BY THE NUMBERS
$238,000 spent over a five-year period by Miami Twp. to terminated employees for settlements resulting from wrongful termination or the termination of employees without following proper industry standards and human resource policies.
$433,000 spent from 2009-2012 by Miami Twp. employees using township credit cards.
923 percent increase in Miami Twp. business lunch expenses lunch charges in the past 10 years.
$602,000 spent by Miami Twp. on contracts without completing any formal procurement contracts.
SOURCE: Miami Twp. audit.
HIGHLIGHTS OF MAJOR FINDINGS
-The township lacks proper segregation of duties.
-Due to the off-the-book preparation of financial statements and the accessibility of the system by other employees, there is a risk in the integrity of the financial statements.
-The township has not done a Generally Accepted Accounting Principals conversion in 10 years. This could have a negative impact on its bond and interest ratings.
-There is no policy and procedure in place to govern proper use of township credit cards.
-The township transacted contracts up to $602,000 without completing any formal procurement process.
-The township has a high litigation risk as a result of an inadequate employee manual.
-There is no formal advance payment policy in place, allowing for the township to pay for work that was never completed.
-The township lacks adequate policy and procedures, and should implement a formal investment process.
Source: Miami Twp.
An internal audit found Miami Twp.’s lack of guidelines for spending, accounting, conduct and other issues risked or cost hundreds of thousands of taxpayer dollars.
Widespread changes are recommended in the 20-page audit, which Trustee Vice President Andrew Papanek said was initiated in late 2013 under the direction of then-trustees Deborah Preston, Mike Nolan and Charles Lewis. Preston did not seek re-election, Nolan lost and Lewis last month announced his resignation for personal reasons.
The audit addresses eight areas, ranging from segregation of employee duties to credit card use. It points out several practices that put the township at risk and note its “vulnerability to internal and external fraud.”
No evidence of fraud was found, said Mukesh Singh, the township’s compliance officer who compiled the report.
Changes outlined in the report will be implemented this year, with many being adopted near year’s end, said Greg Rogers, township administrator.
“We will hold our employees accountable to follow the policies,” he said. “As the policies are adopted, we will have people sign off on the policies.”
To help ensure accountability, Rogers said, employees will be randomly sampled on an annual basis. Singh said the audit was done in part as an effort for the township to show more public transparency.
The township was in “dire need” of the changes outlined in the report, Papanek said. “It will be a major undertaking.”
The audit cites several areas where the township falls short. Among them:
- The township’s lack of separation of duties involving its finances “can lead to fraudulent activities and potential loss of funds.”
- Access for the township’s system for tracking its financial statements is vulnerable to unauthorized changes.
- The township had more than $433,000 in credit cards charges from 2009-2012.
- The township paid out $238,000 related to employee terminations in the past five years.
- The township agreed to contracts totaling $602,000 from 2011 through 2013 “without completing any formal procurement process.”
- Business lunch expenses by Miami Twp. employees the past 10 years increased by 923 percent.
The township has not followed Generally Accepted Accounting Principles, the audit states. Its lack of a GAAP conversion in the past 10 years has hindered the township from knowing the true status of its finances and may hurt its bond rating, according to the audit.
The township’s bond rating has not been lowered, as Moody’s has reaffirmed it at AA, said Harry Steger, the township’s finance director. That rating is “judged to be of high quality” and subject to very low credit risk, according to Moody’s.
Rogers said the first area to be addressed will be the employee manual, the initial phase of which is expected to be completed by the end of June.
“Most of the litigation risks that took place will be addressed in the policy manual,” he said.
Litigation costs outlined in the audit include termination agreements with former Administrator Greg Hanahan and former Deputy Police Chief John DiPietro, Papanek said.
Hanahan was fired in February 2013. Trustees voted then to end the tenure of Hanahan, who had been on accrued paid leave since November 2012. They later reached a termination agreement with him.
Hanahan, who earned about $126,000 in 2013, was paid through the end of the year.
DiPietro left the township after he was accused of improper conduct involving hosing down a naked 17-year-old girl who had been pepper sprayed. In January 2013, the township paid him $18,000 while he was placed on administrative leave. Six months later, Miami Twp. agreed to pay $100,000 to the family of the girl, according to records. In exchange, her family agreed not to sue the township or its current or former employees.
In October, trustees agreed to pay DiPietro $50,000 in township funds as part of the settlement of a wrongful termination lawsuit.
Papanek said the township has “a lot of housekeeping to get in order.” Rogers has given department heads direction on what changes will be coming, he said.
“I feel comfortable proper steps are being taken,” he said. “This will get done and get done in a professional and organized manner.”
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