Investigation Finds Thousands in Unauthorized Spending in Riverside

By B.A. Morelli, Reporter

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By Aaron Hepker

RIVERSIDE, Iowa - A special investigation by the state auditor's office found thousands of dollars in improper disbursements for health benefits, vacation time and sick leave and thousands more in unauthorized spending by City of Riverside staff.

Among several findings, the investigation released on Friday detailed $26,756.35 of unauthorized payments by the city into staff's flexible spending accounts for health care, $24,260 in improper sick leave payouts and $4,900.98 in improper vacation payouts.

In total, the audit found $64,061.85 in improper disbursements from 2006 to 2012. The audit also found $274,047 in disbursements paid prior to City Council approval, $32,016.94 that did not have sufficient documentation and $10,289.10 that were paid without City Council approval, although none of these payments were considered improper.

"Any time an auditor does a report on a city is cause for concern," Riverside Mayor Bill Poch said. "It should be a red flag."

Poch said City Council members in the small town of about 1,000 people about 15 miles south of Iowa City are well-intentioned but are part-time volunteers and must trust the staff in place.

City administrator Rusty Rogerson requested the audit a few months after being hired in October 2012 after noticing some irregularities in the city's accounting.

"When I started reviewing records, I thought I noticed some misappropriated funds," Rogerson said. "Under Iowa law, I am required to report it. I did, and a year later we have received the report."

Poch and Rogerson said many of the recommendations in the report have already been implemented, and more will be implemented in the first quarter of 2014.

Tami Kusian, deputy state auditor, and Washington County Attorney Larry Brock, were both out of the office on Friday afternoon and not available for comment. Rogerson said it is unclear whether the audit will lead to any sanctions for individuals or the city.

Tina Thomas, who worked initially as city clerk beginning in 2004 and later assumed the city administrator title before resigning in July 2011, is connected throughout the report to many of the flagged incidents, including payments for health benefits. According to the audit, City Council should have approved the payments but did not.

Reached on Friday afternoon, Thomas said she is aware of the audit, but has not read it. She said she does not believe she violated any rules.

"There's just a lot going on in City of Riverside," Thomas said. "I will have to look at that (audit) and comment later."

The city's insurance agent and Thomas said the "cafeteria plan" the City Council approved to establish flexible spending accounts included an option for "health reimbursement arrangements." However, representatives for the third-party administrator of the program said "health reimbursement arrangements" are a separate plan that is not covered in the approved "cafeteria plan," according to the audit.

"Based on a review of correspondence between the City’s insurance agent and the third-party administrator, Ms. Thomas intended to use the FSA as a reimbursement for her spouse’s employee share of his health insurance premiums," according to the audit. "However, that is not an allowable expense under an FSA. As a result, the HRA was established to allow Ms. Thomas to receive the benefit she wanted."

In another finding, the audit raised several questions about the use of Hart-Frederick, a Tiffin-based engineering consultant where Thomas now works.

The audit stated nearly $26,000 worth of jobs performed by the Hart-Frederick could have been performed by existing city staff. The audit found 21 bills totaling $220,000 paid to Hart-Frederick prior to City Council approval, and a payment to the firm for $10,713.29 while City Council only approved a payment of $4,195.19.

"The extent to which the City uses Hart-Frederick may not be cost effective and in the best interest of the city," the audit stated.
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