews. The deadline applies to audits covering water and sewer systems, which are prerequisites for receiving certain state funding programs.
Cale Thompson, mayor of Lead Hill in Boone County, attended the meeting to discuss the issue with committee members. His small city is among those working to complete its audit documentation before the summer deadline.
“This is a real concern for towns our size,” Thompson said. “We don’t have the same resources as Fayetteville or Rogers. When you’re a city of a few hundred people, finding the time and money to pull together a proper audit can be a challenge.”
The state requires municipalities receiving certain types of aid to submit annual audits of their utility systems. These audits ensure that funds are being managed properly and that water and sewer services are operating within legal guidelines. Failure to comply can result in the withholding of future state allocations.
For small cities, the stakes are significant. State aid often makes up a substantial portion of budget revenue for towns with limited commercial tax bases. Losing that funding could mean delayed infrastructure repairs, reduced services, or difficulty meeting operational costs.
State officials said they have been working with municipalities to help them complete the required audits, but the deadline remains firm. Kurtz encouraged city leaders to reach out to her office if they need assistance gathering documentation or understanding the requirements.
“We’re not trying to punish these cities,” Kurtz said. “We want to make sure public resources are being used appropriately. But the law is the law, and we have to enforce the audit requirements.”
The issue affects communities across Arkansas, not just in Northwest Arkansas. However, the region’s mix of rapidly growing cities and small rural towns creates a particular challenge. Larger municipalities like Bentonville and Rogers have full-time finance departments capable of managing complex audits, while smaller cities often rely on part-time clerks or mayors handling multiple responsibilities.
Thompson said Lead Hill has been working to get its documentation in order but faces constraints common to small towns. The city of around 280 people does not have a dedicated financial officer, meaning the mayor and council members often handle paperwork alongside their other duties.
“Look, in a city our size, everybody wears multiple hats,” Thompson said. “We’re trying to keep the lights on, maintain the water system, fix roads when they need it. Completing a full audit takes time we don’t always have.”
The Legislative Joint Auditing Committee did not specify exactly how many cities are at risk of losing funding. However, the list includes municipalities in multiple counties, some of which have not submitted required documentation for more than one year.
Committee members discussed potential solutions during Thursday’s meeting, including extended deadlines for cities demonstrating good-faith efforts to comply. No final decisions were made, and officials emphasized that cities should not assume they will receive an extension.
For now, the advice from state auditors is straightforward: complete the audits as quickly as possible. Cities that miss the summer deadline could see their state aid suspended until they come into compliance, a process that could take months and create additional financial hardship.
Thompson said he plans to work with the state auditor’s office to ensure Lead Hill meets its obligations. He urged other small-city mayors to do the same.
“Don’t wait until the last minute,” he said. “The people at the state auditor’s office have been helpful when we’ve reached out. It’s much better to ask for help now than to deal with losing funding later.”
Source: NWA Democrat Gazette
