Discrepancies in city finances

Lisa Depies

Glitches in the city of Geneseo’s accounting software may have led to discrepancies in the city’s financials.

At a special council meeting on Aug. 24, alderman Keith Kennett, who chairs the administrative services board which first was made aware of the situation, read a statement to the board outlining the problems.

“This past spring, shortly after the change in administration with the election and change of our city accountant, several irregularities began to be noticed regarding some city financial records and our IT?(information technology) systems operations,” said Kennett.

“At first, this was believed to be a simple matter of new people going through the process of familiarization with new systems and also with past methods of financial record keeping. However, after significant commitments of time and effort, we’re now at the point of recognizing there are several things we’re simply unable to adequately explain regarding some of the city financial records,” he continued.

Kennett said irregularities had been discovered in the city’s motor fuel tax fund, in the police fund and in the pooled cash account.

He stressed, “We want to be clear that we have found absolutely nothing to indicate anyone was taking money inappropriately from the city. We want to be very clear on this important point.

“From what we are able to piece together, however, it appears monies may have been moved between funds in a type of ‘take from?Peter to pay Paul’ effort, through the use of ‘pooled accounts.’ The ultimate intention being to reimburse the account when anticipated future revenues were received.

“As the city continued to face decreased revenues from the economic downturn, however, the needed future revenues never materialized, and, consequently, it was not possible to repay the funds and bring everything into balance. This situation could explain the differences in account balances between the ledger and actual monies on hand in the pooled accounts.”

In addition, Kennett said among city staff there is “an overall lack of confidence in the operations of the city’s financial software system, InCode, and additionally a lack of confidence in the electronic security of this and other city IT systems in general.”

The city has used InCode, software which is overseen by Tyler Technologies, since the mid-1990s.

“Routinely referred to by staff as ‘ghosts in the system,’ InCode appears, at times, to operate with a mind of it’s own and requires an inordinate amount of double and triple checking to verify accuracy,” said Kennett.

For example, said Kennett, the system credited an employee with compt time for a date that’s not yet occurred. The system also recently issued a check for payment from a 2006 invoice. When staff checked back records, they found the invoice was paid in 2006.

“These things happen more frequently than infrequently,” said Kennett. “Frequently, data that was once accurate is routinely found later to be inaccurate or changed from what was previously entered. Data, at times, simply appears without any explanation or input from those people responsible for inputting financial information.

“Whether this is due to a software problem or due to access and interaction with the system by unauthorized users is not clear,” he said.

The city has used InCode’s technical support staff to try and trouble-shoot issues. That staff told city officials they were unable to replicate any potential software errors and were unable to trace when or where many data entries originated.

“InCode support found our internal IT security measures to be ‘lax’ and found our back-up systems to be incomplete,” said Kennett. He said there were also issues with server security and InCode security being compromised through poor password practices and “backdoor” full-administrative rights access.”

“In short, InCode and our IT systems in general are poorly operating and poorly secured. This makes it impossible for us to determine whether the system itself is poorly operating or if the system is poorly operating because it’s not secure and subject to manipulation,” he said.

Tyler Technologies and?InCode staff told city officials these issues are not occurring elsewhere in their system, said Kennett. “They really can’t give an explanation or even duplicate the problem. They tell us they’re suspect of the security of the system.”

Options available for the city include conducting a full financial and/or technical audit. The costs for those audits could reach six figures, said Kennett, who added “There is the possibility we could spend a lot of money on an audit and not really get an answer.”

Another option is for the city staff to “get the numbers as close as we can and then go from there,” said Kennett.

Work also will be done to tighten the city’s  IT security, and switching from an in-house IT person to outside IT support also is an option.

“We need people beyond our expertise to give guidance. There are probably multiple things going on here, quite frankly,” he said, but again stressed,?“We’ve found nothing that indicates we think somebody was taking money.”

As a result of the nature of the problem, Kennett said the administrative service board can’t even give a dollar amount to the discrepancy. “We haven’t been able to get to a specific amount,” he said.

At the special council meeting, aldermen voted unanimously to solicit proposals for financial and technology audits.

“This is our responsibility and we need to have an audit to clean things up, and, to do that, we’ll have to spend some money,” said alderman?Bob Wachtel.

“I’m on the side of doing it right,” said alderman Ed Deener. “If it costs six figures, it costs six figures.”

At the special council meeting, aldermen also voted against lifting the city’s hiring freeze to promote part-time billing clerk/deputy clerk Loree Phlypo from part-time to full-time.

Aldermen Lowell Ewert, Arnie Schmid, Karen West, Josh Pierce and Curt Spensley voted to keep Phlypo at part-time hours.

Aldermen Kennett, Deener and Wachtel voted to move Phlypo to a full-time position.

The cost to make her full-time would be an additional $15,000 for the city.

The city previously had a full-time accountant, human resources manager and city administrator to share some of the financial duties. Some of those positions have been vacated and left-unfilled.

Currently, accountant?Linda Cothron is alone in trying to manage the city’s finances. “We basically just have one person trying to handle a $12-$13 million business,” said Kennett.

Phlypo’s part-time hours don’t leave her enough time to accomplish all that needs to be done, said Kennett, especially at a time when the city’s finances are in disarray.

Alderman opposed to moving her hours to full-time argued while the city might have the dollars needed for a full-time position now, that’s no guarantee in the future.

“Six months ago we had the money for an economic development director, then we had to fire an economic development director. That was a black eye for the city,” said alderman Pierce.

Kennett said he worried aldermen were being “penny wise and dollar foolish” by not upping Phlypo’s hours.

City accountant Cothron left the meeting saying the city may have lost her services since aldermen weren’t willing to hire additional help for her.