Audit shows former Alexander mayor & bookkeeper received unauthorized payments

(Corrections made 8/01/17)
According to an audit conducted by the Arkansas Department of Legislative Audit former City of Alexander Mayor Michelle Hobbs and former bookkeeper Ruby Whittaker received payments that were not authorized by the city council. This latest audit covers the years 2014 and 2015. Audits of municipalities and counties, who can’t afford an independent audit, are normally conducted by the state annually.

The audit states, “In 2014, the Mayor was paid $1,680, and the Treasurer (payroll preparer) received a pay increase of $0.25 per hour, without Council authorization.”

Alderman Dan Church asked Mayor Paul Mitchell if the salary increase was in that year’s budget. Mitchell said, “No,” and also said the auditors couldn’t find any meeting minutes approving the pay increase or giving Hobbs an additional $1,680.

Hobbs was appointed mayor in November 2012 when current mayor Paul Mitchell lost a recall election after serving only two years of his first term. Hobbs lost her attempt to be elected mayor to Mitchell in 2014. Mitchell has been mayor since January 1, 2015.

Whittaker was appointed bookkeeper by Hobbs May 6, 2013 and served in that position until she resigned effective January 2, 2015. Whittaker was replaced by the current bookkeeper JoAn Churchill on January 2, 2015.

The audit was reviewed during the council’s March 20 meeting. Mitchell told aldermen Legislative Audit has sent a letter to Pulaski County Prosecutor Larry Jegley explaining the violation. It will be up to Jegley to determine if his office will proceed with prosecution.

Just when Alexander officials thought the city was nearly out of its long-time financial hole, the audit says otherwise. According to the “Treasurer and Bookkeeper” section of the audit $46,654 in 2014 and $46,254 in 2015 ($92,908 total) of, “restricted monies were paid from the Parks and Recreation Fund to the General Fund.”

“Restricted” refers to a one-cent sales tax, approved by voters, with the added stipulation that two-eighths (one-quarter) of the collected tax goes to parks and recreation, one-eighth to the fire department and five-eighths to the police department. That revenue can only be spent in those departments.

The audit also states the Police Department Fund did not receive all of its five-eighths-cent sales tax revenue in both 2014 and 2015.

“In 2014 Sales and Use Tax monies were not prorated correctly,” the audit states. “As a result of these transactions $42,617 and $42,736,” ($85,353 total), “are due to the Police Fund from the General Fund in 2015 and 2014, respectively.”

“We got a big surprise after the audit was over,” Mitchell said. “We discovered we didn’t have as much money in the General Fund as we thought we did.”

Neither Mitchell nor Treasurer Kenneth Miller can explain what happened. After the meeting Miller said there were many financial related documents the auditors wanted for 2014 that couldn’t be located. Miller said the city will have to develop a payment plan in the budget to refund those two accounts.

Mitchell has been mayor since January 1, 2015. Miller was appointed treasurer April 6, 2015. He was then elected treasurer in the November 8, 2016 election.

Some good news did come out of the audit. At the end of 2015 the General Fund owed the Street Fund only $648. A major jump from the $87,248 owed at the end of 2014. In an E-mail since the meeting Bookkeeper JoAn Churchill verified the last amount owed to the Street Fund was paid.

The issue of street fund revenue being used by the General Fund goes back to former Mayor Shirley Johnson. Cities and counties receive a share of the state fuel tax monthly. Under state law that revenue must be deposited in to the street fund and can only be used for street purposes. According to past audits by 2008 $132,792 had been kept in the General Fund rather than transferring it to the Street Fund.

In 2006 Woodland Hills, now known as South Alexander, was annexed requiring a reorganization of the city council. When the new aldermen discovered the misuse of street funds the council voted to require Johnson to deposit all street revenue from the state into the Street Fund. Future budgets were also written to pay back the revenue owed the Street Fund.

Johnson’s 20-year reign as mayor ended in 2010 when she was defeated for re-election by Paul Mitchell. Mitchell was sworn-in as mayor January 1, 2011.

In other business during the March 20 meeting;

Council members approved Mitchell’s recommendation to purchase a Mahindra 2538CHIL tractor for $32,200 from Central Arkansas Mahindra in Little Rock. The tractor includes an all-weather enclosed cab, front loader, a rear rotary cutter (bush hog), and a rear finish mower. The council agreed to appropriate $37,000 to cover sales tax, safety-light bar and adding “City of Alexander Street Department” to the tractor.

Central Arkansas Mahindra was the lowest of three bidders. Greenway Equipment, Inc. of Bryant quoted a John Deere 3039R Compact tractor at $36,954.53. Fiser Tractor in Bryant quoted a Kubota L4060HSTC at $40,259.03.

In another purchase for the street department council members appropriated $27,000 towards the purchase of a 2016 RAM (Dodge) 1500 Crew Cab Tradesman pickup truck. The truck will be purchased from Landers in Benton through a state contract.

Mayor Mitchell said the street department currently has one truck with seating for two people, or three close together. Once he hires a street department superintendent Mitchell said that person will be able to use the new truck while the street crew still has a truck available for them.

Aldermen appropriated $25,000 to outfit four new police cars and one pickup truck for the fire chief. The money will be used to add light bars, prisoner cages, radios, and stenciling the city name on the side of the vehicles.

Council members approved using $10,000 from the Park and Recreation Fund to buy benches and trash receptacles for the city park.

The next regular meeting of the Alexander City Council will be held Monday, April 17. The meeting will be at 6 PM in the courtroom at the City of Alexander Municipal Complex. The public is invited to attend.