Auditor of State Mary Mosiman today (Tuesday), released a report on a special investigation of the City of Harlan for the period July 1, 2004 through June 30, 2016. The special investigation was requested by City officials as a result of concerns regarding certain travel reimbursements issued to the former City Administrator, Terry Cox.

Mosiman reported the special investigation identified $144,872.32 of improper and unsupported disbursements. In addition, Mosiman reported the City frequently provided meals, snacks, and/or drinks for City Committee, City Council, or City employee meetings involving volunteers from the community. However, the City does not have a written policy addressing the public purpose of such disbursements. For the period June 1, 2011 through June 30, 2016, $5,703.61 of disbursements for food, drinks, snacks, decorations, and plastic dinnerware were identified for which there is no documentation of the public purpose served.

The $123,543.67 of improper disbursements identified includes $33,953.88 of payments issued to Mr. Cox for travel reimbursements primarily for excess mileage claimed, expenses reimbursed by third parties, expenses for events not attended or for events which provided no public benefit, expenses supported by altered documentation, and alcoholic beverages included on meal receipts.

In addition, Mosiman reported the improper disbursements identified include $35,197.60 of payroll checks issued to Mr. Cox for hours recorded on the payroll register which Mr. Cox did not work. The City incurred additional FICA and IPERS contributions for the improper payroll totaling $5,501.30.
The improper disbursements identified also include:
• a $9,457.60 vacation payout issued to Mr. Cox which he was not entitled to,
• $12,600.00 of payments issued to Mr. Cox for a monthly car allowance, which was previously discontinued,
• $1,315.88 of unauthorized salary issued to Mr. Cox,

• $15,364.72 of payments to vendors,
• $4,811.78 of purchases made on the City credit card issued to Mr. Cox,
• $1,792.48 of purchases made on another City credit card,
• $114.51 of fees including finance charges, late fees, and foreign transaction fees on City credit cards,
• $1,055.00 of payments issued on behalf of City employees for eyeglasses, which did not comply with the City’s policy, and
• $169.85 of payments issued to Harlan Municipal Utilities for the HBO Multiplex package for Mr. Cox’s office included with the cable television services provided at City Hall.

In addition, because the payments issued to Mr. Cox were processed through the City’s payroll system, the City incurred additional FICA and, in some cases, IPERS contributions for the improper payouts, car allowance, and salary totaling $1,788.06 and $112.40, respectively. Although limited records were available for the period prior to July 1, 2004, an additional $308.61 of improper disbursements for the period November 1, 1999 through June 29, 2001 were identified for improper purchases made on the City fuel card issued to Mr. Cox.

Mosiman reported the $21,328.65 of unsupported disbursements identified includes:
• $15,391.26 of reimbursements for Mr. Cox,
• $3,111.15 of purchases made on the City credit card issued to Mr. Cox, and
• $2,826.24 of purchases made on another City credit card.

In addition, Mosiman reported it was not possible to determine if additional amounts were improperly disbursed because adequate documentation was not available.
The report includes recommendations to strengthen the City’s internal controls, such as improvements to segregation of duties, performing independent review of utility billings, collections, and delinquencies, and ensuring all disbursements are properly supported, approved, and paid in a timely manner.

Copies of the report have been filed with the Iowa Division of Criminal Investigation, the Shelby County Attorney’s Office, and the Iowa Attorney General’s Office. A copy of the report is available for review in the Office of Auditor of State and on the Auditor of State’s web site at https://auditor.iowa.gov/reports/1620-0790-BE00.