CONSULTANT FINDS “GROSS NEGLIGENCE” IN CITY H.R. ACCOUNTING

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Consultant firm CliftonLarsonAllen, LLP, has found what it describes as “gross negligence” with regard to the design and execution of process and controls over financial reporting in the City of Sheboygan’s Human Resource Department.  The firm was hired to do the assessment after the department had undergone various personnel and benefit administration changes in 2020, raising various questions related to policies, procedures, and the overall administration of benefits for current and former city employees.

In its findings, the consultant said that HR personnel weren’t able to provide details related to the overall transactional completeness and accuracy of claims, premiums, benefits, and other contractual liabilities related to current and retired employees, and identified a specific “High Risk Finding” in which City finance personnel were unaware of some of the relationship between Payroll and Benefit transactions and the corresponding financial reporting.

Of particular concern, there was no defined policy for overriding the established benefit plan; there was no ability of personnel to determine whether the Fire Department’s “Sick Leave Pool” of pre-1985 donated sick leave liability, estimated at $1.2M, is appropriately recorded; and that Police Department employees were receiving both Good Attendance Credits and Sick Leave Pool Credits for hours accrued over 1,150 hours.  On that last note, the study found that Good Attendance Credits were recorded in the MUNIS System – the city’s accounting software – while the liability for the Sick Leave Pool was not recorded to the financial statements.

The consultant said that unless issues surrounding the control environment as well as the uncertainty around the completeness and accuracy of financial statements are addressed, the city will remain exposed to fraud, financial and reputational risks.

When contacted via email on Thursday, Mayor Sorenson said that the issue has been “a big one” for City Administrator Todd Wolf, and that changes were being taken to correct the issues.