No background checks, pension issues, bad bookkeeping among North Miami audit findings

An audit of North Miami’s finances and management over a five-year period has found extensive problems with the way the city was run, including employees who were hired without proof of education or work experience, a lack of records for contracts and purchase orders for work in the city, questionable payment of pensions, and dozens of other issues.

State auditors said in a preliminary report, obtained by the Miami Herald, that turnover in key positions and a lack of input from the City Council resulted in an environment that could have opened the city up to fraud, violations of state and city law and other liability. However, the preliminary findings don’t point to any criminal activity.

The city has about a month to respond to the auditor’s recommendations, after which the state will issue its final report. The audit primarily covers the period from 2012 through April 2017.

Key issues included:

▪ A lack of an internal audit process for city finances.

▪ Some employees were hired without background checks, even though they are mandated by the city.

▪ Five employees retained access to North Miami’s IT network after they were no longer employed by the city.

▪ Some employees were able to receive a higher pension and other benefits by delaying their official retirement until after their actual last work day. Those two employees received more than $50,000 in sick leave and vacation time payments by delaying their retirement.

▪ No paper trail for some purchase orders or contracts. For example, in July 2012 the city paid $5,000 to a nonprofit to produce a magazine in Haiti that would focus on the impact of hurricanes and earthquakes, but no proof was found that the magazine was ever published. North Miami staff couldn’t produce a purchase order or contract.

▪ A $2,500 contract termination fee was paid to a contractor when the company actually owed the city about $1,700.

▪ The city manager used to be able to spend up to $100,000 without City Council approval. The council changed that rule in August 2015, lowering the limit to $25,000.

▪ Officials who held city-issued purchasing cards spent more than the city’s $500 single transaction limit more than 400 times to the tune of about $428,000.

▪ Museum of Contemporary Art employees spent more than $25,000 on travel for a member of Nigerian royalty to visit the city during Art Basel in November and December 2015. That sum included about $12,000 for hotels and about $7,000 for the Nigerian leader’s private adviser to fly first class.

The majority of the staff and management from the first few years of the audit period are gone and current city leaders said they have taken steps to remedy many of the issues raised through the audit.

And as the audit took several years to complete, city administrators said they’ve adjusted and improved practices.

“We’re working with the state to complete the audit process and we’re providing them with our management responses,” City Manager Larry Spring said.

Based on the preliminary findings, city leaders don’t expect to pursue any charges against former staffers or try to recoup any funds.

“A lot of these things were prior to [Spring’s] administration and prior to mine but, whether it happened under our watch or somebody else’s watch, we have to make sure that wherever these flaws were they don’t continue,” Mayor Smith Joseph said.

State auditors pointed to multiple leadership changes as a potential reason for some of the issues. In the past three years the city has had three city managers. The city also went through four finance directors from 2011-2015.

“City personnel acknowledged that management turnover may have contributed to several of the control deficiencies and instances of noncompliance cited in this report,” the report reads.

Spring was initially hired as North Miami’s finance director in August 2015. He was promoted to city manager in February 2016 after Aleem Ghany resigned. Ghany, previously North Miami’s public works director, followed Stephen Johnson, a former police chief in North Miami and Miami Gardens who resigned in 2014.

The audit process started in 2014 when council members asked the state to perform one while in the midst of a separate investigation by the Internal Revenue Service that ended with the city paying $33,000 in fines.

The IRS questioned money given to about a dozen people for travel to Haiti in 2012, including former council members and staff. When the city couldn’t justify the spending, the agency levied about $19,000 in fines. The other $14,000 was for adjustments to W-2 forms for about 70 city contractors and vendors.

The city budgeted about $200,000 to pay for a more in-depth state audit. Councilwoman Carol Keys thinks the expense was worthwhile.

“I think we have stopped hundreds of thousands of dollars in mismanagement,” Keys said. “I think that’s all the residents can hope for.”

North Miami has taken steps since the audit began like reducing the city manager’s purchasing limit, hiring an employee to strictly scrutinize city contracts and modifying contracts for city administrators so the city isn’t left with huge payouts when managers resign or are fired.

Ethics and government management experts agree that the city’s audit and some of the changes that have been made are steps in the right direction. They said the next step will be assuring the public that the mistakes won’t happen again.

“Being transparent is important when you’re going through problems,” said former County Commissioner Katy Sorenson, who also ran the now-defunct Good Government Initiative. “Recognize the problem and let [the public] know that there’s a solution in place to address the problem.”

In February 2015, the state’s Joint Legislative Auditing Committee approved doing the audit. That same committee will approve the final results.

The audit did not mention names but the findings point to situations like Johnson’s resignation in 2014, and the firing of former city attorney Regine Monestime in 2015.

Johnson was paid a $50,835 severance package that was approved by the City Council. Auditors said “documentation was not available to evidence the public purpose served by the severance payment when the employment separation was voluntary.”

Monestime sued the city after her firing and the City Council voted on negotiating a $150,000 settlement, but the case remains open.

This story was originally published October 20, 2017 at 7:00 AM with the headline "No background checks, pension issues, bad bookkeeping among North Miami audit findings."