Friday, March 14, 2014/lk
The city of Sunnyside has some serious problems, including a possible case of misappropriated funds from its public works department and five findings of serious issues in its 2012 accountability audit.
“This is not normal for a city this size,” said Audit Manager Ivan Dansereau at a special meeting of the Sunnyside City Council held yesterday morning at city hall.
Dansereau and the lead auditor, Chad Crawford, summarized the preliminary draft of the audit findings and answered questions from the attending members of the council during the meeting, and also briefly discussed the potential fraud case.
The auditors explained that city staff asked to split Sunnyside’s accountability audit from its financial audit. Due to issues with the city’s financial records, the financial audit will not be complete for at least another month, but the city wanted to work on the problems brought up in the accountability audit immediately.
The issues uncovered by the audit include practices that have left the city open to instances of fraud. Unfortunately, the city discovered such an instance last fall.
According to the auditors, City Manager Don Day reported a loss of public funds to the auditor’s office on Oct. 21, 2013. The city had discovered that one of the city’s open accounts had apparently been used to purchase personal items.
The city suspects the employee in question may have misappropriated $122 in September 2013. In addition, the city also identified another $2,206 in questionable purchases.
The misappropriation was possible due to a lack of oversight of the accounts and department in question, according to the auditors.
The auditors noted that prior approval was not required for purchase on the account and that the same person who used the account also was in charge of approving those purchases. The auditors also said that no inventory of supplies was made to account for all purchases.
Dansereau explained that the auditor’s office sees these kinds of crimes when controls and oversight are missing.
“It’s not like the employees start out as criminals,” he said. “They notice that the money is not being monitored as closely. Then there’s a time when they are in need, and they can just take a little bit of money, thinking they will pay it back. They think they are just borrowing it.
“But the circumstances don’t get any better, and they take a little more the next week or the next month,” he said. “They don’t get caught. Then they have taken $50,000 and they aren’t ever going to pay it back. That’s how it starts.”
Dansereau said careful controls over accountability are important for both the sake of the city and to protect its employees.
Crawford said that due to the turnover in leadership positions in Sunnyside over the last few years, the city’s policies and procedures have fallen by the wayside. This has led to the potential for fraud in almost every department of the city.
Speaking after the meeting, Day, the city manager, said that he did not know of any other current situation where a misappropriation of funds may have occurred. However, he said the issues that the city is dealing with go back as long as a decade. The city may uncover other problems as the audits continue.
The preliminary draft of the new audit, which covers the dates from Jan. 1, 2012 through Dec. 31, 2012, includes five findings, two management letters and an exit recommendation.
Two of the findings were also on the 2011 audit. Day noted that some of the findings on the 2012 audit will also show up on the 2013 audit because the city did not begin to address them until after the hiring of Interim City Manager John Darrington and Finance Director David Layden.
The city still has issues with its financial oversight, with the auditor finding that the city’s payroll operations are open to abuse due to having a single employee handling all aspects of the system.
In addition, some timekeeping processes are easy to abuse, particularly the method by which police dispatchers account for their hours. Some employees also exceeded their paid sick leave time.
The city’s response to the finding notes that a third party vendor will soon be processing the payroll, and that the new system will add regular reviews and supervisor oversight to the system.
The auditor also discovered problems with the way the city pays its bills. In particular, the city issued too many “quick checks.” The checks are for use only when a payment is needed immediately and cannot wait for the next city council meeting for approval, but the city used them more frequently than necessary.
Another problem listed under the same finding was a lack of a policy for the use of city credit cards.
The city responded that it has reduced the use of quick checks and reduced the number and usage of credit cards. In addition, a purchase order system is being put into place that will eliminate the remaining credit cards.
The third finding addressed the city’s use of restricted funds to supplement the general fund without supporting documentation. Part of the problem was an allocation formula that hadn’t been updated since 2009.
The city responded that it has updated the formula, reduced the amount charged to restricted funds and now provides a breakdown of how restricted funds are used.
The fourth finding addressed a problem with the city’s utility bills. As with other departments, a single person without oversight was in charge of preparing and mailing bills and collecting the payments.
This finding has not been completely addressed by the city yet, due to a lack of staffing. But the city acknowledged the need for more oversight and also noted that utility billing will be contracted out in the future.
The last finding concerned money collected by the municipal swimming pool staff. The auditors determined a serious lack of oversight resulted in deposits being left in a safe for up to 93 days. In addition, the city learned from concerned customers about uncashed checks, some of which have not yet been found.
The city’s response noted that Sunnyside has hired a recreation coordinator and will make certain deposits are made daily in the future. In addition, Day said that all departments will have a process in place for handling cash that is uniform across the city.
Sunnyside also received two management letters, which are slightly less serious than findings but still require action on the part of the city. These were basically the same issues with the handling of money as noted before, with a lack of oversight and poor accounting for both the jail and the courts.
The final issue, called an exit item, was that the city was holding onto a check for two weeks during the audit without depositing it. State law requires timely deposits by the city.
Dansereau said that he is confident that the current leadership of the city is taking the right steps to handle the problems that the auditors found.
“I expect that when we return next year we will see positive results,” he said. “The city has addressed and responded to every request we’ve made. We are pleased with the responses.”