Session 08-31 a Special Meeting of the Homer City Council was called to order on November 24, 2008 at 5:31 p.m. by Mayor James C. Hornaday at the Homer City Hall Cowles Council Chambers located at 491 E. Pioneer Avenue, Homer, Alaska, and opened with the Pledge of Allegiance.

PRESENT: COUNCILMEMBERS: HOWARD, LEWIS, NOVAK, ROBERTS, WYTHE, ZAK (telephonic)

STAFF: CITY MANAGER WREDE

CITY CLERK JOHNSON

CITY PLANNER ABBOUD

FINANCE DIRECTOR HARVILLE

Councilmember Zak has requested telephonic participation.

Council approved Councilmember Zak’s telephonic participation by unanimous consent.

AGENDA APPROVAL (Only those matters on the noticed agenda may be considered, pursuant to City Council’s Operating Manual, pg. 5)

The agenda was approved by consensus of the Council.

NEW BUSINESS

A. Appeal of City Manager’s Denial of Request for Public Records – Lisa Vaughn 

Mayor Hornaday stated Lisa Vaughn filed an appeal of a decision by the City Manager denying her public records request for a copy of a special audit report. A written brief was filed by City Manager Wrede. City Manager Wrede agreed to provide her with part of the document that she requested. Mayor Hornaday asked Ms. Vaughn if she still wished to pursue her appeal as to the remainder of the request.

Lisa Vaughn answered affirmatively.

Councilmember Zak declared ex parte communication with Lisa Vaughn. He had posed the question of a meeting between himself and Ms. Vaughn to City Clerk Johnson. As he was reviewing email from City Clerk Johnson advising against meeting with Ms. Vaughn, at the same time he was talking to Ms. Vaughn on the phone. Councilmember Zak stated it does not affect his ability to make a decision.

City Attorney Suozzo asked what the nature of their communication was.

Councilmember Zak responded Lisa told him her concerns regarding the request to make sure nothing should come back and hurt her later based on what was written in the audit.

City Attorney Suozzo advised anytime there is ex parte communication it is always worth considering disqualifying the councilmember. It is a better safe than sorry type of approach. There does not appear to be prejudice, but Council is taking a risk.

Mayor Hornaday called for a motion to disqualify.

Council offered no motion to disqualify.

Councilmember Novak disclosed ex parte communications with Lisa Vaughn in the past pertaining to future references when she left the City, anything that may be in her records.

City Attorney Suozzo reiterated her advice as it pertained to Councilmember Zak.

There were no objections from Council on Councilmembers Zak and Novak from participation.

Mayor Hornaday ruled both Councilmembers Zak and Novak could participate.

Mayor Hornaday reminded both parties the only issue before the Council is whether the City Manager properly denied Ms. Vaughn’s public records request. Since Ms. Vaughn has been provided with the part of the document that the City Manager asserted was subject to the deliberative process privilege, the only issue before the Council is whether the City Manager properly withheld the remainder of the document under the exception from public record disclosure for payroll records. Argument should be confined to whether the requested records come within this exception to disclosure. There is no reason for either party to address the reasons for Ms. Vaughn’s request for the records, as they are not relevant to the appeal.

Mayor Hornaday reminded both parties that this is not the time to offer new evidence to the Council. The cases must be based on the evidence in the record from the City Manager.

Both parties were given 30 minutes to present oral argument, reserving some of that time for rebuttal. After each party completes his or her presentation, there will be an opportunity for members of the Council to ask questions.

ORAL ARGUMENT

Lisa Vaughn, former Accounting Supervisor for the City of Homer, left in March 2008 to take a position with the City of Palmer. It is not her intent to cause trouble for the City or any employees. She would like to see the audit report for assurance the only amount the auditors found was $16.50 in 2004. Employees’ names could be blacked out. She is more than happy to look at the report in a private office. She would like to see the report as her name is used by the City Manager in a memo to Jo Earls on August 1, 2008 as a reason for the audit. In it was stated the Finance Director had questions regarding journal controls, duplicate check numbers and other accounting anomalies. The City Manager states those issues were brought to employees’ attention and satisfactory answers were not obtained. In a memo to Mayor and Council dated October 2, 2008 the City Manager stated he and the Finance Director had fiduciary and trust responsibilities to safeguard an account for the taxpayers. Ms. Vaughn does not dispute that fact. He stated the Finance Director had become aware of a number of unusual accounting anomalies over the last three years. The Finance Director investigated as far as she could but could not find satisfactory answers from staff. The Finance Director did not have time to investigate because of staffing issues with Ms. Vaughn’s resignation.

Ms. Vaughn explained there were a lot of duplicate check numbers, as Caselle allows the system to print duplicate numbers without showing an error report. Caselle will allow anyone at anytime to delete a journal entry from five minutes ago or five years ago. The City keeps hard copies of all checks and payable checks. The check log lists the date issued, who ran the checks, and whether it is a regular or special run.

Ms. Vaughn continued that at no time did the Finance Director ask to see any backup on the duplicate check numbers.

City Attorney Suozzo interjected that the hearing is on a public records request and everyone must stick to the issue before Council. The issue before Council is whether or not the exhibits attached to the report should be released as public record.

Lisa Vaughn stated her name was used as a reason to call the audit. To say that she gave unsatisfactory answers is wrong. The City of Homer is audited every year, including payroll.

City Attorney Suozzo interjected the audit items are not public.

Lisa Vaughn reiterated her request to see the audit report in its entirety. Her name was used as a reason for the audit; she wants to insure her name is clean and there is not a cloud of question hanging over her. If the report was to be confidential it should not have been left in a public place. It could possibly damage her reputation without her being able to defend herself.

Walt Wrede, City Manager for the City of Homer, stated earlier this year the Finance Director came to him, stating there were a number of anomalies in the accounting system. She had no time or tools to figure them out. Over a period of four years there were a number of duplicate checks, some on payroll, written over multiple years to different vendors. Sometimes the amounts didn’t match up and the checks did not clear. Mr. Wrede was aware of duplicate checks a couple years ago and had not heard about it for a couple of years. He assumed it was fixed, but apparently it was not. There was concern about the duplicate checks and the primary motivation was to find out what was going on and to fix it. In the audit nobody is named. The auditors went in and did their work. The audit was going to happen in the spring anyway. The auditors are familiar with Caselle and the accounting systems. They talked to the auditors ahead of time, told them they were not getting enough information to figure out what is going on and needed to understand what was going on. They have a fiduciary responsibility. The problems were shown to the auditors and they said there was sufficient cause for concern. The auditors were asked what they thought about a third party audit to look at it and account for checks and money, find out why it was occurring and make recommendations to fix it. The auditors conducted tests and proposed solutions. Those have been implemented. They wanted to keep it confidential, as they didn’t want exactly what is going on tonight to happen. They didn’t want to disrupt the financial operations and wanted to protect the interests of any former or current City employee. They did not want to soil anyone’s reputation. There was no reason to tell Council they were doing this as they didn’t want to send out false alarms. That is why it was kept confidential. Most of the report is protected by the City Code. Attachments are backup data, specific checks, dates, amount numbers, and employee ID numbers. There is information about withdrawals from employees’ checks, all protected by Homer City Code.

City Manager Wrede said in rebuttal to Lisa’s request for a hearing he recommended her request be rejected. As the hearing date got closer he talked to City Attorney Klinkner and came to the conclusion enough time had passed and there was no finding of wrong doing. There was no disciplinary action, and nothing went in anyone’s files. We are just trying to fix internal controls in the accounting systems and that is what was done. It was a reasonable compromise to release the part of the audit that talks about the audit and what parts to look into financial procedures. There was a very specific list of checks. The public now has the audit (Attachment A). Mr. Wrede recommended all other attachments remain confidential under City Code.

Council had no questions to ask of Ms. Vaughn or Mr. Wrede.

REBUTTAL

Ms. Vaughn stated she was not part of any ground rules, not advised she had 30 minutes or limited in what she could say. She is looking to make sure her name is cleared. Her name was used as a reason for the audit by the City Manager in two memos. That fact that she did not give satisfactory answers implies she was trying to hide something. The fact is she was never asked. She has a copy of Attachment A and is happy to see only one discrepancy occurred in the year the City converted to Caselle. It is difficult to balance check registers to W2’s, W2’s are balanced to the payroll records themselves.

Mayor Hornaday called for a motion to adjourn to Executive Session.

WYTHE/NOVAK – SO MOVED.

VOTE: YES. NON OBJECTION. UNANIMOUS CONSENT.

Motion carried.

Councilmember Zak was excused from participation in the Executive Session due to his telephonic status.

Council adjourned to Executive Session at 5:57 p.m. and reconvened at 6:23 p.m.

Mayor Pro Tempore reported Council deliberated on the matter and discussed it and has given direction to the attorney. A report will be forthcoming from the attorney.

COMMENTS OF THE PUBLIC

Frank Griswold, city resident, commented on HCC 1.24.120(b) telephonic participation. He asked how Councilmember Zak can effectively participate in this appeal when he is not allowed to participate in the Executive Session. HCC 1.24.110 provides the means for teleconferencing must make everyone hear everyone else. In the back of the room he could not understand Mr. Zak in regards to ex parte communication. He doesn’t understand why telephonic participation under Homer City Code is not allowed for an ethics hearing under HCC 1.10, but is allowed for appeals. There is no reason why one is more important than another. He believes Councilmember Zak’s request to participate by phone should have been denied.

Lisa Vaughn stated she is still a signer on the Wells Fargo account with the City of Homer. Under the issues of internal control it is not a good idea to have an ex-employee as a signer on a bank account. She requested to be removed from the Aflac account and asked Council to investigate and ensure no other signers are on the account. She asked that Council ensure any correspondence or reports concerning the account are factual. She would not want to blamed for any anomalies.

ADJOURNMENT

Mayor Hornaday called for a motion to adjourn.

ROBERTS/NOVAK – SO MOVED.

There was no discussion.

VOTE: YES. NON OBJECTION. UNANIMOUS CONSENT.

Motion carried.

The meeting adjourned at 6:26 p.m.

______________________________

JO JOHNSON, CMC, CITY CLERK

Approved: _____________________