Homeless in Arizona

I wouldn't wait around for these white collar crooks in the Glendale government to be arrested, or even punished for their $6 million theft.

It they do get punished it will almost certainly be a slap on the wrist.

Source

Audit: Glendale misspent $6 million

By Sonu Munshi The Republic | azcentral.com Sat Nov 3, 2012 12:03 AM

Glendale administrators improperly took about $6 million from a city trust fund over three years to cover expenses, an internal city audit obtained by The Arizona Republic shows.

The account dropped from about $8 million in July 2010 to less than $3 million in June this year, largely because of the improper transfers, the audit notes.

The Risk Management Trust Fund, set up in 1987, is essentially a self-insurance policy to cover liability issues, such as personal injuries or property damage.

But in tight financial times, city documents show, staff members used it to pay other bills.

The drawdown exposes the city to the risk of not having enough money to cover liability expenses, the audit notes.

The City Council received a copy of the internal audit this week after The Republic filed a request for the document.

Mayor Elaine Scruggs has called for a special meeting Monday to discuss the matter.

City Attorney Craig Tindall, in a scathing memo in response to the audit, said the transfers violated the city charter and city code, which lays out limited uses for the fund.

The audit said staff did not follow rules and regulations, or keep the Board of Trustees, which oversees the fund, informed about the transfers. However, the audit noted the council was told about one transfer before it happened and others afterward.

The board, which is chaired by Councilwoman Joyce Clark, was presented with the audit in early October.

Clark had said the board should have been better informed, according to a transcript of the board’s Oct. 4 meeting.

Clark at one point said the audit was nitpicky. But at other points, she scolded staff for the lack of information sharing. “Shame on you,” she said.

The councilwoman did not respond to The Republic’s requests for further comment.

The drawndowns under scrutiny include:

$3.2 million to pay a penalty charged by the state retirement system because of an early buyout the city had offered.

$2.65 million transferred to bolster another city fund, the Workers Compensation Trust Fund.

Nearly $500,000 to salaries for three risk-management employees and other administrative expenses, in violation of the city charter.

Other areas of concern raised in the audit included the lack of an annual external audit and the trustees’ failure to submit a timely report to the council.

Interim Human Resources Director Jim Brown, whose department oversees risk management, said the audit brought to light issues that need addressed, particularly unauthorized transfers.

He said the city has scaled back funding to its workers compensation fund and then got hit with several large claims. To make ends meet, they turned to the risk-management fund.

He said he’s working with others to develop a plan for improvement.

Glendale council discovers improper fund transfers through audit

Glendale council discovers improper fund transfers through audit

By Sonu Munshi The Republic | azcentral.com Mon Nov 5, 2012 8:45 PM

The Glendale City Council had tough questions for interim City Manager Horatio Skeete in a special meeting on Monday about an internal audit that showed $6 million was improperly spent.

The council was provided the audit last week after The Arizona Republic filed a public-records request for it.

Skeete said steps are being taken to fix a broken process, and acknowledged council had not been given enough details on the spending.

The council consensus was that staff was following orders from upper management.

It’s unclear how the financially strapped city will rebuild its Risk Management Trust Fund, which fell to less than $3 million this June.

The audit noted the low balance leaves the city exposed to the risk of being unable to cover liabilities, which is the fund’s purpose.

The improper spending went toward a penalty to the state retirement system, to bolster another fund that had gotten too low and to pay some salaries.

Skeete oversaw the Human Resources Department as deputy city manager during the time of the transfers.

In general, he said the city manager had final say on these matters.

City Manager Ed Beasley retired in June.

Documents show some others who knew about the situation also retired, including a risk manager and the HR director.

The audit noted a Board of Trustees that oversees the fund was not informed about the transfers, but the City Council was told, albeit later in most cases. Skeete said the practice was to tell council about the transfers after the fact.

Councilwoman Joyce Clark said part of the problem was staff would not provide transfer details despite council-member requests.

Moving forward, Clark said the biggest lesson is that the city’s trust funds must be adequately funded so such situations don’t happen. The trust fund was adequately funded, but it was illegally spent!!

Mayor Elaine Scruggs said she was particularly disturbed when she read a 2009 e-mail from the former city risk manager, copied to the former HR director and the present budget chiefs, suggesting ways to get around a state law that prohibits taking money out of trust funds for other expenses. Yea, sure!!!

Staff working to circumvent the law “cannot be tolerated,” Scruggs said.

In another instance, Skeete said various city departments paid premiums that were supposed to go into the risk management fund and another, but the money was put into the general fund, which covers much of the city’s day-to-day operations.

Councilwoman Yvonne Knaack said it made her “sick to her stomach” to hear about staff bolstering the general fund through such transfers.

Councilwoman Norma Alvarez pointed to a culture of spending “regardless of whether we have the money or not.” Yea, sure!!

Scruggs noted it led to a false sense of the city’s financial health rather than addressing the tight budget earlier in the recession.

The mayor questioned how the city can rebuild the risk management fund.

Skeete had no good answer.

He said the general fund’s balance is in the negative when considering other obligations that must be repaid.

These obligations include borrowing from utility funds to pay the National Hockey League $50 million to manage the city’s arena.

Skeete should return to the council in December with a plan.