Audit shows $50,000 missing from city coffers: Criminal investigation launched, utility supervisor fired in wake of discrepancies

An administrator in the Boulder City utility department has been fired and a criminal investigation has been launched after a third-party audit found $50,000 missing from the city’s bank accounts last year.

An audit published Dec. 10 revealed that “certain bank accounts were not being reconciled monthly” and there was no record of a timely review and approval process, the CPA firm Piercy Bowler Taylor &Kern wrote in its report. The report, which looked at the city’s finances for the fiscal year that ended June 30, was presented to the City Council on Jan. 5.

“During the audit, it was brought to our attention that several utility deposits (dating back to January 2015) were not deposited in the City’s bank accounts, and that approximately $50,000 remains unaccounted for,” the firm wrote.

According to the city, James Petrie was fired in connection with the missing money.

“It was identified that there were discrepancies in deposits totaling approximately $50,000,” City Manager David Fraser wrote in a statement Monday. “Mr. Petrie was responsible for processing those deposits.”

The city removed those responsibilities from Petrie’s workload and he was “ultimately terminated” Dec. 1 for failing to properly complete his work commitments.

Although no charges have been filed against Petrie, “the Boulder City Police Department is conducting an active criminal investigation related to the unaccounted funds, which have not yet been located, and the City will take whatever action is legally appropriate based upon the evidence collected,” Fraser wrote.

Public salary records show Petrie began working for the city as supervisor of utility billing and collection in 2011. His base pay in 2014 was $69,836.

In the audit report the accounting firm recommended Boulder City officials implement formally documented policies and procedures requiring the timely review of month-end bank account reconciliations, which should be conducted and signed by someone independent of the reconciliation process.

“Unreconciled differences” and the money missing from the city’s accounts would have been detected if the transactions were reviewed in a timely manner, the firm wrote.

Fraser said the city has heeded that recommendation.

“The reconciliation process is up to date, and the City is confident that this process will effectively ensure deposits are processed and accounted for correctly,” Fraser wrote.

Petrie declined to comment Monday but deferred to his attorney, Adam Levine, who said he and his colleagues were unaware there was an ongoing criminal investigation.

“The city, when they fired him, knew that James didn’t take the money,” Levine said in a phone interview Tuesday.

Levine said third-party auditors have been telling the city to change its reconciliation policy since 2011. Annual financial reports posted to the city’s website show auditors identified deficiencies in the utility department’s accounting every year since the fiscal year that ended June 2011.

The responsibility to follow auditors’ recommendations and update reconciliation policies falls on the shoulders of Boulder City Finance Director Shirley Hughes and City Manager David Fraser, Levine said. “Management has been ducking the issue” and “blowing off auditors” for five years, he said.

According to Levine, Petrie supervised the clerks who accepted utility bill payments.

“Nothing in his job description deals with developing internal controls for cash handling or making bank deposits,” Levine said of Petrie’s involvement in the missing money. “Hughes is the equivalent of the city’s CFO and it is her responsibility and that of David Fraser to develop internal controls.”

Petrie’s termination letter said the city fired him because he made nearly 200 utility payment deposits several months late and 36 deposits totaling $53,386 were unaccounted for. Levine emphasized that although Petrie took the deposits to the bank, he had no hand in counting the cash deposits before they were put in sealed bags by the clerks.

Levine said he will represent Petrie as a member of the Teamsters Local 14 and will argue that Petrie was wrongfully terminated to cover up city management’s mistakes. An arbitration hearing is set for April 7 and the professional labor arbitrator should take 30 to 60 days to come to a decision, Levine said.

“This is a scandal,” Levine said of the city’s ignoring auditor recommendations. “We’re going to arbitration for Jim Petrie and we’re going to win.”

Contact Kimber Laux at klaux@bouldercityreview.com or 702-586-9401. Find her on Twitter: @lauxkimber