State auditor: Webster City Chamber of Commerce money misspent

Webster City Chamber of Commerce officials requested investigation. More than $239,000 improper disbursements found. No criminal charges have been filed.

WEBSTER CITY — More than $239,000 in Webster City Chamber of Commerce money was mishandled over five years, apparently by an employee whose actions went routinely unchecked, according to a report released Wednesday by Auditor of State Rob Sand.

The report covered the period of Oct. 1, 2013 through June 30, 2018. The investigation was requested by Chamber officials as a result of concerns regarding certain financial transactions processed by Leah Mulholland, 39, former financial and administrative assistant for the Chamber.

The state Attorney General’s Office and the Iowa Division of Criminal Investigation are now investigating the matter.

The report identified $239,585.23 of improper disbursements and $23.602.83 of unsupported disbursements.

Sand also reported the special investigation identified a $1,128 refund issued to the Chamber for overpayment of state income tax which was not deposited into the Chamber’s bank accounts.

The $239,586.23 of improper disbursements identified includes:

• $190,489.58 of payments to or for Mulholland, including unauthorized

checks, excess gross salary, and the Chamber’s share of payroll costs,

• $14,497 of transfers from the Chamber’s primary checking account to the

Chamber’s “Chamber Bucks” bank account which were not approved,

• $15,725.09 of vendor payments,

• $10,086.57 of penalties and interest paid to the IRS and the Iowa Department of Revenue,

• $3,950 of checks redeemed for cash and cash withdrawals, and

• $4,837.99 of bank fees.

The $23,602.83 of unsupported disbursements identified includes:

• $19,422.51 of vendor payments,

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

• $121.84 of reimbursements issued to Mulholland.

Sand also reported it was not possible to determine if additional amounts were improperly disbursed or if additional collections were not properly deposited because “adequate documentation was not available.”

“We determined that the Board failed to exercise proper fiduciary oversight. 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,” the report states.

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 stated. “The review and approval should be documented by the signature or initials of the reviewer and the date of approval.”

“We had implemented these suggestions prior to the report being issued,” said Colette Bertran, president of the Chamber board.

She said that if the auditor had further recommendations, the board would implement those as well.

“We as a board would like to move on. We’ve been anxiously awaiting this report,” said Bertran.

She said the board and staff would be cooperating with the DCI and the attorney general’s office on the 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. But we’re doing everything we can to support and collaborate with those agencies,” she said.

The Chamber office was forced to close in late June 2018 when the discrepancies were noticed.

It reopened several weeks later under a volunteer effort 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 the new executive director and Denise Smith was hired in January 2019 as the membership director.

Mulholland started working at the Chamber office in October 2013 as an administrative assistant, a position she held until she was let go in late June 2018. The Hamilton County native grew up on a farm near Duncombe and attended Webster City schools. She graduated from Buena Vista University, according to a Webster City Daily Freeman-Journal article from 2013.

Mulholland was originally hired as a part-time employee with 20 hours per week. Her hours were increased to 35 hours per week at the April 12, 2017, Chamber executive board meeting. In December 2017, her hours were increased to 40 per week, according to the audit report.

Revenue sources

The Chamber’s primary revenue sources were membership and sponsorship dues, hotel/motel tax funds provided by the city of Webster City and proceeds from fund raising events.

“However, the Chamber did not maintain a complete listing of events, sponsors, members or a listing of receipts,” the report stated. “As a result, we were unable to determine if all receipts were properly billed and deposited into the Chamber’s accounts.”

Monthly bank statements for the Chamber’s four accounts were mailed directly to the Chamber office and were opened by Mulholland. The report said that the bank statements and images of the redeemed checks were not periodically reviewed by the members of the board or the executive director. Bank reconciliations were not performed during Mulholland’s tenure, the report said.

The discrepancies came to light on June 15, 2018, when the then-Executive Director Linda Christianson reviewed the monthly statement for the Chamber checking account. She reportedly found unauthorized checks issued from the account to Mulholland. Christiansen met with members of the board to review and discuss the transactions on June 18. At that time the Chamber attorney and the county attorney were contacted and the Chamber accounts were frozen. The locks to the Chamber office were also changed at that time.

The same day, the board president, two board members and Christianson met with Mulholland to discuss their concerns. According to the report, Mulholland admitted to the misuse of funds and was immediately fired from her position. During the meeting, Mulholland reportedly signed a form admitting to the misuse of funds. However, the form was misplaced and could not be found after the meeting, the board president told investigators.

All of the materials and financial information were given to the Webster City Police Department, which in turn, contacted the Division of Criminal Investigation. A DCI representative then contacted the office of Auditor of State to request a review of the Chamber’s financial records, the report states.

Checks to Leah Mulholland

The investigation found 367 checks were issued to Mulholland, totaling $236,313.03

Of those, 139 were payroll checks; four were for bonuses and two were reimbursements.

There were 222 unauthorized checks totaling $124,512, in amounts ranging from $20 to $2,000.

The Chamber used an online payroll system called Intuit. The program automatically calculated gross and net pay.

However, there were concerns about some of Mulholland’s paychecks. The investigation found that she had overpaid herself on 101 payroll checks with no authorization. There were 18 total payroll checks that were unauthorized, according to the report, totaling $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. However, she stated several times, ‘Everything was approved.'”

The report identified no concerns with former Executive Director Debra Brown’s payroll, which was electronically deposited to her personal bank account, or with former director Christiansen’s payroll.

Garnishments

Mulholland had garnishments that should have come out of her payroll check, but instead came out of the Chamber account on seven dates, totaling $533.48. The payments were made to Performant Recovery, according to the auditor’s report.

Chamber Bucks

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

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

“We are unable to determine if the funds from the Chamber’s 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.”

There were also 60 overdraft and service fees in the Chamber Bucks account, totaling $4,674.09. There should be no reason for this because the account is self-sustaining, the report reiterated.

Debit card transactions

Of 847 debit card transactions, only 107 were properly supported by Chamber records.

One of the more colorful transactions was a $12.98 purchase from Amazon of body jewelry.

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

Here are some other examples from the audit of purchases using the debit card:

• 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 provder.

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

• Payment to a credit card company for $1,513.20. “Because the Chamber did not have a credit card, we determined the payment was for a personal credit card,” the report said.

• 30 payments to various 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.”

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

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.

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, according to the audit report.

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 IRS fees and penalties totaling $9,221.65.

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