On March 7, 2017, David Meimers, formerly the City’s Accounting Manager/Controller, sent a letter to the Attorney General’s Office and five aldermen who had served on the City’s Administration and Public Works Committee. In his letter, Mr. Meimers said that on March 11, 2016, a partner with the City’s independent auditing firm asked Mr. Meimers to come with him to the City’s Collector’s Office.
“The independent audit firm discovered 35 days of undeposited checks and cash in the Collector’s Office (in unsecure locations) estimated at between $3 – 5 million. The cash and checks were deposits from Feb. 5, 2016 to March 11, 2016,” said Mr. Meimers.
Mr. Meimers’ letter continues, “A Senior Customer Service Representative (CSR) showed us several drawers (one after the other) of undeposited cash and checks (daily deposits) that had not been counted nor deposited to the bank. None of the checks had not been scanned for deposit. Envelopes full of cash were attached to each days deposit no cash or checks had been counted.”
Mr. Meimers says the Public Deposit Funds Act requires that cash receipts be deposited within two working days of receipt.
The City’s independent auditor, Sikich LLP, refers to the issue in more general terms in a letter dated Aug. 5, 2016, which discusses “material weaknesses” in internal controls that the auditor identified during its audit. In the section dealing with “material weaknesses,” the auditor says:
“During the course of our internal control documentation, it was noted that the daily cash balancing and deposit was back logged from approximately February 5, 2016 to March 11, 2016. City staff had been storing the daily receipt packages in the filing cabinet in the revenue manager’s office until each package could be balance[d], posted and then deposited. We recommended that all deposits be made as soon as possible and the reconciliations take place as soon thereafter as possible. Staff made all deposits within the following three days. We recommend that all receipts be deposited by the day after receipt in order to minimize the possibility of theft, fraud or accidental destruction.”
Sikich’s letter also provided the City’s written response concerning this issue:
“Daily deposits during and immediately after the wheel tax deadline have lagged behind in the past. The City took action and implemented the recommendation above on March 11 and 14. The delay in deposits was caused by staff turnover and miscommunication as a result. This situation has been corrected. A new Revenue Manager has been hired and is also in the process of implementing the recommended changes.”
The auditor’s Aug. 5 letter refers to five other “material weaknesses,” each of which contains the City’s response. In August 2016, the auditor issued a clean opinion with respect to the City’s 2015 financial statements.
On March 25, 2017, Assistant City Manager/Chief Financial Officer and City Treasurer Marty Lyons issued the following statement regarding Mr. Meimers’ letter:
“The City confirms that there was a back log of deposits in January through Mid-March of 2016. A smaller backlog has occurred annually (less than one week) due to high volume, but these deposits would be kept in the Wall Safe of the Finance Division for security. This larger back log occurred due to the retirement of the Revenue Supervisor at the end of January, 2016. January is a busy time in the Revenue office as December and January receipts of Wheel Tax (vehicle stickers) are deposited. In a given monthly period the City will have $3 million in deposits collected at the Revenue Office, however, large checks received during this time frame were removed and deposited immediately making the actual deposit back log approximately $2 million. Of these funds, less than $50,000 was in cash. These funds were in the Revenue Manager’s office in a filing cabinet that locks, and behind a locked office door within Revenue main office which is also locked. During the day, only the Revenue Manager and Collections Coordinators are in this office. As noted in the photographs, some of the deposits were also properly in the Wall Safe.
“Upon notification of the backlog, the Treasurer instructed staff to get the cash deposited at the bank within two business days, and the checks to be deposited by the end of the next week. This time frame was needed to confirm each of the deposits a second time. This confirmation is done for every deposit to match cash logs/cash register (this is the record made at the time of each transaction) with final deposits to ensure that no deposits are missing. Please note that all deposits were accurate and complete; no cash or checks were lost or stolen. Regular deposit practices resumed by mid-March, 2016. This delay in deposits had no material impact on the City’s financial position for the fiscal year beginning January 1, 2016 or prior fiscal year that ended December 31, 2015.
“Since this time, the new Revenue Manager has updated all cash management functions/duties and no backlogs have occurred.”
Mr. Lyons added, that the City’s auditor “has not officially reviewed our [the City’s] activities to improve operations after March 2016. This review would be a part of the 2016 Audit field work which starts in the next month.”
Mr. Meimers’ letter refers to several other accounting issues. Mr. Lyons’ prepared statement says the issues in the letter have been reviewed by staff and the City’s auditor.