Auditor: Chamber funds mishandled

More than $239,000 in improper disbursements found in year-long investigation by State Auditor

— Daily Freeman-Journal file photo
The Chamber of Commerce was shuttered in late June 2018 after financial discrepancies were found. The doors opened a few weeks later with volunteer help staffing the office. Auditor of State Rob Sand released an audit report Wednesday with found more than $239,000 in improper disbursements,

Nearly a quarter of a million dollars in Webster City Chamber of Commerce money was mishandled over a five-year stretch, apparently largely by an employee whose actions went routinely unchecked, a state audit shows.

The audit released Wednesday by State Auditor Rob Sand’s office spans Oct. 1, 2013, to June 30, 2018, and sheds light on why the Chamber office was forced to close in June 2018.

Right around that time, Webster City Chamber of Commerce officials asked for the state audit because it had discovered financial transactions that didn’t add up.

Leah Mulholland, 39, the Chamber’s now-former financial and administrative assistant, was responsible for those transactions, according to the audit.

The audit and investigation identified $239,585.23 in improper disbursements and $23.602.83 in unsupported disbursements.

Leah Mulholland

The details of some of those include:

• $190,489.58 in payments to or for Mulholland, including unauthorized checks, excess gross salary, and the Chamber’s share of payroll costs;

• $14,497 in transfers from the Chamber’s primary checking account to the Chamber’s “Chamber Bucks” bank account which were not approved;

• $15,725.09 in vendor payments;

• $10,086.57 in penties and interest paid to the Internal Revenue Service and the Iowa Department of Revenue;

Colette Bertran

• $3,950 in checks redeemed for cash and cash withdrawals; and

• $4,837.99 in bank fees.

The $23,602.83 of unsupported disbursements identified include:

• $19,422.51 of vendor payments;

• $4,058.48 in reimbursements issued to two former executive directors; and

• $121.84 in reimbursements issued to Mulholland.

The audit targets Mulholland for her alleged actions and faults the Chamber and its board for failing to monitor her work.

“We determined that the Board failed to exercise proper fiduciary oversight,” the audit states. “The lack of appropriate oversight and the failure to ensure implementation of adequate internal controls permitted an employee to exercise too much control over the operations of the Chamber.”

“We as a board would like to move on. We’ve been anxiously awaiting this report,” Colette Bertran, president of the Chamber board, said Wednesday.

She said the board and staff would be cooperating with the Iowa Division of Criminal Investigation and the state attorney general’s office in what is expected to become a criminal case.

“At this time, the investigation is moving forward. I can’t say what the time frame is or when the next steps will happen,” Bertran said. “But we’re doing everything we can to support and collaborate with those agencies.”

According to the audit, monthly bank statements for the Chamber’s four accounts were mailed directly to the Chamber office and were opened by Mulholland. Neither the bank statements nor the images of the redeemed checks were reviewed by the members of the board or the executive director, the audit states. Bank reconciliations were not performed during Mulholland’s tenure, it said.

The discrepancies came to light on June 15, 2018, when the then-Executive Director Linda Christianson reviewed a monthly statement for the Chamber checking account and reportedly found unauthorized checks issued from the account to Mulholland. Christiansen then told the Board. At that time the Chamber attorney and the Hamilton County attorney were notified and the Chamber accounts were frozen. The locks to the Chamber office were also changed at that time.

That same day, the board president, two board members and Christianson met with Mulholland to discuss their concerns.

Mulholland admitted to the misuse of funds and was immediately fired, the audit recounts.

During that meeting, Mulholland reportedly signed a form admitting to the misuse of funds. But the form was misplaced and could not be found after the meeting, the board president told investigators.

Mulholland started working at the Chamber office in October 2013 as an administrative assistant, a position she held until she was fired in June 2018.

Mulholland was originally hired as a part-time employee at 20 hours per week. Those hours were increased to 35 on April 12, 2017, by the Chamber’s executive board. She was advanced to 40 hours a week in December 2017, according to the audit.

Checks to Mulholland

The investigation found that of 367 checks issued to Mulholland, 222 were unauthorized.

The unauthorized checks totaled $124,512. They were written in amounts ranging from $20 to $2,000. The rest of the checks included 139 payroll checks, four bonus checks and two reimbursements. In all, the Chamber paid Mulholland $236,313.03.

Although the Chamber used an online payroll system called Intuit, which automatically calculated gross and net pay, the audit found that Mulholland overpaid herself on 101 payroll checks with no authorization. Eighteen payroll checks were unauthorized, according to the audit. They totaled $14,564.41.

“When we asked Ms. Mulholland about the concerns identified, she stated she was not able to provide an explanation without speaking with her attorney,” the audit report states. “However, she stated several times, ‘Everything was approved.'”

Garnishments

Mulholland’s pay was being garnished during at least part of time covered by the audit. That money should have come out of her payroll check. Instead, the audit found, the garnishment funds were taken from the Chamber account on seven dates, totaling $533.48.

Debit card transactions

Of 847 debit card transactions, only 107 were properly supported by Chamber records, the audit found. One of the more colorful transactions was a $12.98 purchase of body jewelry from Amazon.

“Ms Mulholland was not able to provide an explanation for the purchase when we asked during the interview with her,” the audit states. “Because the Chamber would not purchase body jewelry, this was determined to be a personal purchase.”

Other examples of debit card purchases include:

• 21 payments to cell phone providers, totaling $3,507.82. The Chamber did not issue cell phones to employees and it was not the policy of the Chamber to pay for employees personal cell phone bills. The audit shows the payments were to U.S. Cellular, Mulholland’s cell service provider.

• 11 payments that didn’t correspond with any business purposes to various hotels totaling $2,719.72.

• Payment to a credit card company for $1513. 20. “Because the Chamber did not have a credit card, we determined the payment was for a personal credit card,” the audit states.

• 30 payments to multiple Webster City restaurants totaling $699.29 that didn’t appear to correspond with any business purpose.

• 14 payments to various department stores totaling $674.75.

• 23 payments to Google Jam City, totaling $316.77 for cell phone games.

• Five payments to inmate telephone services totaling $216.20. “Ms. Mulholland was not able to provide an explanation for these payments when we asked during the interview with her,” the audit states.

Ultimately, the audit found $13,804.40 in improper disbursements and $10,399.37 in unsupported disbursements.

Chamber Bucks

Chamber Bucks is a one-to-one account, meaning every Chamber Buck is created by a dollar deposited in that account.

“The Chamber Bucks bank account should be self-sustaining with no need for the Chamber to deposit funds from other sources,” the audit states.

However, the audit found 28 deposits into the Chamber Bucks account from the Chamber’s checking account totaling $14,497.

“We are unable to determine if the funds from the Chambers checking account were needed because the amounts collected from the sale of the Chamber Bucks were not properly deposited to the account or if checks were improperly issued from the Chamber Bucks account,” the audit states.

There were also 60 overdraft and service fees in the Chamber Bucks account, totaling $4,674.09.

Checks/PayPal

The audit also found $1,416.14 of improper and $8,454.17 of unsupported disbursements paid by check. Many of those purchases were made at local Webster City area businesses.

And the Chamber’s PayPal account was used for app store purchases after business hours and for personalized e-cards that totaled $419.66 of improper disbursements, and $110.14 of unsupported disbursements.

IRS

The audit states that Mulholland was responsible for paying all Chamber bills on time, including federal and state payroll taxes. However, from 2016 through 2018, the Chamber was assessed Internal Revenue Service fees and penalties totaling $9,221.65. An Iowa Department of Revenue refund of $1,128 went undeposited.

Recommendations

Recommendations to strengthen the Chamber’s internal controls were offered in the report.

“Chamber officials should implement procedures to ensure appropriate payroll records are maintained. Chamber officials should also periodically review payroll records to ensure payroll is calculated properly. In addition, the Executive Board, or a designated member who is familiar with the Administrative Assistant’s actions, should review and approve the administrative assistant’s timesheet for each pay period,” the report states. “The review and approval should be documented by the signature or initials of the reviewer and the date of approval.”

Bertran addressed those recommendations.

“We had implemented these suggestions prior to the report being issued,” she said. She added that if the auditor had further recommendations, the board would implement those as well.

The Webster City Chamber of Commerce office opened several weeks after it was forced to close in June 2018 with volunteers who worked a few hours a day. Former employees were recruited to help answer phones, prepare the table tent calendars and send out the weekly Chamber newsletter. In December 2018, the Chamber board hired Jen Peterman as its new executive director. Denise Smith was hired in January 2019 as its membership director.

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