Letters from the state auditor's office, issued after routine audits of Grove City between 2001 and 2004, warned the city three times that its record-keeping and practices could increase the risk of theft or fraud.

Letters from the state auditor's office, issued after routine audits of Grove City between 2001 and 2004, warned the city three times that its record-keeping and practices could increase the risk of theft or fraud.

Those letters predate the city's latest problems with unpaid federal income withholding taxes. In December, representatives of the Internal Revenue Service said the city owed $685,905. More debt to the IRS was found soon afterward.

City police investigating the unpaid taxes said they have found evidence of theft.

The Grove City Record has obtained management letters sent by the state auditor to the city for the fiscal years 2001-02, 2002-03 and 2003-04.

The 2001-02 letter said the city had a "significant listing" of budget items and written checks that remained "long standing."

That situation "may allow for errors, irregularities and fraud to occur without the timely detection of management," the letter said.

The 2002-03 letter also cited a "significant listing" of "long standing" items.

That situation, the letter said, "could lead to misstated bank or book balances or theft ..."

The 2003-04 letter said 7 percent of park and recreation department receipts were not deposited on the first business day following receipt, as required. "This weakness increases the risk that cash could be stolen or lost," the letter said.

The management letter for 2004-05 lists no mention of theft risk. It does, however, recommend the city revise its computer password policies and network review procedures. Failure to adopt adequate policies and procedures, the letter said, "could lead to an unauthorized individual gaining access to the system and accidentally or intentionally deleting or altering ... data."

Essentially the same warning about computer passwords appeared in the 2006-07 management letter.

The management letters also address a number of other recommendations and each notes "the limited nature of our audit."

Memorandums written by then-city administrator Sharon Reichard and dated Sept. 14 and 17, 2007, listed several steps taken to improve city record-keeping. They included hiring management consultants Schonhardt and Associates to reconcile financial records. Schonhardt also developed a finance department procedure manual.

Both mayor Richard "Ike" Stage and former mayor Cheryl Grossman have said past audits turned up no major concerns regarding tax payments. Each also said a forensic audit found nothing amiss after former finance director Robert Behlen left that job. Behlen did not return a telephone message by press time.

Stage also has said any problems with IRS debts would have been resolved in 2003, when the city settled a $9,074 debt with the IRS and pledged in a letter that it intended to follow all regulations and had implemented procedures to correct past practices.

The Record also obtained an undated letter from then-city council member and finance committee chairman Bob Hatley, written to then-council president Bill Saxton and apparently shared with other council members.

Hatley wrote that at the end of fiscal year 2004, the city's bank balance was $45,927 lower than its book balance, and "it also appears that this may have been an issue for some time."

Hatley did not return a telephone message by press time.

City officials on Feb. 7 said the city has made a payment of $752,179 to the IRS. The IRS said payments had been missed since at least 2007.

City police said they have been issuing subpoenas. Also investigating are the Ohio auditor's office, the Franklin County prosecutor's office and the Ohio Bureau of Criminal Investigation.

The city has hired an independent consulting company, GBQ Consulting LLC, at a cost of up to $20,000, to investigate the causes of the tax errors.