The City of Shawnee has been in the hot seat lately, after allegations from a former city commissioner claim particular funds are being inappropriately used.

The City of Shawnee has been in the hot seat lately, after allegations from a former city commissioner claim particular funds are being inappropriately used.

For the past several months former Shawnee City Commissioner Tom Claybrook has been alleging the city mishandled funds by taking restricted monies and rerouted them to shore up deficiencies elsewhere.

“At the Feb. 4, 2019, meeting of the Shawnee City Commission I revealed that Shawnee city management

during the budget years of 2016 and 2017 had illegally diverted $7 million from the (restricted) Street Fund to

other funds to hide the fact that those funds were overspent,” Claybrook said.

Mayor Richard Finley has stated that it is his understanding that these sales tax issues balance over time.

“You don't look at any point in time and say, 'where are we?'. You measure these things; it's common to use funds from another fund.”

Finley said he resents very much the fact that Claybrook implies the city is misappropriating or stealing, because that is simply not the case.

The issue

The question is whether a city borrowing from itself — especially regarding restricted funds — is inappropriate.

For several weeks, The News-Star has been working to obtain information that would validate or disprove Claybrook's claims. To date, there is still no clear answer as to what is being considered legitimate handling of the funds in question.

City Attorney Joe Vorndran, though he said he couldn't speak to the specific funds to which Claybrook refers, said the (general) shuffling of funds during day-to-day operations are within the authority of the municipality, and appear to be common practice.

“It happens all the time,” he said.

Jim Denton, of Certified Public Accountants Arledge and Associates — the independent auditors who annually prepare a report on the city's financial activities and practices — chose not to weigh in on the matter when asked if an annual audit would be able reveal a misuse of restricted funds. The firm has given the City of Shawnee clean audits for the past several years — the latest report being Fiscal Year 2017-2018, which ended June 30, 2018.

Unfortunately, there often are no quick-and-easy answers to determine what is proper while navigating the complexities of a municipal budget.

Even the Office of the State Auditor and Inspector cannot offer clear certainties into the situation — at least not without digging much deeper.

Director of Public Information Trey Davis, Office of the State Auditor and Inspector, confirmed the state is not auditing — and have not audited — Shawnee.

He said he cannot offer a clear answer without reviewing the ballot title authorizing the sales tax, the city's budget, financial statements, other financial records, meeting agendas or minutes, or interviewing its city manager and other city personnel, for more relevant information.

Generally speaking, he did cite Statute 68 O.S. § 2701 (B), which appears applicable in establishing certain safeguards to protect restricted funds:

“Money in the limited-purpose tax fund shall be expended only as accumulated and only for the purposes specifically described in the taxing ordinance as approved by the voters,” it reads.

That said, Davis also said, since the initial sales tax approved by voters is now permanent, he cannot be certain if that has any impact on the ability of the city to use these funds for any purpose other than those purposes approved by voters.

“We would need to review the ballot title approving the collection and expenditure of these funds,” he said.

With legal and financial experts riding the fence — aside from Claybrook's hard no and the city's hard yes — Shawnee residents, at least for now, are still left without a clear conclusion.

Davis said a Special Audit (also known as an investigative audit or forensic audit) can be requested through citizen petition if enough residents are concerned about misconduct.

About the restricted street fund

In the city's annual financial reports — under the section Revenues, Expenditures and Expenses — it states:

The City levies a three-cent sales tax on taxable sales within the city. The sales tax is collected by the Oklahoma Tax Commission and remitted to the city in the month following receipt by the tax commission.

One cent is legally restricted by the voters.

Sales tax is recorded as follows:

• Two cents goes into the General Fund for operations;

• .3875 recorded in the Capital Improvement Fund and restricted for capital improvements;

• .4375 recorded in the Street Improvement Fund and restricted to street improvements;

• .0500 recorded in the Economic Development Fund and restricted for economic development;

• .0625 is recorded in the Police Sales Tax Fund and restricted for police operations; and

• .0625 recorded in the Fire Sales Tax fund and restricted for fire operations

“This language is very direct and leaves no room for interpretation,” Claybrook said. “It explicitly states that when the voters approved the third-cent of sales tax they did so in a manner dictating how it was to be spent.”

They did not authorize it to be used as a slush fund to cover up profligate spending in other areas, he said. “There is no caveat allowing for those funds to be borrowed and sticking an IOU in the books,” he said to the board. “I was on the City Commission when this occurred and know exactly what the intent was and what the voters were told.”

Big spending

Interim City Manager Eric Benson, who wasn't employed with the city during the timeframe of Claybrook's allegation, confirmed at one time the city did have close to $10 million in surplus.

Since then he said the city has completed some desired and approved projects that were all community supported.

Benson said using existing surplus to invest in itself is what a vibrant city like Shawnee should do.

He said now is the time for reining in spending and getting back to saving.

“We had come to a place where we were spending at a rate we could no longer continue,” Benson said. “It was time to slow down and re-evaluate our priorities; we are still in the black.”

He said, for those who seek answers, he has an open-door policy.

“If any resident has questions or concerns, I am happy to meet with them and walk them through the books,” Benson said.

Finance Director Chance Allison, who is fairly new to that position, said the city for several months did not appear to meet projected revenue estimates, which also had to be rectified — draining a portion of the city's existing funds.

With the exception of October 2017, which was reportedly above budgeted estimates — between September 2017 to April 2018 — then-City Treasurer Cindy Arnold wrote in her reports each of those months that revenues had fallen below what was budgeted. There was no sales tax report for May 2018 (or June), at which time Arnold had left the position. Allison was hired in June 2018.

He said future streets projects, such as the Kickapoo South widening project coming up, will be paid for through funds designated for streets — money that will be coming in from another self-imposed half-cent city sales tax increase barely voted in by residents in June 2018. The new 10-year tax is tagged to cover several capital improvements like public safety, streets and roads, and parks and public facilities. At this time it is unclear if the new tax will be paid back (as an IOU), as Allison has not responded to that specific question.

Recent investments

Keeping in mind the city also has shelled out a large portion of funds (at least $6.4 million) for some sizable projects over the past few years that do fall under streets funding; they include:

• Kickapoo Street widening project (near $2.2M)

• Sidewalks/Master Trails project ($850K to date)

• Downtown Main Street Streetscape (close to $3.2M in construction only)

What now?

Vice-Mayor Harrod said he was waiting to get results of an audit before making comment on Claybrook's concerns.

“We should be getting results the first of April,” Harrod said.

Watch for updates as more information becomes available.