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Ohio audit for Niles once again tells city its financial house is in disarray
By Ed Runyan
NILES
The Ohio auditor’s office has once again told Niles that its financial house is in disarray.
The audit the state released this month lists 11 findings, which are detailed chapters in a 99-page report indicating problems with the way the treasurer, auditor and other officials handled the city’s money in 2012.
The city has had two to three findings in recent years.
The city’s financial problems have been discussed throughout 2014, punctuated by the theft charge filed in April against former Assistant Treasurer Phyllis Wilson, accused of stealing $142,772 dating back to 2009.
That problem, discovered in a routine 2012 audit and labeled “good-old-fashioned stealing” by Ohio Auditor David Yost, was followed by a declaration in October by Yost that the city will be placed in fiscal emergency until it can get various problems fixed. Among them is the water department’s running a deficit of more than $2 million.
The 2012 audit, the most recent one complete at this time, says there were problems in 2012 with the oversight of Wilson’s work and a monthly process for making sure that all utilities payments the city received made it to the proper bank account.
“There was no indication that monthly reconciliations prepared by [Wilson] were reviewed by” Niles Treasurer Robert Swauger, the audit said.
Reconciliation is the term used by state auditors to describe reviews city officials did that could have uncovered the missing funds years earlier.
“We have determined that $117,772 of various cash receipts were stolen by the former treasury clerk between 2009 and 2012,” the audit says. “However, the city never identified these missing monies.”
The audit said the Niles treasurer’s office needed a better “segregation” of duties, saying Wilson “had complete control” over collecting money, depositing it and reconciling the money paid by customers with the money deposited.
Swauger, who has a banking job in addition to being part-time Niles treasurer, said of Wilson’s purported thefts: “There were checks and balances that obviously failed.”
Swauger said there are now “duplicate receipts to different departments” so that additional people are looking at utility funds to better ensure accuracy. Wilson was his only full-time employee, Swauger noted.
State auditors noticed the problem during the 2012 audit but not in 2009, 2010 or 2011 because they pick “sample” transactions to review, not all transactions, Swauger said.
Swauger said new computer software coming online in a couple of months will make it easier for city officials to check the accuracy of deposits compared to receipts.
In the meantime, he’s more personally involved in checking the deposits each month, he said. Under Wilson, who is awaiting trial on the theft charge, checks and balances were more “grouped together,” Swauger said.
“There were multiple failings that allowed the alleged thefts to happen,” Swauger said. “A lot of checks and balances were not followed 100 percent.” He said it would be “name calling” to specify what people or departments failed to follow the required checks and balances.
Bob Hinkle, Ohio’s chief deputy auditor, spoke only in generalities when asked to explain further what controls the city should have had in place.
“Generally, there was a lack of control,” he said.
Bob Marino, Niles City Council president, said failure of city officials to reconcile the utility payments monthly so that Wilson’s thefts could be detected is “appalling.”
“I can’t understand how the books were not reconciled monthly. How do you not balance your checkbook monthly?” Marino said. The city hired the auditing firm Packer Thomas to reconcile the city’s books. The work isn’t done, and he doesn’t know the cost for Packer Thomas’ work, Marino said.
Among the other findings from the state was one relating to money from revenue-generating funds, such as the water fund, being used to pay expenses for nonrevenue-generating departments, such as the police department.
As a result, the city moved $151,870 to the water, sewer and light departments from the police, fire and various other departments to correct the problem, the state audit said.
Charles Nader, Niles’ full-time auditor, said the $151,870 finding relates to technology upgrades that city officials believed applied to a variety of departments, including money-generating departments such as water, but state officials saw it differently.
Nader said he would describe the problems related to the $142,772 theft as being the responsibility of the city treasurer’s office.
“We’re bookkeepers,” he said of the auditor’s office. “It didn’t happen in our department. The money goes to the treasurer’s office. We don’t handle money.”
Swauger, however, said verifying all money that Wilson handled involves the auditor’s office, in addition to the treasurer’s office. “We’re not in balance with the auditor’s office,” Swauger said.