When Hilliard City Council members return from their summer recess Aug. 27, they could decide whether to contract with accounting firm Schneider Downs & Co. to perform a "forensic audit" of the city's past accounting practices and financial controls.
Councilman Les Carrier is lobbying for such an expanded third-party audit, but council President Albert Iosue said he finds it unnecessary, at least until city officials are able to learn the final findings of a criminal investigation that launched the current audit of the city's financial controls.
Schneider Downs' in-progress audit looks only at current practices, according to both Carrier and Iosue.
Typical financial audits confirm the accuracy of a company's financial records, according to basic accounting principles, but forensic audits go deeper, focusing on an issue defined by a client, examining financial information to determine if it is accurate and lawful and meeting standards for use as evidence in court, if necessary.
The findings of Schneider Downs' current audit are expected in about six weeks, law director Tracy Bradford said July 24.
"Council will receive a copy when (the administration) receives a copy, which we anticipate receiving in the next five to six weeks," she said.
Donald R. Owens, a shareholder in Schneider Downs, explained the firm's current audit to City Council on July 9. He appeared at the behest of Carrier.
The city's contract with Schneider Downs states in part, "This agreement shall be considered terminated when the amount of $48,000 has been invoiced and paid to (Schneider Downs) ... unless City Council appropriates and authorizes the expenditure of additional funds."
The contract establishes hourly rates of $110 to $140 per hour, depending on the staff member providing consulting services.
The firm was asked, according to a proposed scope, "to ensure appropriate controls are in place and effectively safeguard the city's funds and assets."
The contract includes a survey of the city's current practices, making recommendations for improvements and implementing some of the improvements.
But Carrier said he wants a forensic audit that would delve into past financial controls, including use of the city's fleet vehicles. He said he specifically wanted to look at the use of a vehicle by Mayor Don Schonhardt while he was acting safety director for a five-year period, which ended last year.
Concerning Schonhardt's use of a city-owned vehicle, Iosue said, there is no evidence to warrant it.
Bradford said in March that the mayor's use of any fleet vehicle was in his capacity as acting safety director.
"I'm comfortable with that," Iosue said.
The current audit was requested in the wake of the alleged theft of more than $500,000 by Heather H. Ernst, the former deputy director of the Hilliard Recreation and Parks Department. A Franklin County grand jury indicted her March 1 on eight felony counts, including theft in office and filing false tax returns.
Court documents revealed that from May 2013 to fall 2017, $541,331 was unaccounted for from deposits from the city's two pool facilities.
A trial date for Ernst, who pleaded not guilty, is scheduled Sept. 26.
Iosue said the city should wait until the criminal proceedings are completed before considering whether a third-party forensic audit is necessary.
"I know (Carrier) wants to know what happened (to the money), but it is part of an ongoing criminal investigation. ... (The parties) have information that we are not even yet privy to know," Iosue said. "Let's be patient."
Iosue said the information Carrier wants to know might become public when the criminal case against Ernst is adjudicated.
"I don't see what we gain from a forensic audit (now) except spending more money," he said.
Council Vice President Kelly McGivern said July 24 she wants "more information" before deciding whether to pursue a forensic audit.
"I believe the type of forensic audit that is being discussed is very expensive and may not yield a return on the investment," she said. "I would rather spend those dollars on a thorough review of our policies and procedures, making needed changes, and robust ongoing monitoring."
Councilman Pete Marsh said he sees the need for a forensic audit.
"I strongly believe that we need to have a forensic audit conducted to review past practices and events," Marsh said. "The ongoing pool-theft investigation is a clear indication that somewhere along the way, some procedure or process failed. We need to know what failed and why it failed to make sure it does not happen again.
"The absence of a criminal theft is not proof that procedures are not failing now that could potentially lead to problems in the future. The only way to properly examine this is through a forensic audit."
Carrier said he has communicated to Schneider Downs the desired scope of a forensic audit. He said he was not sure what a forensic audit would cost and is waiting for the estimate from Schneider Downs based on the requested scope.
Bradford also said she could not quantify the cost of such a forensic audit at this point.
In an email to Owens, Carrier wrote that he wants the city's change-order process for professional service contacts to be reviewed, specifically those Ernst made; a study of payroll operations; a study of the city's 48 tax-increment financing accounts; a review of receipts at the city's two pools that predate the time the first theft was believed to occur; a review of employee use of city vehicles; and establishment of confidential "whistleblower" hotline to report suspicious activity.
"(Ernst) worked for us for 20-plus years," Carrier said.
He said he wants to know more about change orders made for pool-related construction projects, for example, and not just the current practices at the pool facilities and elsewhere in the city.
The failure to properly withhold medical-insurance premiums in 2017 for some City Council members, as was revealed earlier this year, is another example of the need for a deeper audit, Carrier said.
Four council members opted to enroll for insurance benefits in 2017, said David Delande, Hilliard's finance director, but proper deductions were made only for one. The city did not withhold a one-time $1,000 deduction from the three, Delande said; however, deductions from monthly paychecks were made for all four council members last year.
Legislation for a forensic audit is expected to be presented for council's consideration Aug. 27, Bradford said.
"It is also something we will discuss at our council retreat (Sept. 7)," Iosue said.