At a press conference to announce a new fraud hotline this morning, Pittsburgh Controller Michael Lamb heaped criticism on the mayor's administration, accusing finance department employees and employees in the police bureau of mismanaging funds that came into the police bureau's special events office.
Mr. Lamb, who is running against Mayor Luke Ravenstahl, said the way the city finance department accounted for the funds may have provided the opportunity for fraud. Federal authorities are now investigating allegations that funds were misappropriated from the special events office, which organizes off-duty security jobs for police officers.
Mr. Lamb, who only suggested the city was guilty of mismanaging the funds, said he reported the accounting practices to federal authorities.
But city finance director Scott Kunka shot back that there's no mismanagement of his office, which handles the deposit of checks from businesses when they come from the police bureau. The system that Mr. Lamb labeled problematic was set up before he became director and he did not know who decided how the funds should be accounted for.
"If they had a problem with the system, they had [four] years to tell us about it," he said.
At issue is the hundreds of thousands of dollars the city is supposed to recoup in a surcharge to businesses that hire police officers through the special events office, which also is being audited by the controller's office. Businesses get billed for officers' wages and only write a single check, so all of that money including the surcharge is accounted for in one line item for premium pay. That line item is used to pay wages for officers' private security details.
Mr. Lamb said the mingling of the funds in the city's ledgers has the effect of "padding" that line item, allowing the bureau to spend more than it is allocated or providing the opportunity for undetected theft.
"If someone were going to pilfer checks, it would have gone unnoticed because there was still money in those accounts," he said.
Mr. Lamb blamed this on the city's Office of Management and Budget. Deposit slips from that office show they label the funds "OT reimbursement," which directs his office to account for them in the premium pay line item.
"It's not accurate," he said.
But Mr. Kunka does not believe it's problematic to have the funds mixed in city ledgers. The money generated by the surcharge is supposed to pay for lawsuits and worker's compensation claims associated with secondary employment work, all of which are paid out of the general fund.
"It's all paid from the same big pot," he said.
But he also reiterated that it was not his office that decided to label the funds that way.
"That's the way the system works," he said.
Mr. Lamb said recent events have demonstrated the necessity for a fraud hotline, which 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, which will be manned by auditor Ryan Herbinko, will go live on March 1.
Moriah Balingit: email@example.com, 412-263-2533 or on Twitter @MoriahBee.