By Jennifer Edwards
The Cincinnati Enquirer

MONROE - When this city's money troubles were at their worst, the finance director kept a stack of signed checks for the monthly bills on his desk.

As residents paid their water bills, putting money into city accounts, he would send some of the signed checks out.

"When I saw two inches of checks on a desk that couldn't be sent, I knew we were in deep doo-doo, deep trouble," said Councilman Robert Youtsler. "We'd been bouncing checks at the bank a year. Nobody said a word to us."

A draft audit of this city of 7,300 found flaws in nearly every way money has been accounted for and spent in recent years.

AUDIT FINDINGS

Some of the more serious audit findings: • Bank overdrafts in mid- to late 2002 - at one point in 2002, the city was bouncing from 10 to 20 checks a month and sewer bills went unpaid for about six months • Overestimated fund balances in nearly all the city's funds, including the general fund, and police and fire funds • More than a $1 million from the city's water fund was used to pay for general and special revenue fund operations • A fund deficit of $3.5 million in December 2002 in the special revenue funds (money for the police, fire and street departments and capital improvements). This was a result of those funds not producing enough income to cover their costs and improper accounting of money from other funds to balance that out, city officials explain.

Poor internal controls and accounting practices and uncontrolled cash spending in 2002 led to a $3.1 million fund deficit, $660,000 cash deficit and check overdrafts, the audit shows.

The audit sheds light on why two city officials were pressured to quit earlier this year. And it also comes as city officials are asking residents to approve a tax increase Nov. 4.

The draft audit, obtained by the Enquirer, will be released and discussed for the first time at City Council's 7:30 p.m. meeting tonight. The Ohio State Auditor's Office is expected to release Monroe's official audit Thursday.

City officials say that since March, after the former city manager and finance director left, most of the suggested reforms in the audit are complete. The audit found no money was ever missing. And the city is now current with all bills, has reviewed monthly expenditures and cut back dramatically.

"The general fund and the water fund were supporting the safety services (operations) because those were the funds that were generating the most money," Monroe Mayor Mike Morris said.

Council: We didn't know

City Council and Morris have said little about how the financial mess came to be - and why they didn't heed previous audits that pointed out similar flaws.

They blame the former city manager, Donald Whitman and former finance director, David Collins, for the city's financial mess, saying whenever they asked for financial reports, the men put them off.

Whitman has maintained that it was Collins' responsibility and that he was not told about the financial problems by then-finance director Collins. Collins has repeatedly declined to comment.

"There was always something tied up in the computer. We never got it," Youtsler said. "We just assumed that everything was OK..."Morris concedes that he and City Council were supposed to hold city administrators accountable for the mess. But he insists they did the best with what information they had.

"Council is ultimately responsible," Morris said. "We are the elected officials. But you have to get the information to make good decisions."

Finances improving

Since Whitman and Collins left late last winter, Acting City Manager William Brock and Jay Stewart, the director of development who now also is the acting finance director, worked with the rest of city staff to bring the cash balance up to nearly $1 million in the bank today. They eliminated the cash deficit and some of the smaller fund deficits.

MONROE'S FINANCES

• In 2002: Poor internal controls and accounting practices led to a $3.1 million fund deficit, $660,000 cash deficit and check overdrafts, according to the latest audit. • Since March 2003: Most of the suggested reforms in the audit are complete and no money was ever missing, city officials say. Monroe is current with all bills, has reviewed monthly expenditures and cut back dramatically.

They have cut or created savings of $2.3 million in the 2003 and 2004 budgets, which included slashing three staff positions.

There are five other positions that are unfilled at this time, including the city manager and finance director slots.

The city now has an independent audit committee made up of four citizens with accounting backgrounds who will review the audit, make recommendations to the city for improvement and serve as a check and balance.

Now, Brock and Stewart stress, residents are getting the most for their dollar in city services.

"We're turning the corner. We're on our way up," Morris added. "You'll see a significant difference in our next audit."

Residents upset

But many residents remain upset at city leaders for the financial mess. They wonder why they are being asked to pass a half-percentage-point income tax increase in November, raising the rate to 1.5 percent.

City officials contend an increase would have been needed anyway because of Monroe's growth.

But dozens of residents are expected to turn out at today's meeting, demanding answers from City Council and the mayor about the audit.

"How did it get to the point that it got to without someone noticing it?" said Mary Jo Bauer, 73, who has lived here 40 years.

"When we go to the meeting Tuesday, hopefully we'll find out what happened and get this resolved."

E-mail jedwards@enquirer.com.