‘A failure at several points’: City leaders respond to embezzlement investigation

The electronic sign on Lynn Lane welcomes visitors to the Sportsplex and Travis Outlaw Center on Friday. News broke this week that four more employees of the city of Starkville's Parks and Recreation Department were arrested in connection with an ongoing embezzlement investigation. (Photo by Ryan Phillips, SDN)
By: 
LOGAN KIRKLAND
Staff Writer

City officials on Friday discussed how they will address the ongoing embezzlement investigation concerning the city of Starkville’s Parks and Recreation Department, with at least five former employees accused of embezzling nearly $22,000.

Mayor Lynn Spruill said the news of the arrests is a “great disappointment” because the city trusted them to do their job while behaving ethically and they broke that trust.

“Once you get past that, then you have to get into the ‘how do we fix this and keep it from happening again,’” Spruill said. “We go into the mode of making it better than it was before.”

Going forward, Spruill said there needs to be a methodology where people are monitored more closely when managing cash.

One example Spruill gave was having double receipts where two people have the same receipt so, when it’s necessary, they can go back and review them.

“We are looking to implement changes in order to make sure that we close any loopholes or any kinds of opportunities that employees would have to go unchecked,” Spruill said. “That’s part of what we are getting the auditors to look at, as our best management practices for handling funds.”

Spruill said she looked at not allowing the departments to handle cash, but said it would be impractical, especially in the Parks and Recreation Department where small transactions are regularly made for facility usage.

“On a day-to-day basis, you would just have a flow that has an accountability factor that we didn’t necessarily have before.” Spruill said.

THE INVESTIGATION BEGINS

Spruill told the Starkville Daily News identifying the embezzlement took “several paths” before the investigation began to yield suspects facing criminal charges.

She said the city was going through an audit, along with a new Board of Aldermen, which brought fresh eyes to documentation and procedures.

Spruill said she asked about background checks, because Starkville Police Chief Frank Nichols told her someone in the Parks and Recreation Department was not a good person to be working there.

At the time, the city did not do background checks on 10-99 employees. As the city was working to implement the checks, Spruill gathered a list of employees and sent it over to the Parks and Recreation Department.

“When we got the list and sent the list to the parks department, some of the people there said ‘I don’t know who that is, I’ve never
seen that person,’” Spruill said. “That was how that all came to pass.”

Those looking into the matter discovered it was more than just the abuse of hours, but the mishandling of cash as well.

PREVENTION

Director of Human Resources for the city of Starkville Navarrete Ashford said when it comes to the hiring and oversight of subcontractors, it is handled through the specific department and eventually the city clerk’s office. Many other city departments apart from Parks and Recreation also hire subcontractors.

“Originally, they were coded as referees and janitorial, but they were functioning as doing janitorial work and a night time supervisor,” Ashford said.

When asked if there would be more thorough background checks in the future, Ashford said the city runs background checks for its employees, but the Parks and Recreation Department does background checks for its own subcontractors.

“There was nothing in the employees’ background that would have flagged them from being hired as subcontractors,” Ashford said.

During background checks, the city looks at both criminal and sexual offense history.

To help prevent cases like this one from happening, Ashford said the city will have a team to help maintain internal control.

He said this small team will be made up of Budget Chairman and Ward 2 Alderman Sandra Sistrunk, City Clerk Lesa Hardin, himself and an accountant from the Electrical Department.

The group will focus on cash-handling processes, checking procurements and other issues dealing with money.

“That’s going to focus on being proactive rather than reactive,” Ashford said.

CITY FINANCES

In terms of monitoring city finances, Sistrunk said there are a series of steps in place.

Those steps include approval from department heads, which is then prepared by the city clerk and sent to the board for approval in a claims docket.

Former Parks and Recreation Director Herman Peters turned himself in to SPD this week and is facing conspiracy to commit embezzlement, while the other four arrested face embezzlement charges.

“We have an opportunity to ask if there’s something that looks out of the ordinary,” Sistrunk said.

This fiscal year, Sistrunk said herself, the city clerk and the mayor are meeting with department heads, asking for financial statements, asking questions about budgeting and getting a better understanding of the operations.

Sistrunk said during review, sometimes items may be over budgeted or budgeted revenues are projected too low.

“Some things will pop out there that might cause you to follow up on something,” Sistrunk said.

To put the money lost from the embezzlement into perspective, Sistrunk said the budget for the Parks and Recreation Department is grossly rounded at $1.7 million.

She said the $22,000 that was embezzled could have been used for funding operations like a part-time sports programming position, life guard salaries for the summer or even a part-time janitorial job or services.

“By not having those funds, the question is what have we not been able to do? It’s less about what we add on, to me, as opposed to what have we not done as well as we should have because this was happening,” Sistrunk said.

When asked if the embezzlement could have been easily discovered, Sistrunk said the Parks and Recreation Department is a complicated situation, because it operated as an independent entity until 2015.

She said when someone is reviewing financial information, one of the things people will look at is one period compared to a previous period.

She said in those comparisons, the main concern is looking for a “spike up or spike down” in numbers.

“At that point, you inherit historical information,” Sistrunk said. “I think that was a complicating factor for this.”

Sistrunk said in cases of embezzlement, when more than one person is involved, it becomes harder to discover. She said an audit may not have necessarily caught the embezzlement because they tend to be narrowly focused.

“As long as the numbers are within a range, you might not have some reason to look,” Sistrunk said.

Sistrunk said the city’s financial reviews for proper internal control for cash management would have helped in this particular situation.

Along with the financial reviews, the city will look at educating for purchasing techniques, purchasing practices and policies to ensure it is doing what is necessary as a government entity.

“I think numbers tell a story,” Sistrunk said. “When you start to get financial information that is comparable from period to period that’s giving you good information, then it does get easier to see irregularities.”

Sistrunk said the city has good employees, but at times there are people who will take advantage of an opportunity.

“We the board, department heads, all of us involved in this, need to be putting people in a position where they’re not tempted to do these things,” Sistrunk said. “There was a failure at several points.”

TRUST WITH PUBLIC

Spruill said the city understands the serious nature of the arrests because every dollar counts, even more so when it’s the public dollar.

She said she wants to make sure the public trust is kept, especially when one of the city’s biggest initiatives is the expansion of its parks and facilities.

“If part of what we are trying to do is going to cost money, then you want to be able to say that you didn’t ever waste it,” Spruill said. “Every little bit that comes away from there is that much less we can do.”

Spruill said she wants to let the citizens know this unfavorable situation is not being taken lightly.

“I anticipate that we will move forward and be better than we were before,” Spruill said.

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