Financial review indicates misappropriation, mismanagement of public monies; recommends fraud investigation

Marshal Billy Cloud said this week he will investigate potential wrongdoings at the Chamber involving the spending of public money.

The document, prepared by the accounting firm Heinfeld, Meech and Co., and paid for by the chamber with city money, provides 16 findings and recommendations. The findings provide a snapshot of the financial working relationship among the city’s previous mayor, council and the Chamber’s previous board.

A summary of the financial review’s key findings:

• Executive directors were paid almost $100,000 in salary over 3.5 years without city approval, an employment contract or employee records for tax purposes.
• Public funds were commingled with private funds and in certain instances no accurate account of spending could be determined. Receipts for spending were routinely non-existent.
• The Chamber exceeded the maximum transfer allowance from the Boot Hill Cemetery gift shop by almost $1,700 in July 2010 and roughly $6,800 in August 2010. The maximum amount its city contract allows is $6,000 per month.
• An undocumented transfer of $3,000 for “advertising” from Tombstone Courthouse State Historic Park account to the Chamber’s checking account.
• Checks were written out to “cash” totaling $2,550 as prizes for a festival. The checks do not have documentation verifying the amounts of the prizes or who received the money.
• No documentation exists for a check written to the executive director for almost $1,700 for “office expenses.” No receipts for those expenses could be found.
• The Chamber paid out almost $1,000 in overdraft fees and late payment penalties because it failed to pay its bills on time.
• The executive director “mistakenly” used a Chamber debit card to pay almost $900 in personal expenses. Those expenses were not approved and have not been reimbursed.
• The courthouse wrote a check for more than $300 to the chamber president for a computer monitor. The accounting firm could not locate the monitor.

Tombstone City Clerk/Manager George Barnes released the financial review this week after the Epitaph filed a freedom of information request for the data. The review only examined documents provided by the Chamber and was “more limited in scope than would be necessary to express an opinion on the financial performance as a whole or an audit.”

Last month, the council voted to allow the Chamber to use money from its Boot Hill Cemetery account to help pay the approximately $13,000 bill for the review. Heinfeld, Meech and Co. Accountant Pat Walker provided final copies to the city, the Chamber and Marshal Cloud.

Cloud said he would have rather waited to release the review so he could examine it with the state attorney general and Cochise County attorney.

“I can’t control what others do,” he said.

Chamber Executive Director and President Susan Wallace said the Chamber was not part of the city’s decision to release the audit, and per Cloud’s request, could not comment on an ongoing investigation.

Wallace took over in January after former President Don Taylor joined former Executive Director Patrick Greene in resigning amidst questions surrounding the chamber’s failure to provide quarterly financial reports from the Boot Hill gift shop.

Taylor, who works at Bronco Mercantile, declined comment for this story.

Greene was paid a salary for serving as executive director from May 2009 until January, according to the Chamber of Commerce. The Epitaph repeatedly tried to seek comment from him at his law office on Toughnut Street.  A phone call made to the same office was not returned.

Last year, in an interview with an Epitaph reporter, Greene said there was no wrongdoing during his time with the Chamber. “Do the audit,” he said.

Greene’s predecessor as executive director was Elizabeth Ingalls, who was also paid a salary. She could not be reached for comment.

The majority of the issues raised in the audit occurred in 2010 under Greene’s and Taylor’s time at the Chamber. Dusty Escapule, publisher of the Tombstone News, was mayor at the time. He lost his bid for re-election last year and both Greene and Taylor resigned two months later after the new council began questioning actions of the chamber.

Barnes said he is “relieved” the review’s results are public, and that while the document shows a lack of city oversight, many of its findings can be better explained when applied to the context of the relationship between Tombstone and the chamber.

“We’re tightening up the process,” he said. “Over the years, the chamber has made a good attempt to give financial reporting.”

Furthermore, Barnes said the rapid growth of the Chamber’s role representing the city contributed to the failure to establish protocols and get official approvals.

“We’re talking about a business that dealt with hundreds of thousands of dollars,” he said. “With a lax system, it’s easy to make a mistake.”

Barnes said the city is working with the Chamber to address Heinfeld, Meech and Co.’s recommendations by creating the new promotions manager position, segregating public and private money, creating more accountability and improving transparency.

“We’ve tied our fates together,” he said.

For more information about the finacial review, the chamber and the city, click the headlines below:

Residents, officials and the press debate financial review on its long road to daylight

Council members react

How other chambers of commerce operate

Graphics of chamber spending in 2009 and 2010