Some Killeen city officials improperly used public money, created a side account for money transfers and made a raft of questionable decisions.

And those are only the early findings of the audit investigating Killeen’s financial practices over recent years.

Houston-based public accounting firm McConnell & Jones presented its findings to the City Council on Tuesday.

Here are the initial findings:

— Bond funds were used for unauthorized purposes, such as operating expenses, including salaries;

— Consistent analysis and planning for capital projects was not performed;

— Enterprise (moneymaking) funds were transferred to another fund to buy vehicles not used for the benefit of the respective enterprise fund;

— Former finance staff created an escrow account and used it to transfer funds and record liabilities;

— Pay raises were inconsistently applied, with some employees receiving both cost-of-living allowance raises and performance raises while some received one.

Those are the results so far; seven key areas are being reviewed, per council authorization.

The findings fly in the face of statements made by Councilman Jim Kilpatrick, former Mayor Scott Cosper, former City Manager Glenn Morrison, former Mayor Dan Corbin and longtime city spokeswoman Hilary Shine.

Kilpatrick, who is running for re-election May 6, has opposed the audit despite being chairman of the council’s subcommittee charged with giving direction to the audit firm based on council recommendations.

Kilpatrick has voted against the audit, then voted for funding it but maintained throughout that no investigation was needed, instead wanting to blindly trust former city administrators.

Kilpatrick asserted there was no evidence of criminal wrongdoing.

Councilman Juan Rivera also voted against the audit.

Mayor Jose Segarra has questioned the need for an audit in the past, as has Corbin, who previously called red flags raised by the Herald “bull—.”

Some of those red flags were validated by the preliminary report.

Corbin previously put the spotlight on an ongoing “revenue problem” as the source of city troubles, but like Kilpatrick, maintained there was no cause for pursuing an investigation.

Corbin also was head of a political action committee that donated money to Kilpatrick on behalf of developer Bruce Whitis.

Shine, in March, said the city’s routine external audit from last year, “offered a clean opinion, which is the highest level of assurance possible that your tax dollars are being properly managed by city staff.”

Shine’s comment was out of context with national reports that routine municipal audits have failed to detect serious problems, including fraud.

RECAP

The investigative audit by McConnell & Jones was approved March 14, and a mid-audit briefing was agreed upon for May 16 — 10 days after Election Day, which would have left voters in the dark.

Public perception and trust had tanked when city administrators failed to share news of declining city finances, kept it quiet for years and then finally pulled the curtain back on a heavy $8 million budget shortfall last summer.

Overspending from at least fiscal years 2013-16 was visible in lopsided budgets, and although the city balanced the fiscal year 2016-17 budget and began work on 2018, it left in its wake a trail of questionable financial decisions with little or no explanation.

“There appears to be a lack of analysis of the long-term fiscal impact when presenting recommendations to Council,” the McConnell & Jones preliminary report reads. “The City lacks critical policies in many areas to guide decision-making.”

The report also says the city did not make it easy for council members to make more knowledgeable decisions.

Councilman Richard “Dick” Young was blunt: “They found issues in each of my concerned areas. … Where there’s smoke, there had to be fire.”

UP NEXT

All data must be received by the firm by May 8; a mid-audit briefing was scheduled for May 16; an interim briefing is June 6; and a draft report is expected to be issued July 7.


OBSERVATIONS SO FAR

BOND FUNDS: Bond funds were used for purposes other than the authorized use of bond proceeds included in bond documents. Uses included: Transfers of bonds to the general fund to be used for operating expenses, including salaries; Use of bond funds for costs related to city-owner agreements; and transfers of certain bond funds to certain other bond funds for as yet undetermined purposes.

Bond funds were co-mingled with the general fund in the past and subsequently corrected with journal vouchers.

CAPITAL OUTLAY: The city does not have a comprehensive Capital Improvement Plan to facilitate long-range planning. It has individual master plans, but those do not help strategic planning, prioritization and decision-making.

The city does not consistently perform analysis and planning for capital projects regarding long-term costs.

INTER-FUND TRANSFERS: Money was transferred from enterprise (moneymaking) funds to the internal services fund to buy vehicles that were not used for the benefit of the respective enterprise fund.

Former finance staff created escrow accounts in the financial system and were used to transfer funds and record liabilities instead of recording expenses and liabilities in the appropriate accounts.

PAY RAISES: Regarding increases of three percent to cost of living allowance and eight percent to civil service, planning was made without regard to long-term financial impact.

Some non-civil service city employees received the eight percent pay increase.

Pay increases were inconsistently applied; some employees received performance-based and cost of living allowance increases in the same year, while others who received an increase for performance did not.

MORE INFORMATION

Houston-based public accounting firm McConnell & Jones was hired for $394,456, paid biweekly as work is completed, administrators have said.

Because the scope of the audit affects mainly the general fund, water and sewer fund, and solid waste fund, each will be tapped to provide a portion of the money.

The general fund will pay 70 percent ($276,119), Water & Sewer will pay 20 percent ($78,891), and Solid Waste will pay 10 percent ($39,446). An amendment for the general fund will be $216,687 because $59,432 was already budgeted.

The plan contains a seven-point scope of services, crafted by City Council consensus to analyze:

— Capital outlays from fiscal years 2006-2016 ($62,492).

— Use of bond money from fiscal years 2002-2017 ($84,448).

— Interfund transfers from fiscal years 2010-2016 ($32,176).

— Pay increases from fiscal years 2014-2017 ($22,751).

— City/owner agreements from fiscal years 2002-2016 ($36,692).

— Private roadway ownership from fiscal years 2002-2016 ($41,773).

— Spending during post-recall period from November 2011 to May 2012 ($34,892).

The firm’s proprietary planning and quality control process ($34,708), a mid-audit briefing at $10,092 and the written report with findings and recommendations at $34,432, bring the total to $394,456, which includes travel and miscellaneous fees.

COMPLETION STATUS

The following completion status was reported by the firm as of April 28: capital projects (10 percent); bond money (35 percent); inter-fund transfers (40 percent); pay increases (40 percent); city-owner agreements (10 percent); roadway ownership (none); and post-recall spending (25 percent).

asierra@kdhnews.com | 254-501-7463

(8) comments

Alvin
Alvin

This is the personal opinion of this writer.
Well it sounds like people are finally starting to wake up to what has been going on for years. But it sill gets me that this council and mayor want to ''spread the fault over as large an area as possible.
But the proof will be in the pudding.
People I call on you to get out there and vote. The old saying says: 'There is power in the vote'. Make it come true.
One of the few who voted.

TexaSoldier

--"The report also says the city did not make it easy for council members to make more knowledgeable decisions."--
I have my suspicions but What does this mean? Does this refer to any one of the 30 plus civil "servants" making MORE than 6-digit figures attempting to cover up their fleecing of the tax payers?

I was not initially for a forensic audit since the cost would be more than double what this managerial audit is costing and I doubted that it would turn up anything anyway. HOWEVER, this initial report is so bad that each department now needs to be analyzed in detail. They haven't even covered the city credit card abuses yet.

None of what is said in the article surprises me. I have been ranting and raving about the financial mismanagement and cover up for a long, LONG time. The public finally has to get pissed off as the old Bob Dylan song says, "When ya gonna wake up?" There is one last chance on Saturday, May 6th, to throw a couple of the bums out: Jim Kilpatrick and Brockley Moore. If you are tired of the city mismanagement, pandering to special interest, and cover ups, make sure that anyone supported by Dan Corbin & Prosperity Central Texas does not get into office on May 6th such as Debbie Nash-King and Kenny Wells. If you haven't already, VOTE ON MAY 6th against these people!
.

dailymajor

Sounds a lot like Peter robbing to pay Paul. Giving raises to some and not others? My goodness !
For nearly a half a million dollars to do this investigation, I would love to hear the names, and exactly what was done by whom, not a general sweeping of a net and broad accusations.

eyewatchingu
eyewatchingu

Its time the FBI gets involved!!!!
Kleptocracy
Kleptocracy is a form of political corruption in which the ruling government seeks personal gain and status at the expense of the governed, literally meaning “the rule by thieves.” Through graft and embezzlement of state funds, corrupt leaders amass tremendous wealth at the expense of the broader populace. Some of the most egregious examples have occurred in countries with very high rates of poverty. The inherent challenge for corrupt leaders is covertly expatriating and holding money in secure locations where it can be accessed in the future. Generally, that requires international movement of funds. When transfers occur in U.S. dollars or transit the U.S. banking system, federal money laundering jurisdiction is established. The FBI initiates money laundering investigations to trace the international movement of assets and, in conjunction with foreign partners, forfeit and repatriate assets back to legitimate authorities in victim countries.
Among the most challenging money laundering investigations are those targeting “gatekeepers,” which may include bankers, brokerage houses, trust companies, attorneys, accountants, money managers, notaries, or real estate agents. ICU investigates these international business people who provide professional services to illicit actors wishing to disguise the source or nature of their money. These insiders have unique knowledge concerning the financial and legal systems in which they operate, making detection difficult. ICU’s kleptocracy program is run in close coordination with DOJ’s Kleptocracy Asset Recovery Initiative (KARI), part of the broader Priority International Money Laundering Threat (PIMLAT) violation.

Pharon Enochs

The following comments are in deed the opinions of Pharon Enochs I will get straight to heart of the matter, what do you say now Kilpatrick, Corbin, Scott C. , Morrison , Rivera and any others who said nothing was remiss ? The way most of you folks fought so hard to keep an audit from taking place, in my opinion cast doubt on if you really felt nothing was remiss. In fact in my opinion it actually appears you may have known about the problems and did not want them to be exposed. This somewhat resembles how the big boys in Washington, DC play the game. The truth usually comes to light. Now will this be the period when finger pointing starts, excuses are made and the someone is blamed. I do not think President Bush should be blamed, he was blamed for darn near everything else, but I would not rule it out. Small town politics at its worse. Some of the information revealed by the audit might just be violations of state and federal laws. This might get even uglier. God bless America, President Trump and John Wayne where ever he may be.

Roody2
Roody2

[thumbup]

timebandid

I am happy to hear that some of our questions concerning the misappropriations of Killeen's finances are beginning to be answered. But as the audit unravels the mystery, there needs to be individual accountability for the problems and, it appears, illegal activity. Those who still hold public office and were party to these blatant misdirection of funds should be removed from any further opportunity to injure the city's finances in the future. If their is criminal charges to be made, that should also be done, once the audit is complete. I wish to thank the KDH for its continued pursuit of truth in these matters. Without their dogged insistence on answers to these important issues the citizens would remain in the dark and our city would continue with fiscal mismanagement to the point of bankruptcy. To each of these who pressed to stop this audit from going forward, I sincerely hope you are soon voted out of office, unless you make a sudden and distinct turnaround on issues that are important to citizens of Killeen. This means voting in line with what your constituents desire rather than maintaining your own agenda and your search for personal gain.

Alvin
Alvin

This is the personal opinion of this writer.
Some Killeen city officials improperly used public money, created a side account for money transfers and made a raft of questionable decisions.
So here are the 'preliminary findings' of the company authorized to perform the Killeen audit, and as such, apparently do not point the fingers at individuals, only suppositions.
The questions of 'who, where, when, what and why' apparently 'fall by the way side' when push comes shove.
Here are some of the findings, Bond funds for unauthorized purposes, consistent analysis and planning, enterprise (money making) funds were transferred to another fund, former finance staff created an escrow account and used it to transfer funds, pay raises were inconsistently applied, and that is just a 'preliminary finding'.
Once again the 'preliminary findings' fly in the face of councilman Jim Kilpatrick, former mayor Scott Cosper, former mayor city manager Glenn Morrison, former mayor Dan Corbin, and the long time city spokeswoman Hilary Shine, and that I personally feel is just touching the ones who should be included in the wrong doing. Others that should be included are the present mayor who has consistently held that councilmen Jim Kilpatrick and Juan Rivera, both took the position that 'there was nothing wrong, and the firmer mayor, Dan Corbin who just recently stood before this council and stated, and I paraphrase here: It was/is just a total waste of money, that this august body 'did nothing wrong'.
I've asked this question many times before and I'll continue to ask this question: 'Who are the people/persons that make up the governing body or administrative group that are the governing body/administrative body that make up the Killeen city charter in lieu of the city manager and the city council???? I've been asking this question for about one and a half years now, and expressly pointed out to 'my councilman, Kim Kilpatrick to no avail. Is this the person with whom we would 'trust' to 'guide this city into the future???? This question should be addressed to every council person and if you don't see a 'gleaming white picture' in my opinion, you should move on to the next candidate.
This paper has thrown out the 'Red Flags' and in many cases, those 'Red Flags' were in fact validated.
Some of the other 'Red Flags' that were raised was the advent of 'Whitis Corporation' who is/was responsible for the development of a new/proposed housing development outside of the boundaries of this city's 'zone of influence, who was responsible for the $30 million, and growing, indebtedness, to this city, who, after the fact, when the Georgetown fiasco was brought to a head, the question has been asked, many times, does this indeed make for the continuance of the 10 MGD of water that is 'promised' to the city of Killeen, and the fact that the Whitis corporation has taken the lead in this and 'not the city of Killeen, and then just recently the phrasing of 'the Whitis Water Control District', and I have posed the question, 'Why doesn't the 'Whitis Water Control District follow up and take control of this and relieve the city of Killeen of this and every other involvement to this city'. I still do not have a good answer to this and all of the many questions I have brought forth.
Yes, I think that it would be a good question to ask of one's self, 'Is this the candidate with which I want to sail my ship'???
One of the few who voted.

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