GIRARD Audit cites hall, mishandled funds
The findings do not call for the recovery of any money.
By TIM YOVICH
VINDICATOR TRUMBULL STAFF
GIRARD -- State Auditor Jim Petro has issued 26 findings against the city for improperly handling public funds.
The audit reports on the city's 1999 and 2000 books do not call for the recovery of any money in the financially troubled community, but they do call for $471,726 to be transferred from the general fund to the capital improvement street utilities fund.
With the move, the general fund deficit, already at $1.7 million, now balloons to $2.2 million in a community that has been under a state-imposed fiscal emergency since August 2001.
Mayor James J. Melfi said it will be up to the state commission appointed in 2001 to oversee city finances to determine if it wants to become more aggressive to get the city out of debt.
The city did not follow proper procedures and ignored state laws governing the control and reporting of financial transactions, according to the audit released this morning.
There is no indication of missing money, but inappropriate handling of funds, including violations of state law, touch all parts of city government.
City council approved creation of administrative positions and increased wages while obligating the city to $6 million in capital improvement projects. These actions, the 2000 audit says, caused the state to place the city under fiscal emergency.
Many of the questionable activities involve the construction of a justice center, which includes a new police headquarters.
Although no names were specifically mentioned, the audit raises questions about the actions of a former service director and former city auditor.
Ralph Ruggiero retired as service director in September 2000, and Sam Lamancusa resigned as city auditor in February 2001 to become office manager at the Trumbull County Treasurer's Office.
To correct many of the findings, Petro recommends the city establish procedures and follow state law in controlling its money.
The audit points out that city council was not kept informed about finances, such as transactions involving the construction of the justice center.
City funds were overdrawn, contracts were awarded without being approved by the city controlling board and council, equipment was bought without competitive bidding, and payments were made for projects out of the wrong funds, according to the audit.
Melfi has been critical of municipal Judge Michael A. Bernard concerning the cost of the center and of Lamancusa for not keeping him and council up to date on that project.
"[The audit] pretty much says everything we've been saying," said Melfi, who took office in January 2000.
It reinforces the idea that the question of the need for the center should have been put before voters in the form of a levy, rather than just dipping into the general fund, the mayor said.
"The borrowing and mishandling of money has produced the largest fiscal debacle in the city's history," Melfi said.
For example, in December 1999, the city borrowed $3.5 million at Second National Bank for the construction of the center and replaced that with a $4 million note in November 2000.
Neither the $4 million note nor payment on the $3.5 million note were reflected in the city's monthly financial report.
The audit says the center's major contractors were paid through 35 "official checks" and four money orders drawn on Second National instead of using checks drawn against an official city account.
The transactions were not reported in the monthly finance reports provided to the city administration and council and were never used in preparing the city's budget.
In 2000, there were 32 change orders on the center project totaling $190,085. Approval for the work was circumvented because it was never placed before the city controlling board by the service director.
State law calls for city council to approve all expenditures of more than $15,000, the audit says.
The audit lists $231,652 in purchases -- each for more than $15,000 -- for work at the center without council approval.
Melfi said Judge Bernard issued a judgment entry ordering the six bills totaling $231,652 be paid "or we could go to jail."
In retrospect, Melfi said the city should have told the judge "to go to hell. We should have gone to jail and fought it in court."
"This is when the battle [with Judge Bernard] started," the mayor added.
In some cases, purchases of more than $15,000 didn't go through the proper bidding procedure to determine the best supplier.
For example, in 2000 the city bought a $23,650 X-ray machine for the justice center without bidding.
Council authorized the service director in executive session to spend $43,989 for parking lot work at the center.
The city auditor's job is to make sure funds are not overdrawn, the state said, calling attention to 18 funds' being overdrawn in 1999 and 24 funds' being overdrawn at the end of 2000.
In 1999, 20 percent of transactions of more than $1,000 were done without the city auditor's certifying that money was available to pay the bills, the state said.