City audit shows mismanagement of funds by several departments
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A city audit by the finance director for the City of Bay City shows mismanagement of city funds, missing credit card receipts and proper city procedures not being followed by several city departments.
The audits for several city departments include the Main Street department, the Bay City Community Development Corporation and special construction projects done by the city.
The audit also shows numerous expenditure invoices not coded correctly, missing credit card receipts for travel and food, and several construction projects done by the city with projects not sign by the previous mayor, but by the director of public works.
The memo also shows several instances where funding agreements for various projects were not found including the Boys and Girls Club and the Matagorda County Museum.
“We performed these audits for the safety of our city,” said Mark Bricker, City of Bay City mayor. “Taxpayers money has to be accounted for and seen that it is used properly.”
The audits obtained through a public records request shows that expenditures and projects funded through the Bay City Community Development Corporation did not meet the requirements set by the state’s local and government code.
One example from the audit was the Boys and Girls Club of Bay City; the club received $100,000 to renovate a school building. According to the 2008 Economic Development Laws for Texas, 4B funds funding must be used for professional and amateur sports and athletic facilities, public parks and related open space improvements, entertainment, tourist and convention facilities.
The facility for the Boys and Girls Club does not fall into any of those categories, according to the audit.
The development corporation was also sponsoring various charitable events and coded the expenditures to promotional advertising.
“The Attorney General has concluded a promotional expenditure must advertise or publicize the city for the purpose of developing new and expanded business,” read the report.
The development corporation funded the library approximately $78,000 for operational support, but the Texas Economic Development Council states that is not a approved expenditure by the statute.
“I spoke to Mr. Schwab at the Texas Economic Development Council and was told that this was not grandfathered, therefore the funding for the library is not an allowable expenditure,” said Catherine Ezell, director of finance for the City of Bay City, in her report.
A loan to the Matagorda County Museum in 2005 in the amount of $400,000 was given by the community development corporation. The audit shows there was no formal loan agreement signed by both parties.
The statue requires 4B corporations to enter into a written performance agreement with a business enterprise when they provide funding.
Under the statue a city projects that expend more that $10,000 city council must adopt a resolution authorizing the project after giving the resolution at least two separate readings, this according to the 2008 Economic Development Laws for Texas.
The only agreement found was by the minutes in a community development corporation meeting, according to the report.
When auditing credit card statements for the community development corporation, the audit shows in fiscal year 2010 there were 18 receipts completely missing and 15 detailed receipts missing. In 2011, a total of 31 receipts were completely missing on top of 7 missing detailed receipts.
The Bay City Community Development Corporation manual states all credit card purchases must be documents with receipts, invoices and other documents.
The audit shows credit card receipts missing or not accounted for hotel stays in Hilton Las Vegas totaling $500 in April 2010 and $900 for Southwest Airlines.
In October 2010, no credit card receipts were found for $1,000 for a hotel stay at the Gaylord Texan Hotel in Grapevine.
Credit card receipts were also missing for hotel stays, meals, and gas totaling $777.20 between April 2011 and May 2011.
The audit shows there were several instances where the community development corporation's bank account was over drafted between 2009 and 2011.
“This shows mismanagement of cash, the bank balances should be verified before issuing checks,” according the report.
Ezell said she also found the clerk at the community development corporation is allowed to do telephone wires and move money from one account to another.
“The corporation’s policy manual states that it will follow the city’s investment policy, which names the city treasurer/finance director as the investment officer and the person responsible for managing the funds,” said Ezell in her report.
In the audit, Ezell recommended, based on the findings, that all financial records be returned to the finance office and that all financial records from this point forward be handled by the finance office.
The Main Street audit shows a bank account was opened without the approval from the mayor in July 2010.
In last week’s city council meeting, the bank account, which was being used for the donations for the USO restoration project and totaling approximately $26,000, was transferred to the finance department.
“The charter states that the finance department oversees and has to be in control of all city expenditures, investments and funds so it’s only enforcing the charter that’s in front of me,” Bricker said.
Special projects done by the city for fiscal year 2010 include, the TDECU road project, South Texas Project Training Center Phase III, hospital phase III and the softball complex project.
The audit shows that all of the contracts for the special projects performed by the City of Bay City were signed on behalf of the city by Clark Young, former director of public works for the City of Bay City, and not the mayor.
“I was unable to locate any evidence accept for the STP training center project that the proper bidding procedures were followed,” said Ezell in her report.
Ezell said the project system is unorganized and convoluted where it seems the projects are making a profit when in reality they are not because project management serves and equipment reimbursements were not charged to the projects.
“It was found that some charges billed to projects were actually charged to other projects. I feel that things were being hidden to make this project system look like it was working,” she said.
The audit shows the city did not bill STP for $55,556 of actual expenditures. The budget for the STP training center project was $935,756 and the city only billed the nuclear plant for $881,201, a loss of the project of $54,556.
Bricker said the results of the audit are alarming.
“It is very alarming that proper oversight was not given over the CDC,” he said. “There are a lot of procedural issues and no accountability given from the CDC board or council members.”
It is appropriate the city finance office keep a closer eye on the CDC money to protect taxpayer’s money, he said.
Bricker said city council has been informed of the audit.
“I am very confident they will make the right decision and find a new direction for the CDC and its operation,” he said.
Comments
But if you call the Attorney General's office, they will tell you that the 4B law has a grandfather clause in it for things that were started under the old law.
September 18, 2011 at 4:43 p.m.The CDC needs to concentrate on improving our city for the people who live here now, not wining and dining at "conventions". When our town is in good shape - streets, parks, soccer fields, entertainment, etc - businesses will want to come here, people will shop here, workers and executives will live here instead of Brazoria County.
September 15, 2011 at 4:36 p.m.