Photos by Jon Anderson
John Slavek, an outside forensic auditor, gives a report on his investigation into Hoover city finances during a Hoover City Council meeting on Monday, Aug. 19, 2024.
An outside forensic auditing firm brought in to dig into problems in the city of Hoover’s finances on Monday night reported to the City Council that it did not find any evidence of financial fraud, malfeasance or asset misappropriation.
However, there were repetitive issues and problems that needed to be addressed, said John Slavek, the representative for the Kroll financial and risk advisory firm that has been labeled as “Wall Street’s private eyes.”
Slavek said his firm was hired several months ago to investigate deleted electronic records, missing files, unbalanced transactions, unreconciled accounts and delayed financial reports.
Hoover Mayor Frank Brocato said the city’s new chief financial officer, Jennifer Cornett, who started in January, found some issues that made her uncomfortable enough that she wanted an independent investigation.
Cornett said anytime you run across issues like these, but especially when you’re dealing with public money, it’s a good idea to bring in someone from the outside to take a closer examination.
“You don’t want to find out later that funds had been misappropriated and you didn’t bother to look,” Cornett said, noting that the former finance director for the city of Homewood just pleaded guilty to embezzling nearly $950,000.
Slavek said his team over the past three months reviewed thousands of documents and interviewed more than 20 current and former employees in the course of their investigation.
While they didn’t find any fraud, malfeasance or asset misappropriation, “it was almost a perfect storm of multiple negative factors coming together at the same time,” Slavek said.
One of the biggest factors was the departure of numerous key personnel in the Finance Department between late 2019 and early 2021, he said. At least four key people — including the chief financial officer, revenue director and city treasurer — retired within one year and one month, and a fifth left in December 2021, he said.
This left a “huge experience void,” and “it’s hard to replicate that kind of experience,” Slavek said.
The general ledger and payroll department was hit particularly hard, and all of this happened at the same time the city was implementing a new financial software system, he said.
Brocato said the new software system did not work as planned.
“Quite frankly, it was a disaster, and it just compounded the problems,” the mayor said. “They [the staff] were just swimming upstream constantly.”
Some people were getting overpaid, and others were getting underpaid, which led to incorrect W-2 and problems with the Internal Revenue Service as well, Slavek said. “It was almost a like a domino effect.”
Additionally, the city’s Finance Department not only lacked experience in certain areas; it is understaffed, he said. The cities of Tuscaloosa and Auburn, which are similar in size to Hoover, have almost double the number of finance employees, Slavek said. A study conducted in 2017 found that Hoover’s Finance Department could use another six or seven people, he said.
“What got you by in previous years was that the people you had here were so good at what they did and were so experienced and were able to do the jobs of maybe two or more people,” he said.
Brocato said some personnel in the Finance Department also had some personal tragedies in their lives, which added to the stresses on the department.
Slavek said his team is almost finished with its final report and plans to release that later this week, but he wanted to go ahead and give a verbal report because there have been so many concerns in the community about delays in getting audits completed in recent years.
The average time for conducting an audit for the city of Hoover going back to 2017 was about six months, he said. The past two years, the audit took 11 months, and this year, it took 10.5 months, he said.
Cornett said she hopes the final report from the Kroll auditing firm will put to rest the major concerns, and Brocato said he's ready for the city to move forward. He's extremely pleased the outside audit found no fraud, malfeasance or misappropriation of funds, he said. Both he and Cornett said the city already has been working on the problems that were identified and will continue to do so.
More training is needed for some personnel in the Finance Department, and "I think it was loud and clear that we need more employees in the Finance Department," Brocato said. Cornett said she has indicated she needs five more people.
2023 Audit
The city’s auditing firm — Barfield Murphy Shank & Smith — just completed the audit for fiscal 2023 and gave Hoover an “unmodified report.” Keith Barfield, a principal with the firm, said “it doesn’t get any better than that.”
Cornett said that, for the 40th year in a row, the Government Finance Officers Association gave the city of Hoover a certificate of achievement for excellence in financial reporting for clear, concise and easy-to-read financial information.
The audit found that the city took in $194.2 million in revenue in all of its primary funds in fiscal 2023 and spent $184.7 million, creating $9.5 million in excess revenues. Additionally, the city issued $96 million in new debt in fiscal 2023 for major capital projects and did not spend most of that money in that fiscal year. This means the city started fiscal 2023 in October 2022 with about $139 million in its governmental funds and ended the year in September 2023 with about $242 million, records show.
The city’s general fund started the year with about $80 million and ended the year with $70 million, while the capital projects fund started the year with $44 million and ended it with $65 million, records show. General fund revenues were up about 8% from the previous year, finishing at $171 million, General fund expenditures were $144 million, leaving $26.8 million in excess revenues before transfers were made to other funds, Cornett said.
City Clerk Wendy Dickerson said she planned to have the audit available for public review on the city’s website soon. She just received the electronic copy shortly before Monday night’s council meeting, she said.
