Pittsburgh council considers plan to transfer police funds

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As allegations of mismanagement of police funds flew between city officials Tuesday, Pittsburgh City Council took up legislation that would transfer funds from the police bureau's special events office and give the city's finance office direct oversight of the money.

"We're asking the controller to set up a trust fund for the funding that is at question now -- that we set up a separate account and move that account under the finance department. That should have happened a long time ago," said Councilwoman Theresa Kail-Smith, who authored the legislation introduced at Tuesday's council meeting. "It's incestuous -- everything's inside the department. There has to be another set of eyes."

Tuesday's legislation was introduced within hours of a news conference held by Pittsburgh city Controller Michael Lamb in which he skewered city officials for their handling of money from the special events office, saying they may have inadvertently created opportunities for fraud or theft.

PG graphic: Police investigation
(Click image for larger version)

The special events office organizes off-duty security jobs for police officers and handles millions of dollars a year collected from private businesses for officers' wages.

Deputy police Chief Paul Donaldson has said he thinks the FBI is investigating allegations that funds were misappropriated within the bureau.

Mr. Lamb, who is challenging Mayor Luke Ravenstahl in the Democratic primary for mayor, said the way the funds were labeled when they were handled by the city's finance office made misappropriation difficult to detect within the special events office. The controller, who is in the process of auditing the office, said he reported the accounting practice to federal investigators.

City finance director Scott Kunka fired back, saying the system for how the funds were accounted for was set up before his time. He also said that Mr. Lamb has never raised any issues about how the funds were labeled before this month.

"That's the way the system was set up and [Mr.] Lamb's been accounting for it that way" for the duration of his time in office, Mr. Kunka said.

The verbal sparring came in the midst of a deepening crisis in the police bureau. Nate Harper was asked last Wednesday by the mayor to step down as police chief, several days after federal authorities seized records from the bureau's special events, personnel and finance offices, and from the Greater Pittsburgh Police Credit Union, where an unauthorized account was set up by the chief's office.

The special events office not only receives money from businesses for officers' wages but also for a surcharge, which last year raised nearly $800,000. The Post-Gazette learned earlier this month that a check from the University of Pittsburgh that was sent to the office instead ended up at the credit union in an unauthorized account that is now the subject of the federal investigation.

The special events office bills businesses for both the officers' wages and the surcharge of $3.85 per officer per hour and receives one check for the amount. That check is then sent to the city finance office, where employees deposit it in one of several banks authorized to receive city funds. They then record the deposits on deposit slips, where they label the funds as "OT (overtime) reimbursement," records show.

Because they're labeled as such, the funds are then accounted for in the premium pay line item, which is used to pay officers' overtime wages in addition to their earnings for private security jobs. But the money recouped through the surcharge is not labeled separately.

Mr. Lamb called this system "not honest and not accurate." He said it has "cushioned" the premium pay line item and may have allowed misappropriation to go undetected. But he emphasized that he could not say for certain whether that occurred.

"If someone were going to pilfer checks, it would have gone unnoticed because there was still money in those accounts," he said.

According to the Fraternal Order of Police Lodge No. 1, the surcharge fee is supposed to be used to pay for litigation and workers' compensation claims associated with private security details.

Mr. Kunka said he did not design the system, nor did he make the decision to label the funds that way. He added that he didn't think the system was problematic because the funds were "fungible." In other words, the money used to pay legal fees and worker's compensation claims are "all paid from the same big pot," also known as the general fund.

Mr. Lamb said recent events have demonstrated the need for a fraud hotline, which will go live on Friday. It will allow city employees, city vendors and members of the public to report fraud and misuses of taxpayer dollars by calling 412-255-4777. The hotline will be manned by auditor Ryan Herbinko.

Other city officials continue to respond to the issues that have emerged in the bureau. Last week, Mr. Ravenstahl announced he would hire former Washington County District Attorney Steven M. Toprani to review bureau policy after revelations Mr. Harper set up a side business with several subordinates, including Cmdr. Eric Holmes, who also had a second, full-time job as the head of campus security at Slippery Rock University in 2007 and 2008.

City solicitor Dan Regan said the city is still working on a contract with Mr. Toprani and expects to have a resolution before city council votes next week on authorizing Mr. Toprani's hiring.

At a meeting Tuesday night of the Citizen Police Review Board, acting Chairman Ralph Norman addressed the "negative news" surrounding the police bureau that has "shaken the faith of every citizen in the city."

"I can tell you the reputation of good, hard-working officers in the bureau has been tarnished," he said.

While the board waits to see how the federal probe at police headquarters and the Allegheny County district attorney's probe into last month's officer-involved shooting on the South Side unfold, the board must step back and "passively monitor," by attending debates, hearings and meetings, board executive director Elizabeth Pittinger said.

Based on the conclusions of the investigations, the board can decide on appropriate action, she said, and in the meantime, the board can address related policy matters.

"We cannot investigate the officers, but we can review and evaluate the policies," she said.

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Staff writers Tim McNulty, Lexi Belculfine and Liz Navratil contributed. Moriah Balingit: mbalingit@post-gazette.com, 412-263-2533.


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