NEW DISCLOSURE OF FISCAL IMPROPRIETY AT CITY HALL
The audit report for FY 2010 for the City of Prior Lake warned that the “limited segregation of duties increased the risk of fraud and error” at City Hall. In layman’s terms, this means there is a lack of checks and balances in handling of Taxpayer dollars. (See the attached article on this website under the link RISK OF FRAUD at City Hall). The auditing firm that reported on the “risk of fraud and error” was not retained by the City for the FY 2011 audit.
Not surprising, the 2011 audit by a different auditing firm uncovered similar and additional mishandling of finances at City Hall. Under the heading Segregation of Duties-Disbursements, the auditors noted that “the City Manager is approving his own P-Card purchases”. What this means is that the City Manager is carrying and using a credit card that bills charges to the city, without anyone else reviewing or approving the purchases or charges. The auditors go on to state that “A good system of internal controls would require approval of all purchases from someone other than the person that initiated the transaction”. This ought to be obvious to anyone who has ever worked in a management position, but it apparently isn’t to our city’s chief executive of 20 years.
Readers might be reminded that it’s only four years ago that the City’s Fire Chief was convicted on two counts of felony theft, and the fire department treasurer was convicted of a gross misdemeanor related to the theft. Limited segregation of duties, a term used by auditors to describe the lack of checks and balances, is what created the opportunity for that crime to occur.
But that’s not all. The auditors also reported on various failures of City Management to comply with Minnesota laws and regulations. Probably the most serious failure flagged by the auditors relates to the requirement that “each person claiming payment from the City is required to make the following written declaration: I declare under penalties of law that this account, claim, or demand is just and correct and that no part of it has been paid”. The auditors go on to state that “this declaration was not obtained for disbursements made using checks during 2011”.
Failure to obtain the required declaration greatly minimizes or eliminates the risk of prosecution of those who would defraud the City and its taxpayers. Why City Management decided to ignore this requirement is inexplicable, and of course we don’t and probably won’t know how long this has been going on.
The message is clear. City Hall needs an overhaul, and we don’t mean lip service or more written policies. It costs taxpayers approximately half million a year on salaries and benefits for a City Manager, two Assistant City Managers, and a Finance Director. That ought to be more than enough to pay for fiscal competence and some common sense. Instead it seems we have to rely on an outside auditor to explain to members of our City Council that the City Manager should not be allowed to approve his own purchases that get billed to the City.
If precedence prevails, the Council will issue another “comprehensive” policy involving fiscal management, authored by City Management, and purporting to correct the problem. Members of the Council majority will once again tell us that our City is being managed to the highest fiscal standards possible, and it will continue to be business as usual. That’s not what the tax payers deserve.