REPORT: McCallsburg officials found to have mishandled nearly $90,000 in finances

Information discovered during a requested audit and follow-up investigation of the city of McCallsburg’s financial records have been released by the State of Iowa.

Iowa Auditor of State Rob Sand released findings Wednesday morning, just one day after the Story County Sheriff’s Office announced a criminal investigation centered on the City of McCallsburg. Sand’s report covered a period from January 1, 2014 through August 31, 2019 and was prompted by McCallsburg officials after concerns were raised regarding the handling of City finances by former City Clerk Jennifer Heithoff.

According to the report, the investigation found nearly $90,000 in mishandled finances during the period indicated above. These mishandlings include the following:

  • $47,510.28 of uncollected and undeposited utility bills
  • $32,063.48 of improper disbursements
  • $10,213.93 of unsupported disbursements

Also included in the report are findings that indicate that adjustments were made to personal residences’ utility bills, including those of Mayor Chris Erickson and Councilmember Leanne Hazen. The utility system showed that no payments were posted to Erickson’s account for nearly two years, during a period from October 3, 2017 through July 25, 2019. One of the adjustments occurred after Heithoff’s July 25, 2019 resignation, during a time in which Erickson was the only one recording transactions to the utility system.

Hazen told investigators that she had not been billed for her home’s utilities during the final 18 months of Heithoff’s employment. She also admitted to not paying for utilities during the same time frame.

The above text message conversation between former McCallsburg City Clerk Jennifer Heithoff and current Mayor Chris Erickson was released as part of an in-depth report by State of Iowa Auditor Rob Sand on Thursday.

No other councilmembers were found to have had irregularities in their utility accounts.

The report outlined the $32,063.48 worth of improper disbursements as follows:

  • $15,407.99 of unauthorized payroll costs resulting from Heithoff reporting hours worked in excess of expectations
  •  $10,449.75 of reimbursement checks issued to Heithoff for excessive mileage
  •  $4,572.24 of payroll to City officials for pay increases which did not comply with requirements established by the Code of Iowa
  • $847.34 of IPERS (Iowa Public Employees’ Retirement System) late fees and interest
  • $786.16 of improper purchases made with the City’s Staples charge account

Per the report, the $10,213.93 of “unsupported disbursements” is made up of transactions that the City could not account for via proper documentation. These include the following:

  • $9,890.68 of checks issued from the City’s bank account to individuals and vendors
  • $231.08 of reimbursements to Heithoff
  • $92.17 of purchases made with the City’s Staples charge account.

The report also stated that the City’s bank records indicate that payments from four councilmembers totaling $1,200 were deposited in September and October of 2021 for their “respective shares of the payroll they improperly received during 2018 and 2019.”

A mishandling of basic legal procedures was also found during the investigation, including an inconsistent record of city council meeting minutes. One such example was included in which councilmembers inquired as to why the road adjacent to Erickson’s home was paved instead of graveled. Erickson had stated that previous councilmembers had approved the paving. However, his claim could not be substantiated because the available minutes of council meetings did not include any such discussions.

Also included in the report are recommendations for the City moving forward. Officials were urged to do the following:

  • Implement procedures to ensure the City’s internal controls are strengthened, including implementing independent reviews of bank statements
  • Segregate duties, perform utility reconciliations
  • Ensure all disbursements are properly supported, approved, and paid in a timely manner
  • Ensure all actions taken by the city council are properly documented in minutes of council meetings

Story County Sheriff’s Office Lieutenant Leanna Ellis released a statement Wednesday announcing a criminal investigation in response to the state’s findings.

Ellis noted that the Sheriff’s Office is providing no further details into the investigation at this time. However, more information is expected to be released once the investigation concludes.

A spokesperson for the City of McCallsburg told StoryCounty.News on Wednesday that a statement from city officials would be released Thursday. At the time of this story’s publishing, StoryCounty.News has received no such statement.

Efforts to reach Heithoff for comment Wednesday were unsuccessful.

The entire report can be read HERE.

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