Wednesday, February 2, 2022

Anti Fraud Measures In North Bay Village

 In my last post, I wrote about 2018 and the lack of controls that would have prevented someone who was neither an employee of North Bay Village nor had any approved written contract from submitting, approving and signing payments to himself from Village funds while evading Florida Retirement System and Florida Statute rules for his own benefit.  In the piece, I wondered what has changed since 2018 that would prevent a repeat of the same.  After publication I received a detailed response to my questions from Deputy Village Manager and HR Director Carla Gomez.  Honestly I'm impressed.  

First - What Is This All About?

On January 5, 2022, the Village received an unexpected invoice from the Florida Retirement System for $472,546 as its penalty in a scheme perpetrated by Lewis Velken to avoid complying with FRS rules.  Velken was never a North Bay Village employee and never had a written contract with NBV yet he was first sworn in as police chief then moved to Village manager under the shambolic administration headed by Connie Leon Kreps.   
From at least August 2018, while he was "interim village manager", Velken submitted invoices for his own services to the village, approved the invoices and signed the checks along with then Mayor Kreps.  
Velken was not an employee and had no written contract with the Village.  
In most organizations, this would have raised huge red flags.  It is standard government accounting practice that every non-payroll disbursement needs to refer to the legislation or contract that supports the payment.  In 2018, in North Bay Village, this didn't happen.  

North Bay Village in 2022 is faced with a huge issue - what to do about the $472,546 fine.  That has to be addressed.  

Looking at that impending payment which would kill our reserves, I also wanted to know two things - 
  • Has NBV fixed the holes that allowed an individual to pay himself without a contract and a careless mayor from signing those checks? 
  • Is there a plan to recoup the more than $70,000 noncompliant payments?

The Answers From The Village - YES  AND HOW

These are the questions I posed to Village Manager Ralph Rosado and HR Direct/Deputy Village Manager Carla Gomez.  The answers are very detailed so I have taken the  liberty of summarizing them. For the full response, click here.  
1.     Are you currently reviewing employee training and procedures on the need for Village disbursements to be clearly supported by more than verbal agreements?  
The short answer is “Yes”  
Following the consulting assessment done by Alvarez & Marsal in 2019, the Village updated the accounting and procurement procedures.  These are detailed in the report but for the purposes of the real question, “How did a non-employee who had no written contract manage to get paid?” it’s clear that in 2018 the procedures were not in place.  
They are now.  
2.      Are you working on clearly laying out a procedure for staff to report suspected non-compliance and fraud?
Again, there is a very long answer but the short answer is that the current administration requires employees to submit an affidavit if there is reason to suspect non-compliance or fraud in payments.  This was not the case in 2018 and it’s a good thing.  
3.      Is there a plan to recoup the disbursements to Stephanie Leon PA (Velken) as they were noncompliant with the Village policies?
Legal is reviewing this as an option.  

Alvarez & Marsal Report

To be honest, I had forgotten about the Alvarez & Marsal Report.  So let’s cover that now.  
When Mayor Brent Latham, along with Commissioners Julianna Strout and Marvin Wilmoth first took office in 2018, it was clear that the Village was out of control.  
As it has emerged now, nowhere could that be more clear than the fact that someone who was not employed by the Village nor had a written contract with the Village was able to oversee the payment of over $70,000 to himself without any alarms being raised.  
Latham took charge immediately and one of his first big moves was to bring in a consulting firm, Alvarez & Marsal, to do a bottom up assessment of North Bay Village and its processes.   
The result was a comprehensive set of recommendations.  North Bay Village Manager Ralph Rosado created and executed a tactical plan based on the recommendation and for several years reported monthly to the commission on progress.  In my view, the most critical aspect has been the rebuild of the Finance Department with strong anti-fraud measures.  Fraudsters will always probe for weakness but North Bay Village is no longer a sitting duck.  
For a complete look at the Alvarez & Marsal Report, click here

People Fought Mayor Latham and The Commission About This Report

The entire Commission agreed to hire Alvarez & Marsal but Latham took the heat.  A failed mayoral candidate and former commissioner who was on the dais in 2018 kept JAQ’ing (“Just Asking Questions” as the kidz say or used to) wondering why it was so costly.   Others began accusing random people of missing money.  But Latham and the Commission persisted and the final report provided the roadmap to reform.  
It's been a long hard road and North Bay Village has not yet closed this chapter, and it won't until the fraudsters make the village whole, but the Village has shut down an opportunity for a repeat performance.  

Kevin Vericker
February 3, 2022

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