This week, The Kansas City Star released a detailed editorial on small town government fraud and corruption, many times spurred on by the creation of their own self derived blinders, facilitated by their friendships with fellow city officials, and by becoming too cozy with city employees and leaders who have been working within the city structure for a very long time!
The article can be found here…
https://www.kansascity.com/news/politics-government/article278
In one example, they detail how a clerk in the city of Central, which is located in eastern Missouri made herself a fixture of small town government. As part of her job, she managed the city books and took minutes at meetings. Meanwhile, her husband was serving as the city’s Police Chief. Carman volunteered at local elementary schools and was active in her church. She often watched her son play at the baseball field. The City Council trusted her, and unfortunately for the citizen taxpayers of the city… fraud lurked quietly just beneath the surface. In fact, from 2015 to 2019, Carman stole at least $316,887 from Center. It serves as a stark reminder to citizens that waste, fraud, and abuse can happen to any city, small or large, right beneath the noses of City Council’s, and certainly ‘We the People’!
The Kansas City Star noted how…
Carman, who was then called Tracey Ray, falsified financial reports and lists of bills prepared for City Council meetings. Additionally, she also benefited from the extraordinary level of autonomy that those very same city leaders gave her. The mayor and council didn’t probe into city finances or even insist on simple methods of oversight. Sadly when it all came to a head, the scheme not only collapsed quickly, but it led to a “shootout” that left both the local sheriff and deputy injured.
Later, when the Missouri State Auditor was called in, their report found that Tracey Carman (then called Tracey Ray), used city funds to pay personal credit card bills and misappropriated a total of $316,000 from taxpayer dollars!
While Carman’s case stands out for its shocking details, Center is far from alone in suffering the consequences of financial fraud and mismanagement. In fact, a months-long investigation by The Kansas City Star exemplified how small cities, towns, and local governments repeatedly fall victim to fraud and how officials misuse public funds in incidents that tear apart communities and deprive them of precious resources that could be used to improve the city for its residents and businesses. The investigation found that absent strong safeguards, localities are often a petri dish for fraud and other wrongdoing.
This Kansas City Star’s story is the first in “Broken Government,” a new project from The Star to expose the ways in which government at all levels across Missouri and Kansas fails to work for residents and taxpayers – and hold officials and politicians accountable. They are examining everything from Sunshine Law violations in local governments to the problematic use of no-bid contracts, both of which Joplin was cited with failing in 2015, as Joplin City leaders failed to fulfill sunshine requests, mismanaged millions of taxpayer dollars, utilized poor business practices, awarded no bid contracts, and led to the resignation of a City Councilman for alleged ethics violations. In fact, then Missouri State Auditor Nicole Galloway noted how Joplin mismanaged millions of taxpayer dollars, as well as, failed to safeguard citizen tax dollars! Sadly, with few safeguards still in place, and no in person follow-up to verify that these issues were even resolved, there is no guarantee that many of those problems continue, which makes Joplin tax dollars susceptible to those same concerns today and into the future, regarding potential mismanagement, waste, fraud, and abuse!
The Star went on to note how small towns and cities can be especially susceptible to abuses of power, whether that involves financial crimes or the improper use of government authority. Investigating financial fraud and mismanagement in small local governments, The Star found that local leaders, either out of necessity or convenience, sometimes place broad financial authority in the hands of a single person and then fail to properly keep tabs on their actions. Basic budgeting and accounting rules are not always followed. Conflicts of interest strain public trust. Violations of open meetings rules keep residents in the dark. Many municipalities are well run, but examples of the same weaknesses in financial oversight and security emerge over and over again, fostering the conditions for questionable expenses, improper payments and outright theft. It’s a pattern that plays out year after year in community after community, both large and small.
Former U.S. Senator and State Auditor of Missouri Claire McCaskill stated…
“There’s no question that in many small communities there’s an overriding sense of well, this is the way we’ve always done it. And many times that doesn’t include basic controls you need on financial matters.”
In Joplin, Missouri, now former State Auditor Galloway noted in 2015 that the City Council did not ensure evaluation committees were independent and free of potential conflicts of interest before awarding contracts, which led to Wallace Bajjali costing Joplin taxpayers millions! Additionally, the JRC, which is a component unit of the Joplin Government failed to use independent appraisals and consideration of previous real estate transactions when purchasing properties. These led to at the very least, the appearance of conflict of interest, as well as costing the Joplin taxpayers a lot more than those properties should have cost! In fact, just five of the properties purchased cost the taxpayers $315,000 more than those properties were worth. Additionally, the State Audit found that one Council member had conflicts of interests with personal and city business dealings, which led to his resignation. The JRC also sold 5 properties at a loss of another $19,766.00. Combine that with the fact that the City of Joplin’s Finance Department failed to file reimbursement claims totalling another $10.9 Million dollars, and as of May of that year, the Finance Director, who still serves as the Finance Director, failed to file claim forms for another $6.6 Million of Federal Emergency Management Assistance, and $2.7 Million of the state’s portion of Community Development Block Grant funds for completed projects. In addition to the $9.3 Million, the Finance Department had failed to allocate city labor and equipment expenses totalling $1,646,000.00, incurred during the time period following the tornado, to the applicable FEMA projects and requested reimbursement. To make matters worse, Joplin Government was found to not always comply with sunshine laws, did not always prepare meeting minutes for closed sessions, all of which make public transparency and accountability scarce! Additionally, Joplin didn’t always follow its own bid policy, maintain documentation for decisions made, or ensure bids were open and evaluated prior to signing contracts. Also, Joplin did not have a formal change-order policy, and neither the City Manager, nor the Council approved change orders for significant amounts or changes in scope of service. In fact, in several departments, there was a serious failure in oversight or documentation. Also, the city of Joplin didn’t properly monitor its contracts with outside organizations such as the Chamber of Commerce, who received $342,645.00 in 2014. In fact, the Auditor noted how the city did not monitor for compliance with the contract. Also the city entered into an agreement with a baseball organization, committing major renovation/construction funds, without doing any kind of feasibility study, that has since led to a massive loss to the taxpayers finances. To make matters worse, the city did not have established policies for the use of manual checks… which are still being utilized today. Furthermore, the Finance Director was found to be shredding voided checks, and was not accounting for numerical sequences of checks… thus reducing transparency and accountability of city funds. Further complicating the issues, the accounting controls and procedures over the city’s sewer and special tax bills were noted as needing improvements, and two-signature sign-off for adjustments were not always followed, much like was occurring in the City of Central! The auditor went on to note how improvement was needed in the city’s handling of certain financial issues and reporting! Sadly, the list is long, and decisions made by the city have cost our taxpayers dearly, as well as our public safety, which have led to increasing taxes, which have only led to what seems to be more waste, and the city’s desire to raise taxes again, and again, and again! As a result, typically a follow up audit is performed on any city who fails or gets a “poor” rating, but due to the alleged suicide of Missouri State Auditor Tom Schweich in Feb. of 2015, and the suicide of the Auditor’s spokesman Robert “Sepnce” Jackson a month later, thus leading to the soon after appointment of Nicole Galloway, Joplin City Government only had to respond with written responses that stated if they had corrected the highly concerning issues, due to the massive backlog left by the chaos in the Jefferson City Auditor’s office. Sadly, no follow up has ever been performed beyond that, leaving a question of what is going on inside Joplin finances post 2015 and today! It is also important to note that our Finance department was given high marks on their financial audit, the same year it was found by the State Auditor to have mismanaged millions, lacked accountability and transparency, and demonstrated poor business practices that hurt our citizen taxpayers. The same city hired auditor who has done our financial audits for decades!
The Kansas City Star also noted dozens of other cases that risk citizen tax dollars in local municipalities, and they point out how the examples go on and on, noting how Andi McNeal, Vice President of Education at the Association of Certified Fraud Examiners stated…
“I think a lot of smaller governments are so focused on just keeping their operations going, making sure the constituents that they oversee have the services they need, are getting the programs they need, and aren’t really paying attention to this risk,” noting “that’s a real problem we hear about regularly.”
The Star also pointed out how…
A 2022 report by the Association of Certified Fraud Examiners found government accounts for 18% of occupational fraud cases, with local government making up 25% of those cases.
Meanwhile, David Malamed, Forensic Accounting Expert noted how financial statement audits, such as the one that Joplin does yearly, only account for 3% of frauds being identified, according to the Association of Fraud Examiners, while he notes that a tip or whistleblower program identifies 50% of frauds! Therefore, while the city likes to cite that they get an audit each year, and they use that financial audit to claim that there are no problems, it doesn’t really answer the big question… Are Joplin funds truly being managed appropriately, and are our citizen tax dollars actually safe from waste, fraud or abuse?
The Star also noted that…
‘Fraud doesn’t just occur in small towns. Last year a former Johnson County District Court accounting supervisor admitted in court she embezzled more than $1 million and created false documents to cover up the crime, for instance. This is why a state auditor often plays a pivotal role in exposing misconduct by issuing public reports. However, while the auditor has a relatively free hand to examine state agencies, Missouri law restricts the ability of the auditor to initiate audits of municipalities.
In fact, Missouri State Auditor Scott Fitzpatrick stated…
“We do have the ability to investigate fraud allegations, but our authority stops at an investigation. We can’t go in and do a full-scale audit.”
Sadly, this is why our Joplin Citizen Audit team has turned to a citizen petition effort for an audit of the City of Joplin! In fact, currently, municipalities must either invite in the state auditor, which our city leaders have clearly told us that they have no desire or intention to do so, or enough residents must sign a petition. In the case of the current effort to initiate an audit on the City of Joplin, 1,970 signatures of registered Joplin voters are required. We are aiming for 2,500.
Our Joplin Citizens for a Transparent and Honest Government(https://www.facebook.com/profile.php?id=100090728525191&mibextid=ZbWKwL)
have found a large number of financial discrepancies, presented them to CPAs, as well as traveled to the State Auditor’s office in Jefferson City, and presented our findings to the Missouri State Auditor’s lead investigator who recommended to us that our best course of action is to initiate a citizen audit petition. Meanwhile, each and every expert that we detailed our concerns to, from local CPA’s, to former City leaders, former Mayor’s, former City Council members, and to the State Auditor’s office, their reaction is always the same… they all saw what they noted as being concerning red flags! However, much like Missouri State Auditor Scott Fitzpatrick stated, it requires the city to initiate an audit, or a citizen petition request is required, such as the one that our Citizen Petition team has been diligently working on, to have the Missouri State Auditor step in and audit our city, which I can now confidently say will be complete very soon… thus triggering a state audit!
Meanwhile, the Kansas City Star noted how Missouri lawmakers this spring weighed legislation that would make it easier for the state auditor to initiate audits of municipalities, and other local units of government. SB 222 would allow the auditor to start an audit after finding a credible report of improper governmental activity, but the proposal didn’t pass before the legislative session ended in May.
Sadly, the Star noted that…
‘episodes of fraud and misconduct in small local governments don’t always surface publicly unless criminal charges are filed – and problems short of criminality may be kept quiet. And in an era of shrinking local news coverage, discussion of problems during city council and governing board meetings may not always draw wider notice.
Unfortunately, this has been our audit team’s experience as well, as local news coverage has little interest in airing the concerns of local government transparency and accountability, and has not even requested to meet with us to go over our documentation that we have presented to the State Auditor’s office!
Meanwhile, although we have met with the Mayor and finance director once, our City Manager twice, and several Council members multiple times, a majority of our Council seems to have little interest in explaining any of the discrepancies totalling in the millions, in a way that can actually justify those concerns, such as why end of fiscal year amounts not matching beginning of year figures… or a $22.6 Million error in the 2021 financials, the $7.1 Million error, our countless other fiscal discrepancies!
This effort started out as a means to find funding for Police and Fire, but upon finding a large number of these discrepancies, it turned into an effort to ensure that taxpayer dollars are being properly managed and safeguarded. An effort that has led to pushback by our city leaders, but widespread support of our community, including residents, local businesses, and even former city officials and Council members!
The Star noted how “The City of Center is a small community and is not able to employ a large number of persons, therefore the council and mayor are placed in a position to have to trust the city clerk to do her job professionally and honestly,” Browning and other council members would later write in a letter to a federal judge. “Mrs. Ray certainly violated that trust, and without regard to the impact it would have on the citizens of the City of Center, abused our trust in a most egregious way.”
Sadly, our own City Manager, Mayor, and Council have openly expressed those same issues of not having enough resources to have clear checks on financial and other decisions by city leaders! Our Joplin City Council says it is therefore forced to trust our Finance Director, as well as other key city leaders, with little oversight into potential issues that could be lurking beneath the surface. Sadly, as noted previously, the yearly financial audit of our city finances does little to ensure that our citizens tax dollars are safeguarded, which is why a State Audit is desperately needed in Joplin.
Mayor Doug Lawson has repeatedly stated that Joplin gets audited yearly, and that a State Audit would be a waste of financial resources. However, between the fact that Joplin has had the same finance director handling the finances with little oversight, and we have had the the same auditor for nearly 2 decades… a city hired auditor that gave the highest marks to Joplin in 2015, when the State Auditor revealed tens of millions in financial mismanagement problems and poor business practices, it gives little assurance to the citizens that their tax dollars are well managed or safeguarded!
The Kansas City Star pointed out something that Missouri State Auditor Scott Fitzpatrick clearly noted… that financial audits, much like the one that Joplin has yearly by the same firm, is often performed by certified public accountants, but they are not the same as the investigations conducted by the Missouri State Auditor’s Office. Fitzpatrick also responded to Peter Theil on Newstalk KZRG who asked the auditor if an audit is really necessary in Joplin, and Missouri State Auditor Scott Fitzpatrick replied…
“An audit is never a bad thing”, adding… “Sunshine is always the best disinfectant”!
State auditors are empowered to examine the entirety of a city or agency’s operations, while CPAs and financial audits focus on more centralized with smaller focus on specific financial matters, which do not look at the entirety of the city finances. In fact, according to our meetings with the Council and the Finance Director, the financial audit that the city hired did not even look at many of the financial concerns that we brought to their attention, nor did they ever review the entire budget… Only a portion of it! That could help reveal how we can get an award of excellence in financial reporting from an auditing firm that works for the city, while failing a State Audit that is hired by and works for ‘We the People’ of Joplin!
Ultimately, government transparency is key, and Joplin City Government lacks transparency at a monumental level! The budget is written in such a way that most Council members, let alone the public can fully understand or comprehend much of its meaning! The budget is written with columns moved around like a shell game, and pages put horizontal one year, and vertical the next! Meanwhile the antiquated website is far from functional for citizens to get information, with a great deal of it unavailable online, and when our team had to request that missing information, we were charged thousands of our own personal dollars! Therefore, connecting the financial trail of dots cost us thousands! Furthermore, with pressure applied on the city, the City Manager put together a finance team and asked me to join that team, which would have ultimately silenced me and prevented me or stalled my effort to collect signatures and trigger an audit! Ironically, the finance committee did little to help the city finances, as the City Council wouldn’t even listen to their findings before making critical key financial decisions!
If a city like Joplin is open and willing to give the information that the citizens or public or news media wants, then that helps tremendously in building trust that they are operating appropriately. Therefore, it is high time that Joplin not only undergoes a full state audit, but that there is a complete follow-up, and if any inpropriety is found… anybody involved is held accountable, and transparency becomes much more apparent to the taxpayers of this city!
Ultimately, although I am confident in the findings that there are some serious financial issues that our citizen taxpayers would find deeply concerning, it is my hope that there isn’t fraud or corruption found within this city’s leadership. Regardless, a thorough audit serves as both a safeguard and a deterrent against improper handling of city funds, as well as improper business practices. Regardless, with more than $159 Million this year… and a proposed $180 Million flowing through our city coffers in 2024, if procedural and financial safeguards are not in place, it leaves our citizen tax dollars at potential risk, places our families safety at risk, and can have financial repercussions that affect generations to come.
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https://www.kansascity.com/news/politics-government/article278111252.html#storylink=cpy
Brian Evans for Joplin 