City Manager Apologizes for False Perception to Council, Councilman Howze Apologizes for Charges of Fraudulent City Accounting

At the May 13, 2010 Special Turlock City Council Meeting directing staff how to use newly discovered “reserve” funds sitting in accounts totaling over $6 million, Turlock Vice Mayor Kurt Spycher started a discussion concerned with transparency as he stated that a lot of the information is new to Council and questioned if Council ever approved the changes to grossly overfund these accounts and why it would change in 2006. Vice Mayor Spycher asked if anyone from staff could shed any light on the decisions or if Mayor Lazar knew since he has history on the Council.
 
Staff had no real answers but some excuses were made as to how and who let accounts accumulate over $6 million in excessive reserves and why Council didn’t know about these funds.
 
City Manager Roy Wasden said “I have not done an exhaustive search but I couldn’t find anything that I could say this is why it changed.”
 
Mayor John Lazar recalled that maybe the increase was because of some pretty big claims in the late 1990’s or year 2000.
 
Vice Mayor Spycher pointed out that the overfunding began in 2006 however.
 
Councilwoman Mary Jackson suggested that the increased funding could’ve been due the introduction of the Workers Comp reform in 2006.
 
“I know I talked to staff, I don’t believe there was any intent to hide,” said Councilwoman Mary Jackson. “Maybe there were concerns to be prudent and they had no idea what Workmans Comp reform was going to do.”
 
City Manager Roy Wasden pointed out that the Workmans Comp reform helped stabilize the swings though.
 
City Manager Roy Wasden went on to explain that staff has had discussion about the issue and that the City also no longer has a Finance Director.
 
“We’ve made a number of changes, very complimentary of the hard work by the finance folks. To their credit, they were following the pattern that they had been given to implement and charge these rates out to the different departments. They were just following the protocols that had been set up over the last four or five years,” said Wasden.
 
Councilman Ted Howze said “The real point is though, it doesn’t matter. There was absolutely no reason to stick these balances in these funds that they did, none, because in the end it’s all general fund money anyway.”
 
“To take 1, 2, 3, 4 million dollars and sit it in a fund that there is never any direction given by this elected body or any information shared with this elected body as to what is going on is unforgivable,” said Councilman Ted Howze. “As we have this discussion go forward, it’s a lesson learned that from now on there has to be transparency in how this money is being shifted between these funds.”
 
Through the discussions regarding the funding of these overfunded accounts, it was also discovered that hundreds of thousands of dollars were transferred from one fund to another without Council knowledge, let alone Council approval.
 

At the May 25, 2010 Turlock City Council Meeting during a Special Agenda, Turlock City Manager Roy Wasden explained that within the budget subcommittee process and a Special City Council Meeting last Wednesday that “I left Council with the perception that money had been moved without the knowledge of Council.”
 
“Finance staff researched the information and found in fact that there were three times the money had been moved, from the 149 to either the 144 or 148 account, that would be the workers comp health account, and that in every one of those occasions it had been brought in front of Council,” said Wasden.
 
Wasden went on to say “So I apologize for leaving the impression that that had not been in front of Council.”
 
Between the May 13, 2010 Special Council Meeting and the May 25, 2010 Council Meeting, Ted Howze wrote an Op-Ed piece on TurlockCityNews.com on May 21st that included accusing the City of Turlock of “fraudulent accounting” because of the information provided to him and Council by Turlock City Manager Roy Wasden.
 
“The problem that arises from this type of fraudulent accounting is its effect on the city’s ability to calculate our true costs to provide services to our residents and our ability to conduct effective labor negotiations,” states Howze in his Op-Ed piece.
 
Ted Howze also states:
 
“The truth is that the increasing fraudulent SUI and Workers Comp charges would have been used to cover up the health insurance funding shortfalls if not for an overly aggressive bite at the funding apple. Because of the 8% increase in health costs that occurred last year and another 15% increase expected this year, there was the need to get a head start on saving the sinking health insurance fund. The resulting 8 fold increases in SUI charges intended to be the salvation of the health fund resulted in a red flag that led to the divulgence of the funds existence.
 
If a fortune 500 company hid its sinking employee health fund from its board of directors and shareholders by redirecting dollars it claimed to have spent on research & development to the health fund, somebody would go to jail. In Turlock, some believe it’s just the way things always have and always will continue to be done. Not on my watch!”
 
Because of the misinformation presented by City Manager Roy Wasden in a budget subcommittee meeting and the May 13, 2010 Special Council Meeting, Councilman Ted Howze’s opinion about the City’s accounting practices changed and he apologized to the finance staff.
 
Councilman Howze said “I’m a big boy and I’m going to tell you right now I’m going to offer an apology to finance staff. Ok, it’s the right thing to do.”
 
“We asked the questions was that money moved with the knowledge of this body and the answer at the time was no. The facts have changed, and I’m glad that we dug the facts up because I’m going to tell you it was very painful and very disturbing last week to sit on the knowledge that something looked like it could’ve been fraudulent in this city,” said Councilman Howze. “I am so happy that it’s not and to the individuals in the finance staff, you have my sincerest apology that that thought was ever passed down.”

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