Cleveland: Accounting error spurs audit threat

Council chief demands answers from Whites staff

Monday, September 18, 2000

By CHRISTOPHER QUINN

PLAIN DEALER REPORTER

Because of irregular bookkeeping and blunders by Mayor Michael R. Whites staff, Cleveland City Council says it doesnt know if Cleveland has the cash to pay its bills, and Council President Michael Polensek is preparing some extreme measures to determine the citys bank balance.

Polensek said yesterday he is fairly certain he will cancel all of todays scheduled committee meetings and call a special Finance Committee probe, inviting Whites fiscal experts to explain the state of city finances.

He said he might ask State Auditor Jim Petro to decipher the city books. He also said he might use his power under the city charter to launch a formal council investigation and question Whites staff under oath.

"What the hell are they doing?" he asked yesterday. "When the Finance Department of the city of Cleveland cannot provide me with the financial data of the city, which they are required by law to provide, somethings terribly wrong."

Finance Director Ronald Brooks was unavailable yesterday but said last week that he did have a clear understanding of the citys finances. He said council could also have that understanding if it would read the data he has given them. The citys financial state became a crisis for council on Friday, when White announced he had just learned that $52.5 million in Water Division money had been mixed into the citys general-purpose accounts.

Whites announcement, in a press release, said the money was paid back last year but did not say how long it sat in the general fund. White ordered $977,099 paid to the Water Division on Friday for lost interest.

Whites disclosure came as council grew increasingly concerned about city bookkeeping. One reason for the alarm was Whites inability to provide monthly reports on city finances, as required by the city charter. Then, in an audit released last week, independent accountants found the city books replete with errors, including million-dollar math mistakes and inexplicable swings in account balances.

"I am not about to let this administration play roulette with the budget of the city of Cleveland," Polensek said.

"Whats the cash balance. ...We really dont know at this point."

White spokesman Brian Rothenberg said the mayor also wants answers on the Water Division money and has ordered an investigation.

Polensek said he saw no point in having todays scheduled committee hearings because the agendas consist of legislation that requires spending. He said council members are wary of spending any more money until they know how much the city has.

Polensek said using Water Division cash for city operations is illegal and likely to incense suburban mayors, who earlier this year criticized water rate hikes. Cleveland, which provides water to most Cuyahoga County suburbs and some cities in other counties, will boost rates by an estimated 18 percent over five years.

The spending of Water Division money on city operations was one reason Cleveland almost lost its water system under Dennis Kucinichs administration 20 years ago, when the suburbs sued the city over faulty water service. Even though the water system was crumbling, the city moved $18 million out of the Water Division building account and used it for city projects, infuriating suburban mayors. They sued to put the water system under a regional board.

The mayors settled the lawsuit when Cleveland promised to improve the water system. The upgrades continue today, and one of Whites justifications for the rate increases was renovations of water plants. Now, suburban mayors are learning the city used Water Division cash for city operations.

"This is a revelation that no one expected," said Beryl Rothschild, mayor of University Heights and a leader of the opposition to the rate hikes. "I think that we would feel that maybe all of this rate increase wasnt necessary." Polensek said the city finances are so out of control that the mayor had a hard time stating on Friday exactly how much Water Division cash had been moved. In the citys first press release, the amount was listed as $47.5 million.

A few hours later, a revised release said "ongoing financial analysis" bumped the amount up by $5 million.

"They cant even count," Polensek said.

Rothenberg said staff members were in the process of confirming the figures when the statement was released.

"That is the reason for the corrected press release," he said.

Whether council can find the citys bottom line is unknown, Polensek said. Experts might be needed. The first thing he plans to do today is question members of councils Finance Committee about how they wish to proceed. Then, Finance Committee Chairman Bill Patmon likely will begin grilling the mayors staff, he said.

"If I feel that they are covering anything up, that they are misleading, doing the same old thing, I will swear them in and let the chips fall where they may," he said. "I will ask Petro to come in a New York minute."

E-mail: cquinn@plaind.com Phone: (216) 999-4604

)2000 THE PLAIN DEALER. Used with permission.

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-- Carl Jenkins (Somewherepress@aol.com), September 19, 2000