CLEVELAND HEIGHTS, Ohio — Key findings from the city’s 2021 financial audit include a budget carry forward of nearly $18 million, as well as an ongoing investigation into a supervisor’s family business dealings, that have already been referred to the Ohio Ethics Commission.
City Council heard on Monday (October 17) from the independent auditors who issued the 250 page reportwhich had no compliance breaches or material control weaknesses.
But there were some “significant deficiencies” and “disputed costs”, including involving a facilities supervisor who made several municipal purchases from a construction company owned by his sister-in-law.
“Some of the invoices for the jail and other work done on police department facilities were questioned by the Chief (Annette Mecklenburg) for possible inflated invoice amounts,” the audit report states, regarding “the fraud or related party transactions”.
Sujata Sulzer, Partner at James G. Zupka Certified Public Accountants, told the board that the police department is still investigating and the issue has been referred to the Ohio Ethics Commission.
The report further notes that “following the Chief of Police’s investigation, the bill amounts were subsequently reduced.” He goes on to cite “a lack of control over the purchasing process, which led to inappropriate purchases.”
With the investigation ongoing, the city’s chief legal officer, Bill Hanna, declined to comment further on Monday when asked if the supervisor was still with the city this year.
“We recommend that the city review its procurement process procedures for related party transactions and make the necessary changes to increase controls,” the audit findings note.
Another “significant deficiency” involved a case in which a city employee, who is also the paid executive director of a nonprofit, accepted payment on behalf of the city’s nonprofit. .
“The payment was initiated by a city employee from another department, who is an unpaid member of the board of directors of the same nonprofit organization,” the audit findings state.
As the administration develops enhanced purchasing controls and requirements for city employees to disclose side employment as well as “related parties,” employees are currently required to complete an annual Safety Commission course and quiz. Ohio Ethics, as noted in the city’s response to audit funding.
Under the “severance pay” list, there was also a case where a retiring city employee received 259 hours of accrued vacation when it should have been capped at 200 hours, based on a 2021 order.
Former city manager Susanna Niermann O’Neil granted the overtime, as she was authorized to do, because this employee wanted to take 59 days of vacation before retirement.
“However, the employee was needed to help the city complete a project before retirement, as he was the only competent staff member to complete such a task on schedule,” the audit notes.
Based on those circumstances, O’Neil approved the accrued overtime vacation hours, though it’s unclear if she told the board.
The audit findings also noted the $4.5 million loan the city secured through the Ohio Water Development Authority (OWDA) to set up its automated collection and recycling program. curbside litter this year.
Among other key financial highlights for 2021, auditors noted that “overall, total city revenue of $80.9 million exceeded total expenses of $63 million, increasing the total net position of $17.8 million for the year 2021”.
This led to a total net position of $80.2 million at the end of 2021, compared to approximately $62.4 million the previous year.
“In 2021, the city’s government fund balance increased by approximately $7 million from 2020,” the auditors noted. “This is largely due to an increase in (recoveries) of property taxes, municipal income taxes and service revenue charges.”
Auditors added that the city’s 2.25% local income tax revenue for 2021 was approximately $32.5 million, an increase of more than $2.9 million – or almost 10% – compared to 2020.
At the same time, O’Neil asked department heads to cut their respective budgets by 30% on non-personnel items for the proposed 2022 budget, citing financial uncertainty in the early stages of the new form of government.
As the 2023 budget hearings approach, City Council will have a new Chief Financial Officer on board to help sort it all out. Andrew Unetic was hired on Monday, coming from Painesville and officially starting Oct. 24.
Unetic succeeds Amy Himmelein, who left Cleveland Heights in August after 2.5 years to become chief financial officer of South Euclid.
Council President Melody Joy Hart said she was looking forward to the return of a chief financial officer, to which Mayor Kahlil Seren replied: “Not as much as me.”
Seren noted that some of the budget data was “hand-made” rather than in computer form – “and frankly it shouldn’t be.”
“With the experience (Unetic) brings both as an auditor and CFO, we will be very well served in terms of a budget being prepared in a more digestible format,” Seren noted. “He’s going to get to work and get to work on this.”
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