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Photo by Jon Anderson.
John Slavek, a representative for the Kroll financial risk and advisory firm, goes over a forensic audit of the city of Hoover's Finance Department and city finances with the Hoover City Council.
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Photo by Jon Anderson.
Members of the Hoover City Council listen to details of Mayor Frank Brocato's proposed budget for fiscal 2025 during a council work session on Sept. 12.
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Data courtesy of Kroll.
Below: This chart shows staffing levels for the finance departments of Tuscaloosa, Auburn and Hoover.
The results of a recent forensic audit conducted on the city of Hoover’s finances has some residents calling for an outside investigation by other governmental authorities.
But Hoover Mayor Frank Brocato said that he’s already shared the city’s financial reporting problems with state officials and that people raising a red flag are doing so for political purposes with a city election coming up next year.
At issue are the findings of a forensic audit requested by Hoover’s new chief financial officer, Jennifer Cornett, after she was hired at the first of this year and noticed irregularities.
The mayor, through the city attorney, hired Kroll, a New York-based company that was hired to find Saddam Hussein’s hidden financial assets and helped Enron restructure after its accounting fraud scandal.
Kroll’s task was to look into Hoover’s unbalanced transactions, unreconciled accounts, delayed financial reports, IRS penalties and missing financial records and to determine if funds were misappropriated.
Photo by Jon Anderson.
Members of the Hoover City Council listen to details of Mayor Frank Brocato's proposed budget for fiscal 2025 during a council work session on Sept. 12.
NO FRAUD BUT DELETED FILES
John Slavek, a Kroll representative, reported on Aug. 19 that his team found no evidence of financial fraud, malfeasance or asset misappropriation.
However, there were problems, Slavek said. Hoover’s Finance Department was understaffed and lacked documented policies and procedures, training on roles and responsibilities, experience and skill in key functions and adequate communication, Kroll’s 274-page report said.
One of the most significant concerns was missing and/or destroyed financial records, the report said. Among the key missing records was the audit “permanent file,” which contains important information auditors need year after year. However, Barfield, Murphy, Shank and Smith — the city’s audit firm — did have a copy of this permanent file.
The Kroll team also found that 219 financial folders with potentially thousands of files had been deleted from the city’s server on July 25, 2023. There also were 123 finance-related files and emails deleted from devices assigned to former Chief Financial Officer Tina Bolt on Aug. 1, 2023 — two months before she retired, the report said.
Bolt, in an interview with Kroll, confirmed that she deleted files as part of a citywide mandate from the information technology staff to create more space on city servers, the report said.
Kroll also found there were virtually no hard-copy records in the CFO’s office when Cornett was hired, nor in the city administrator’s office following the departure of former City Administrator Allan Rice in July of last year. Bolt told the Kroll team she rarely kept hard-copy documents, and Rice said he kept as few as possible and regularly shredded them, according to the report.
Data courtesy of Kroll.
Below: This chart shows staffing levels for the finance departments of Tuscaloosa, Auburn and Hoover.
‘PERFECT STORM’
Slavek said a “a perfect storm” of circumstances contributed to Hoover’s problems.
One big factor was the departure of numerous key finance personnel 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.
Jobs were consolidated at the same time that the city implemented a new financial software system. Brocato said the new system was a “disaster,” leaving some people overpaid and some underpaid. This led to incorrect W-2 reports to the IRS. The city did not respond to some IRS letters, and now the IRS claims the city owes more than $200,000 in penalties and interest.
The Finance Department also is understaffed, Slavek said. Hoover employees were overworked and unable to complete necessary tasks, leading to unreconciled accounts and errors, the report said.
The City Council voted Aug. 29 to create a new payroll manager position and was considering four more new finance positions as of the Hoover Sun’s press date.
The Finance Department also had some employee tragedies. A payroll specialist died in 2020, and her replacement never received full training, the Kroll report said. Also, Bolt had an ailing son who died, and she was absent from the office for about 14 months, the report said. While she worked away from the office, she wasn’t always available to the finance team and didn’t perform annual performance reviews, and the accuracy of work regressed, the report said.
In one case, the city’s ending general fund balance was misstated to regulators, investors and underwriters by $36.6 million, the Kroll report said.
PETITION CIRCULATING
A petition circulating on social media says Hoover is in a financial crisis and is in need of accountability and transparency to ensure the city keeps its AAA credit rating and doesn’t lose millions in federal funding.
The petition demands “immediate action to protect us all from a looming financial disaster” and notes that destruction or tampering with government documents can be a criminal offense.
“We urge you to take the necessary steps to restore trust and confidence in our city government and request the appropriate governmental authorities undertake a formal investigation of the City’s finances,” the petition states.
Hoover Councilman Steve McClinton said in mid-September that he had received 27 copies of the petition as of that time.
The mayor said he heard months ago that people who live outside Hoover but with interests in the city were targeting him, Council President John Lyda and City Attorney Phillip Corley for political attacks.
“It is an organized, well-focused attack against us, and it’s just complete hogwash,” Brocato said. While there are financial problems, “the city is in great financial shape, and it’s hurting their narrative.”
The city’s regular auditors in August gave Hoover an “unmodified report” for fiscal 2023, with Keith Barfield, a principal in the firm, saying “it doesn’t get any better than that.”
Brocato said he’s already talked with state officials, including the state attorney general’s office.
“I bared my soul to everybody,” the mayor said. “I wanted everything looked at, and it turned out everything was on the up and up. … The state auditor would already have been here if they thought there was something wrong with the city of Hoover.”
