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Our previous investigations have already exposed a troubling pattern of failure within Marion’s city government. Through “The Watchmen’s Report,” and “Silent Sabotage” series, we have highlighted a legacy of financial mismanagement, revealed a critical and systemic breakdown in information technology governance. This history is not one of isolated mistakes, but of a long-standing culture of failure and an apparent disregard for the state laws and statutes meant to protect taxpayer funds. The audit findings detailed below confirm this culture has been entrenched for decades, making it perfectly acceptable for officials to commit grave violations such as sharing passwords.
When a history of financial discrepancies, missing records, and systemic IT control failures spans decades, a standard financial audit is no longer sufficient. Industry standards, and indeed common sense, demand a full forensic IT audit. This non-negotiable step goes beyond checking the books; it investigates the digital “how.” A forensic audit examines the system’s logs, access controls, and data integrity to determine who made changes, when they were made, and if data was deleted or tampered with. Given the repeated findings of “super user” access, missing audit trails, and data “disappearing”—as revealed in our “Silent Sabotage” investigations—only a deep, forensic examination can uncover the full extent of the mismanagement and potential malfeasance. We recomment a full forensic IT audit from at least the installation of the New World software onwards, and an immediate change of financial sofware.
Audits conducted by external CPA firms during this period, including Buckingham & Associates (1985, 1986, 1987) and Pry CPA Services, Inc. (1994), repeatedly identified severe problems. These independent auditors found the city was failing to deposit cash daily, violating competitive bidding laws for contracts over $5,000, and failing to maintain any accurate inventory of city assets. Buckingham & Associates also noted the city had no formal accounting manual, poor controls over its computer systems, and failed to monitor prevailing wage laws on federal contracts. In 1994, Pry CPA Services designated the Municipal Court’s lack of internal controls as a “Material Weakness,” a finding that had been repeated for over a decade.
The issues drastically increased when the New World software used to manage city finances citywide was installed. This is not conjecture, it is backed by proof from official documents.
Findings from “Silent Sabotage” and “The Watchmen’s Report”
Our own investigations, published under the “Silent Sabotage” and “The Watchmen’s Report” series, have detailed the modern culmination of these decades-long failures. The issues uncovered in the 1980s and 1990s—such as lack of financial controls, reconciliation failures, and poor IT management—were not resolved. Instead, they festered, leading to the catastrophic financial and IT failures of the 21st century.
The “Silent Sabotage” investigation, focusing on the period from 1999 to the present, revealed a system in chaos, where fundamental failures of security, oversight, and control created an environment ripe for fraud and mismanagement.
Key Information Technology (IT) Failures:
- Compromised Core Systems: The city’s financial software (Tyler/New World, implemented circa 2008-09) was plagued by “chronic, persistent, and well-documented problems.” These issues were cited by state auditors as significant contributors to 22 distinct audit findings in 2010 alone.
- Critical Missing Components: A vital reconciliation module, required by law to properly balance the city’s books, was reportedly missing or non-functional from the software’s installation around 2008 until it was finally addressed in 2024.
- Lack of Basic Security: Core IT security principles were systemically ignored:
- No Disaster Recovery Plan: The city had no viable, tested plan to recover financial data.
- Inadequate Backups: Backups were not stored securely off-site and were not tested, making them “virtually useless in a real disaster”.
- Servers as Offices: The server room was reportedly used as an office, allowing end-users physical access to core systems, a severe breach of IT security.
- Total Lack of Access Control:
- “Super User” Access: Multiple “unauthorized personnel” across different departments allegedly held “unlimited administrative access,” allowing a single person to create a vendor, approve an invoice, and issue a check with no oversight.
- Shared Credentials: The widespread sharing of passwords and login credentials made it “impossible to track who does what.”
- “Permission Wars”: Administrators were reportedly changing one another’s system permissions, creating chaos.
- Destruction of Audit Trails: We received reports of critical financial records “disappearing” from the system, making forensic auditing “impossible”.
Key Financial & Legal Failures (Post-1998):
- Massive Structural Deficits: The city’s financial troubles were evident early, with a $2.3 million General Fund operating deficit in 1999 and $2.5 million in uncollected taxes. This debt grew to $26.7 million by 2007, with uncollected taxes reaching $4.4 million.
- Persistent Control Weaknesses: State audits repeatedly cited the City Auditor’s office for “Material Weaknesses,” including:
- Failure to perform timely and accurate bank reconciliations (a finding that persisted for over a decade and directly enabled later catastrophic errors).
- Failure to obtain prior certification of funds, a direct violation of ORC § 5705.41(D).
- Chronic Budgetary Violations: The city was repeatedly cited for “Material Non-Compliance” for violating ORC § 5705.39 (appropriations exceeding certified resources).
- Findings for Recovery (FFR): These represent illegal expenditures of public funds identified by the State Auditor:
- $1,173.48 (FY 2006): Issued against a Deputy Auditor for salary overpayments.
- $22,500 (FY 2019): Issued against Auditor Kelly Carr for penalties from failing to file 2018 tax forms.
- $154,399 (FY 2020): Issued against Auditor Robert Landon III for penalties from a $1.28 million tax payment error. The State Auditor explicitly linked this error to the long-standing, uncorrected failure to perform bank reconciliations.
- Continued Financial Bleeding: The problems have continued, with penalties and potential liabilities under the current administration (Auditor Miranda Meginness) including:
- Over $84,000 in new late payment fines.
- A potential $394,240 in IRS liability for ACA reporting failures.
- Over $70,000 in unpaid prior payroll tax penalties.
- Allegations of Intentional Misconduct: Beyond incompetence, allegations of intentional wrongdoing have surfaced, including:
- Alleged admission to “deliberately miscoding” an expense to conceal an IRS penalty from oversight.
- Alleged “falsification of official ordinances” and authorization of improper payments.
- Potential violations of state law, including Theft in Office (ORC § 2921.41) and Tampering with Records (ORC § 2913.42).
- Insider Theft: The theft of tens of thousands of dollars by a city utility supervisor (Brenda Nwosu) went undetected internally for over 3.5 years (2011-2014), proving the internal controls were broken long before the recent crises.
- Breakdown of Governance: The situation culminated in an 8-to-1 Vote of No Confidence by the Marion City Council against the current auditor in January 2024.
Historical Audit Analysis (1981-1998)
The following is a detailed breakdown of the official audit findings that laid the groundwork for the modern crisis.
1981 – 1983
(Based on the Report of Examination for October 1, 1981, through December 31, 1983)
This early audit period revealed a foundational breakdown in basic legal compliance and financial controls. The problems were not isolated but spread across numerous city departments. Auditors found that basic legal requirements were ignored: officials had not taken their required oaths of office, and the Municipal Court was operating with incomplete records and missing bonds for its staff. Financially, the city failed to follow basic accounting laws. Money from programs like WIC and fees from food service and trailer parks was put in the wrong funds. Eight different city funds spent more money than was legally appropriated. The city also failed to follow federal rules for its grants, improperly notifying the public and spending grant money without proper appropriation.
Internal controls were found to be extremely weak. In the Sewer and Sanitation department, “All employees” had the ability to bill customers, collect cash, make adjustments without approval, and access the computer—a situation the audit explicitly warned “increases the possibility of manipulation of revenues”. This lack of segregated duties, where one person could both control the books and the cash, was also found in the Municipal Court and the Income Tax department, where staff could approve their own refunds or make cash disbursements. The city also had no inventory list of its property, a basic and repeated failure.
Illegal Issues
- Insufficient Collateral: The city kept funds in Bank One that “were in excess of the amount the institution had pledged as security,” violating Section 135.18, ORC.
- Missing Oaths of Office: There was “no evidence” that members of the board of hospital trustees had taken their required oath of office, violating Section 749.22, ORC.
- Incomplete Court Report: The Municipal Court’s annual report was incomplete and failed to provide “a complete report of actual receipts, total expenditures and undistributed balances.”
- Missing Bond for Court Clerk: There was “no evidence of the acquisition or filing of a bond… for the clerk of the municipal court,” as required by Sections 1901.31(D) and 1901.37, ORC.
- Incomplete Court Records: The court’s criminal docket was missing key information. It “did not specify all proceedings, note verdicts, in some instances, or orders made for fines, restitution and court costs.”
- Improper Bailiff Bond: The bailiff was covered by a city-wide blanket bond, not the specific, separate bond required by Section 1901.32(A), ORC.
- Improper Fund Posting: Fees for food service operations and trailer parks were illegally posted to the General Fund instead of their required special funds, violating Sections 3732.04 and 3733.04, ORC.
- Missing Bond Funds: The City failed to establish required Bond Retirement Funds for Hospital Mortgage Revenue Bonds, General Bond Retirement, and Hospital Construction Escrow Bonds, violating Section 5705.09(C), ORC.
- Missing Special Fund (WIC): The City failed to establish a separate special fund for monies received from the Women, Infant, and Children (WIC) Program, violating Section 5705.09(F), ORC.
- Improper Fund Certification: Trust and agency funds were improperly “combined on said certificate to the county auditor,” and several hospital-related bond funds were not certified at all.
- Appropriations Without Certification: The City adopted additional appropriation measures in 1983 without first filing the required certificates from the county auditor, violating Section 5705.39, ORC.
- Expenditures Exceeding Appropriations: Eight different city funds spent more money than was legally appropriated, including the Senior Citizen Fund, Federal Revenue Sharing Fund, Housing Urban Development Fund, Garbage Fund, and multiple hospital-related funds, violating Section 5705.41(B), ORC.
- Lack of Prior Certification: At the end of 1982 and 1983, “material amounts of expenditures were made, not encumbered, and were subsequently charged against the following fiscal year’s appropriations,” a violation of Section 5705.41(D), ORC.
- Improper Public Notices (Federal Funds): The city failed to tell the public how much federal money it had or how it planned to spend it in its public notices for Federal Revenue Sharing (FRS) funds.
- Missing Public Notice (Federal Funds): The City “had not been published” a required public notice informing the public where the enacted budget was available for inspection.
- Illegal Spending (Federal Funds): The City violated FRS regulations by allowing its Federal Revenue Sharing fund expenditures to exceed its appropriations.
- Violation of Local Ordinances (Deposits): The City failed to maintain its active money deposit quotas in various banks as required by Ordinances 1981-87 and 1983-68. This was a repeat finding.
- Violation of Local Ordinances (Taxes): The income tax department violated City Ordinance 720.13 by allowing some establishments to file amusement tax returns quarterly instead of monthly.
Financial Control Issues
- Sewer & Sanitation (Lack of Segregation of Duties): The audit found that “All employees” in this department could do everything: “prepare the billings, make adjustments without approval, collect revenue over the counter… and have access to the computer terminal.” Auditors warned this “increases the possibility of manipulation of revenues”.
- Sewer & Sanitation (Weak Reconciliation): The “cash register tape was not used to reconcile the stubs retained and the money received.”
- Sewer & Sanitation (Unapproved Adjustments): “Change orders to customer accounts did not require approval of department head.”
- Sewer & Sanitation (Poor Record Keeping): Utility stubs were not stamped “paid” with the date and were bundled “in no logical sequence.”
- City-Wide (Lack of Asset Inventory): “a listing of property and equipment was not maintained,” which could lead to improper insurance coverage or unprovable losses from theft or destruction. This was also cited as an illegal issue.
- City-Wide (Inaccurate Insurance): Property insurance coverage had not been updated since 1980, and the “insurance company had not been notified of all changes.”
- City-Wide (Weak Disbursements): Expenditures were made using “Photostatic copies of invoices or no invoice”; department heads “did not approve expenditures” before payment; and “Invoices were not cancelled” to prevent duplicate payment.
- Municipal Court (Lack of Segregation of Duties): Bookkeepers were “involved in all aspects of accounting activities,” including collecting, check writing, and bank reconciliations.
- Municipal Court (Improper Cash Use): The criminal branch “had made disbursements in cash,” and in the civil branch “actual cash was used to reimburse employers for garnishment fees.”
- Municipal Court (Weak Cash Controls): “Daily deposits did not equal daily receipts” and “A permanent bond/bail record was not established.”
- Income Tax Dept. (Weak Controls): The department lacked a control account for delinquencies; there was “no evidence that returns had been reviewed”; “All employees were given the authority to approve and prepare refunds”; and adjustments/voids were not approved.
- City-Wide (Incomplete Minutes): City minutes “did not include pertinent information as to the transactions that had been entered into.”
- Mechanical Taxes (Weak Controls): Receipts were issued “only when cash payments are received” (not checks) and licenses were not all prenumbered.
- Bicycle Licenses (Weak Controls): “Receipts are not issued for bicycle licenses and the revenue… are not summarized in any fashion.”
- Swimming Pool (Weak Controls): “no receipts are written to these employees” turning in admission and concession revenue.
- Health Dept. (Weak Controls): The department “used different receipt books,” “not all revenues were receipted,” and “not all receipts were prenumbered.”
Information Technology Issues
- Sewer & Sanitation (Weak Access Controls): All employees had “access to the computer terminal to post adjustments and payments.” The audit recommended limiting access to “one or two individuals.”
1984
(Based on the Report of Examination for January 1, 1984, through December 31, 1984)
The 1984 audit showed little to no improvement on the major issues identified in the prior review. The city continued to illegally overspend, with the Community Development Block Grant Fund spending more than its certified revenue and the Income Tax Fund spending more than was appropriated. The failure to maintain an inventory of city assets was noted as a “repeat citation”. Most critically, the severe internal control weaknesses from the 1981-83 audit were found again. Auditors issued a “repeat recommendation” for poor record-keeping in the Sewer and Sanitation Department and once again warned of the “lack of segregation of duties” in the Municipal Court, where the same employees who collected money were also in charge of the accounting records.
Illegal Issues
- Appropriations Exceeding Revenue: The Community Development Block Grant Fund had appropriations “in excess of the amount certified as available,” violating Section 5705.39(A), ORC.
- Expenditures Exceeding Appropriations: The Income Tax Fund “had expenditures which exceeded appropriations,” violating Section 5705.41(B), ORC.
- Missing Contractor Tax Statements: The City awarded “several contracts let by competitive bid that did not have” the required statement affirming the bidder had no delinquent personal property taxes, violating Section 5719.042, ORC.
- Lack of Asset Inventory: The City “did not have inventory records on file,” which was noted as a “repeat citation” in violation of Section 733.11, ORC.
- Insufficient Collateral: Funds on deposit at Savings of America “were in excess of the amount the institution had pledged as security,” violating Section 135.18, ORC.
Financial Control Issues
- Municipal Court (Lack of Segregation of Duties): “some employees were involved in all aspects of accounting activities,” including collecting revenue, writing checks, and bank reconciliations. This “increases the possibility of manipulation of revenues”. (Repeat finding).
- Police Dept. (Weak Parking Ticket Controls): The department “did not issue receipts for all fines” and parking tickets were “not picked up every 24 hours from the fine boxes,” which “could result in revenue loss.”
- City-Wide (Inaccurate Asset Records): The City “did not keep an accurate record of its assets,” which “could result in loss of City owned assets”. (Repeat finding).
- Sewer & Sanitation (Weak Payment Controls): Utility stubs retained by the City “were not stamped paid with the date paid”. (Repeat finding).
- City-Wide (Stale Outstanding Checks): A review found “several checks over six months old.”
- City-Wide (Incomplete Minutes): Council minutes “did not include all pertinent transactions” and Civil Service minutes were “only signed by the secretary.” (Repeat finding).
Information Technology Issues
- No information technology issues were listed in this report.
1985 – 1986
(Based on the Reports of Examination for 1985 and 1986. The 1986 report re-issued the 1985 findings, as the 1985 audit was delivered late in 1986, giving the City “not… adequate time to comment and implement”).
These audits show a systemic failure to correct known problems. The 1986 report specifically noted that the 1985 audit was delivered late, giving the city little time to implement changes. As a result, the findings for 1986 were almost entirely repeats of uncorrected issues. The city’s failure to maintain an asset inventory was again marked as “Not Corrected”. Illegal activities continued, including spending more than appropriated, failing to deposit cash daily from the Health and Transit departments, and again violating competitive bidding laws for city contracts. Federal grant rules were also repeatedly broken. Nearly every financial control weakness from the previous audit was re-issued, including a lack of segregated duties in the Municipal Court, weak cash controls in the Health Department, and a total lack of accountability for parking tickets and prisoner money in the Police Department.
Illegal Issues
- Expenditures Exceeding Appropriations: The Special Assessments Fund and the Rotary Fund had expenditures that exceeded appropriations. (Repeat finding).
- Lack of Daily Deposits: “Moneys collected within the Health Department and Transit Department were not deposited daily.” (Repeat finding).
- Lack of Asset Inventory: The City Auditor failed to “exhibit accurate statements of all property owned by the City.” (Repeat finding).
- Late Tax Levy Certification: The City failed to certify its tax levies by the October 1 deadline.
- Bypassing Competitive Bidding: “Fill dirt contractual expenditures far exceeding the $5,000.00 limit” were made “without ordinance, and without competitive bidding.” (Repeat finding).
- Improper Fund Accounting (Federal): Funds from Department of Labor and Veterans Administration grants were improperly posted to the General Fund instead of a special fund.
- Missing Procurement Policy (Federal): The City lacked a “written code or standards of conduct” for contracts supported by Federal funds.
- Improper Public Notice (Federal): The City “failed to publish a notice of availability of the 1985 audit report.”
- Missing Property Records (Federal): The City “does not maintain a separate record of the City’s property” as required by Federal Revenue Sharing regulations. (Repeat finding).
- Missing Grievance Procedures (Federal): The City “has not established a formal grievance procedure for complaints alleging handicap discrimination.” (Repeat finding).
Financial Control Issues
- Petty Cash: Vouchers were “not signed by the person receiving the cash.” (Repeat finding).
- Cash Receipts (Lack of Segregation of Duties): The employee who verifies receipts is also the person who “input cash receipt information into the computer.” (Repeat finding).
- Cash Disbursements (Stale Outstanding Checks): “A few old outstanding checks exist which have not been investigated.” (Repeat finding).
- Inventory (Lack of Records): “No inventory is kept of raw materials and supplies.” (Repeat finding).
- Plant and Equipment (Lack of Records): “The City did not account for the fixed assets of the various departments.” (Repeat finding).
- Purchasing (No Receiving Report): “The City does not have a formal receiving report,” and “No documentation exists to prove the City received the items ordered.” (Repeat finding).
- Purchasing (Inefficient POs): “Purchase orders are being issued for trifle amounts,” where the “cost of preparing… exceeds the benefit.” (Repeat finding).
- Payroll (Lack of Segregation of Duties): The clerk who “prepares the payroll, inputs and prepares the payroll checks is given back the checks for distribution.” (Repeat finding).
- Long-Term Debt (Lack of Segregation of Duties): “The Bond and Coupon Account is reconciled by the City Auditor with all financial activity taking place by the City Auditor.” (Repeat finding).
- Long-Term Debt (Improper Payments): Payments for notes and bonds “should come directly from the funds designated rather than transferring monies to the Bond Retirement Fund.”
- Health Department (Weak Cash Controls): “More control is needed.” The department used multiple receipt books, did not post to a cashbook, did not prepare a monthly report, and “Money is not being deposited daily.” (Repeat finding).
- Health Department (Trailer Park Licenses): “pre-numbered receipts are not used and the capacity of the trailer is not shown.” (Repeat finding).
- Health Department (Vital Statistics): Cash receipts “entered into a cashbook by deposit only,” “deposit cannot be traced back to individual receipts,” and “Money is not deposited daily.” (Repeat finding).
- Transit Department (Weak Cash Controls): “Coupon book which are pre-numbered are not accounted for on any record.” “Drivers also are issued coupon books and these are not accounted for.” (Repeat finding).
- Landfill (Weak Cash Controls): “Weigh stubs are not pre-numbered and are not verified independently.” (Repeat finding).
- Investments (Poor Ledger): The investment ledger “does not show redemptions and purchases,” making tracing difficult. (Repeat finding).
- Bond Debt (Improper Recording): The City “held its own debt and was not recording it on the financial records.” (Repeat finding).
- Payroll (Outdated Policy): The “personnel policies booklet be updated.” (Repeat finding).
- Payroll (Improper Voiding): The City “does not properly deface void payroll checks.”
- Income Tax Department (Weak Controls): “All tax returns are not dated upon receipt.” “Machine tax receipts are currently combined with income tax receipts.” (Repeat findings).
- Safety Department (Incomplete Reports): “Monthly reports for licenses and permits should include amount of fees received.” (Repeat finding).
- Safety & Transit Departments (Deposits): “Collections are not being deposited daily.” (Repeat finding).
- Police Department (Incomplete Reports/Weak Controls): “does not issue an annual report of receipts”; “Manual records are maintained for the activity in the prisoner accounts”; “authority to maintain prisoner money be placed in the hands of the Treasurer”; “not accounting for the numerical sequence of parking tickets.” (Repeat findings).
- Parks and Recreation Department (Weak Controls): “accountability of monies at the swimming pool are not adequate.” (Repeat finding).
- Transfers (Vague Ordinances): “Council did not specify on the Appropriation Ordinance to what funds monies should be transferred to.” (Repeat finding).
- Municipal Court (Lack of Segregation of Duties): Bookkeepers were “involved in all aspects of accounting activities,” including collecting, check writing/signing, and bank reconciliations. (Repeat finding).
Information Technology Issues
- Cash Receipts (Segregation of Duties): The employee verifying receipts is also the person who “input cash receipt information into the computer.” (Repeat finding).
- EDP (Master File Changes): “Changes to the master files… are not approved by someone other than inputer.” (Repeat finding).
- EDP (Access Controls): Terminals “controlled by passwords only”; “Passwords are never changed.” (Repeat finding).
- EDP (Backup Tapes): “not stored in a separate location” and “not fire-proof.” (Repeat finding).
- EDP (Segregation of Duties): “one city auditor employee handles cash and is an inputer of the computer.” (Repeat finding).
- Police Department (Automation): The audit repeated the recommendation to “computerize the activity in the prisoners accounts.”
1987
(Based on the Report of Examination for January 1, 1987, through December 31, 1987)
This audit continued to find many of the same problems, while also identifying new, basic failures in city management. The city’s Records Commission “did not meet during 1987”. The city was still violating competitive bidding laws, this time for “computer software… for the police department and an endloader… repaired” for over $5,000. The audit introduced new concerns, including the fact that the city had no formal accounting manual with written procedures. It also found the city was not monitoring prevailing wage laws for all federal contracts. On the IT front, auditors found that computer tapes and discs “are not under library control,” and that the same people handling cash were also performing computer transactions, creating a significant risk.
Illegal Issues
- Lack of Daily Deposits: “Daily deposits… were not being made” by the Health Department, Parks and Recreation Department, and Utilities Department. (Repeat finding).
- Bypassing Competitive Bidding: “Computer software was purchased for the police department and an endloader was repaired… neither was bid out although both exceeded $5,000”. (Repeat finding).
- Missing Grievance Procedures (Federal): The City “has not established a formal grievance procedure for complaints alleging handicap discrimination.” (Repeat finding).
- Cash Management (Federal Funds): “The three day rule of not disbursing funds upon receipt was not adhered to in all cases” for several CDBG grants.
- Late Budget: The 1987 tax budget was adopted September 8 (due July 15) and submitted September 16 (due July 20).
- Late Tax Levy Certification: The City did not certify its tax levies by the October 1 deadline; it was done November 24.
- Improper Blanket Certificates: The City “had ‘blanket’ certificates for fuel that exceeded $5,000.00,” violating Section 5705.41(D), ORC.
- Records Commission: The City’s “record commission did not meet during 1987.”
Financial Control Issues
- Management (No Accounting Manual): “an up-to-date accounting manual with adequate written instructions on accounting policies and procedures is not maintained.”
- Cash Disbursements (Checks to “Cash”): There was “not a definite written prohibition against drawing checks payable to ‘cash’ or ‘bearer’.”
- Cash Disbursements (Check Signing Authority): “check-signing authority is not restricted to executives who do not have access to accounting records or to negotiable assets.”
- Cash Disbursements (No Check Protector): “A check protector is not in use.”
- Purchasing (No Receiving Report): The City “does not have a receiving report.” (Repeat finding).
- Purchasing (POs not used): “Purchase orders are not being utilized for all relevant purchases.” (Repeat finding).
- Cash Disbursements (Invoices not Canceled): “Not all vendor statements are being cancelled upon payment.” (Repeat finding).
- Cash Disbursements (Missing POs): “Not all voucher packets include an attached purchase order, this occurs especially related to blanket purchase orders.”
- Cash Disbursements (Filing System): The voucher filing system “causes repetitive voucher package preparation” and makes tracing a single check with multiple distributions difficult.
- Income Tax Refunds (Weak Controls): “supporting documentation is kept on file in the tax department” but there is a “lack of good sequential filing and the lack of cancellation procedures.”
- Cash (Voided Checks): The “signatory is not torn off of all voided checks.”
- Long-term debt (Improper Recording): “two general obligation notes that were retired and reissued were recorded at the net amount rather than the gross amount.”
- Payroll (Authorization): “Payroll deductions were hard to track to the authorization in the personnel files.”
- Health Department (Petty Cash): “more than one person has access to petty cash.”
- Parks and Recreation (Lack of Segregation of Duties): “The employee who collects the money also records the transactions and makes the deposit.” (Repeat finding).
- Parks and Recreation (Weak Cash Controls): “more than one receipt book is being used… neither pre-numbered nor numbered… one receipt book is missing.”
- Federal Funds (Fund Accounting): “city does not maintain a separate fund for each federal grant.” (Repeat finding).
- Federal Funds (Segregation of Duties): “purchasing function is not separate from the receiving function.”
- Federal Funds (Procurement): “city does not have procedures to obtain the best possible price for items not subject to competitive bidding.”
- Federal Funds (Check Signatures): “two signatures are not required on any checks.”
- Federal Funds (Davis-Bacon): “not all construction contracts involving federal money went through the City’s system for monitoring” prevailing wages.
- Federal Funds (UMTA): “a trial balance is not prepared detailing where general ledger balances are compiled on the Operations Reimbursement Invoice.”
Information Technology Issues
- EDP (Library Control): “computer tapes, discs and other sources of computer input software are not under library control,” meaning they are not secured and “unauthorized personnel may have access.”
- EDP (Segregation of Duties): “computer transactions are performed by persons actually handling the negotiable instrument.” (Repeat finding).
1994
(Based on the Report of Examination for January 1, 1994, through December 31, 1994)
The 1994 report highlighted significant violations of state law and elevated a long-standing issue to a “Material Weakness”—a severe internal control deficiency. For the first time, the audit officially designated the “lack of segregation of duties” in the Municipal Court as a Material Weakness, noting that the same cash-handling and record-keeping control failures reported over a decade earlier had still not been fixed.
The city was also found to be in violation of prevailing wage laws and had made an illegal investment in a World Bank Bond. This report also noted significant financial risks, including pending wrongful termination lawsuits seeking $5.5 million in damages and over $800,000 in public money that was improperly collateralized in its bank, violating state deposit protection laws.
Illegal Issues
- Lack of Daily Deposits: “Daily deposits with the Treasurer were not being made… by the Transit Department, Police Department, Airport, and Municipal Court.” (Repeat finding).
- Improper Contract Management: The audit noted “two contracts in which the one of the above were not met” regarding rules for contractor accounting and establishing escrow accounts, violating Section 153.13, ORC.
- Bypassing Competitive Bidding: “the City entered into a contract that exceeded ten thousand dollars without following competitive bidding procedures.” (Repeat finding).
- Failure to Monitor Prevailing Wage: The audit “found two instances, where employees of the contractor were not paid prevailing wage rates.” It also found “one instance where the City failed to verify prevailing wage rates for a contract,” violating Sections 4115.04 & 4115.05, ORC.
- Unallowable Investments: The City “had an investment that was not allowable” (a World Bank Bond), violating Section 135.14(B), ORC. The report notes this investment became legal on July 1, 1994, due to a change in the statute.
- Improper Collateral: $810,522 in public deposits “was covered by collateral held in the pledging bank’s trust department,” which is a violation of state law requiring collateral to be held by an independent third-party institution.
Financial Control Issues
- Municipal Court (Material Weakness): The audit identified a “MATERIAL WEAKNESS” for lack of segregation of duties. “The duties of collecting cash, recording receipts, and reconciling bank statements are not segregated.” (Repeat finding).
- Landfill (Change in Estimate): The estimated liability for landfill postclosure care costs was reduced by $3,637,612, which was “considered a change in accounting estimate that occurs as a result of new information or as additional experience is acquired.”
- Landfill (Deficit): The Sanitation Enterprise Fund had a deficit of $5,910,628 “as a result of the Landfill Closure and Postclosure costs.”
- Pending Litigation: The City was a defendant in two wrongful termination lawsuits asking for damages of approximately $5.5 million.
Information Technology Issues
- No information technology issues were listed in this report.
1997
(Based on the Report of Examination for January 1, 1997, through December 31, 1997)
By 1997, audits showed the city’s IT infrastructure was critically vulnerable, and federal grant money was being mismanaged. The problem of uninsured deposits had grown significantly. Auditors found the city was sitting on hundreds of thousands of dollars in federal CDBG funds instead of disbursing them, a violation of cash management rules. Financially, the city was at significant risk. The audit revealed that $5,223,214 of the city’s deposits were “uninsured and uncollaterilized,” leaving a vast amount of public money unprotected. Auditors also noted a major land sale to the Greater Marion Community Area New Development Organization, Inc. (CANDO) was conducted with “no written agreement,” warning this “could result in a misunderstanding”. The Sanitation Fund and Harding Center Fund also carried large deficits, totaling over $6.1 million. A new and serious threat emerged in this audit: the Year 2000 (Y2K) bug. The city’s core financial, payroll, and utility systems were “not Year 2000 compliant,” and the vendor, NCR, “no longer supported the computer system.” The city also lacked a security policy, a disaster recovery plan, and proper password controls.
Illegal Issues
- Cash Management (Federal Funds): The City violated the “Fifteen Day Rule” for its CDBG grant. “For the Economic Development Program, none of the $400,000 received was expended within fifteen days.” For the Housing Improvement Program, only $44,818 of $314,000 was spent on time.
- Improper Collateral: The city’s uninsured deposit problem ballooned. The audit found $5,223,214 was “uninsured and uncollaterilized,” potentially subjecting the City “to a successful claim by the FDIC.”
Financial Control Issues
- CDBG (Weak Controls): The audit recommended the City “appoint an individual that is independent of preparing the draw down requests to monitor the cash balances” to ensure federal cash rules are followed.
- Missing Written Agreement: The City purchased land and sold it to the Greater Marion Community Area New Development Organization, Inc. (CANDO), but there was “no written agreement between the City… and the… Organization.”
- Fund Deficit (Harding Center): The Harding Center Construction Capital Project Fund had a deficit of $1,750,000 from notes issued to finance the project.
- Fund Deficit (Sanitation): The Sanitation Enterprise fund had a deficit of $4,400,737 “as a result of recording loan payable amounts.” (Repeat finding).
- Landfill (Postclosure Costs): The City had an estimated liability for landfill postclosure care costs of $3,159,000.
Information Technology Issues
- Y2K (Reportable Condition): The audit identified a “Reportable Condition” for Year 2000 (Y2K) compliance. The City’s “financial, payroll, utility, and income tax applications” were “not Year 2000 compliant.”
- Y2K (Vendor Support): The vendor (NCR) “no longer supported the computer system and did not intend to upgrade it,” forcing the city to find a replacement.
- Missing Security Policy: “The City was aware of the need for a security policy, but had not yet developed one.”
- Weak Access Controls: The audit noted severe security weaknesses: “Individual IDs and passwords were not assigned to users” and “Passwords to applications were manually changed approximately once every year.” (Repeat finding).
- Missing Backups: There was “no off-site storage of any backup tapes.” (Repeat finding).
- Missing Disaster Recovery Plan: “The City currently does not have a disaster recovery plan.”
1998
(Based on the Notes to the General Purpose Financial Statements and Schedule of Findings for 1998)
The 1998 report showed the city was illegally spending federal grant money and the Y2K crisis was in full swing. The uninsured deposit risk had doubled to a catastrophic level. Auditors found the city illegally used $12,619 from a federal COPS grant to pay for “overtime and fringe benefits specifically prohibited by the grant agreement.” The city also illegally spent $3,095 from a senior program grant on “payroll for employees that did not provide grant services.”
The city’s financial risk had exploded, as the amount of “uninsured and uncollaterilized” public money on deposit ballooned to $10,241,366. This risk was compounded by major partnership failures. The city’s partner on the Harding Center project, MSHLP, “defaulted on the note” for $1,750,000, leaving it “unpaid as of December 31, 1998” and throwing the project’s fund into a $2.1 million deficit. Furthermore, the city had not transferred the deed for $750,000 of land sold to CANDO in 1997, forcing the city to continue assuming the property tax obligation.
Meanwhile, with the year 2000 just one year away, the Y2K crisis was unresolved. By June 1999, the city was still “in the process of remediating” its core financial, 911, and court systems, with the audit warning that “Testing and validation… had yet to be completed.”
Illegal Issues
- Illegal Spending (Federal COPS Grant): The City “used $12,619 of federal grant monies to pay police officers for overtime and fringe benefits specifically prohibited by the grant agreement.”
- Illegal Spending (Federal Senior Program): The City made “Federal grant expenditures of $3,095… for payroll of employees that did not provide grant services” for the Title III-B Supportive Services and Senior Centers grant.
- Appropriations Exceeding Estimated Resources: Three funds were in violation: the CDBG Formula Fund ($216,000 variance), the Insurance Proceeds Fund ($25,000 variance), and the Youth Center Fund ($1,240 variance). (Repeat finding).
Financial Control Issues
- Harding Center Note (Default): The Marion Senior Housing Limited Partnership (MSHLP) “defaulted on the note” for $1,750,000, which “remained unpaid as of December 31, 1998.” (The note was subsequently repaid in May 1999).
- Fund Deficit (Harding Center): This fund had a “deficit fund balance at December 31, 1998 of $2,100,000.”
- Fund Deficit (Sanitation): The Sanitation fund deficit remained at $4,291,865. (Repeat finding).
- Land Sale (Deferred Revenue): As of year-end, the city had still not transferred the deed for $750,000 of land sold to CANDO in 1997 and “still assumed the property tax obligation on that land.”
- Landfill (Postclosure Costs): The estimated liability for landfill postclosure care costs was $3,037,500.
- Massive Uninsured Deposits: The city’s uninsured deposit risk grew to an alarming $10,241,366, which was “uninsured and uncollaterilized.”
Information Technology Issues
- Y2K (Reportable Condition): The Y2K issue was listed as a “Reportable Condition.”
- Y2K (Financial/Utility Systems): As of June 1999, the city was still “in the process of remediating” its core financial, payroll, and utility systems, with $233,881 committed to the project.
- Y2K (911 System): The “911 police and fire emergency reporting system” was also still being fixed, with $64,301 committed.
- Y2K (Municipal Court/Police): The court and police reporting systems were also still “in the process of remediating.”
- Y2K (General Weakness): The audit warned that “Testing and validation of these systems… had yet to be completed” and failure “may affect the delivery of essential consumer services or public safety.”
- Y2K (External Systems): An audit letter recommended the City check Y2K compliance for “external parties” critical to city operations, including “tax collecting, grant processing, water meter reading, and cash and investment transacting.”
Conclusion
The evidence compiled from four decades of official state and independent audits is not an indictment of a single department or a single administration. It is a portrait of a deep-seated, generational culture of failure. This culture enabled the more recent IT and financial control issues.
What these reports show, year after year, is not a government struggling with complex, novel problems. They show a government that has repeatedly failed to perform the most basic, non-negotiable duties of public administration. The uncorrected, “repeat” citations for failing to maintain a simple asset inventory, failing to segregate financial duties, and illegally spending money without appropriation are not minor bookkeeping errors. They represent a fundamental and persistent breakdown of stewardship.
This culture of disregard is the foundation upon which the modern crises, as detailed in our “Silent Sabotage” and “The Watchmen’s Report” investigations, were built. The 1980s failure to secure cash in a drawer evolved into the 1990s failure to secure $10.2 million in public deposits. The 1980s warning about “all employees” having access to a single computer terminal metastasized into the 21st-century disaster of “super user” access for unauthorized staff, non-existent audit trails, and a complete lack of data recovery.
When a government fails to perform basic bank reconciliations—a finding that persisted for years—it is not a surprise when it results in a $1.28 million tax error and a $154,000 penalty. This was not a sudden crisis; it was an inevitability. When a system’s controls are so broken that an insider (Brenda Nwosu) can steal funds for 3.5 years without detection, it proves the controls are, and have been, non-existent.
The City of Marion’s core financial system has been allowed to operate in a state of “silent sabotage.” The documented lack of a critical reconciliation module for over a decade, the failure to secure backups, and the inability to track who is in the system are not just IT problems. They are financial control failures of the highest order. They have created a system “designed to be unaccountable,” where fraud is not only possible but, if it occurs, is untraceable.
The Findings for Recovery, the massive IRS penalties, and the 8-to-1 Vote of No Confidence are not the beginning of this story. They are the predictable climax of a 40-year failure in governance. The historical record is clear: the City of Marion has not been the victim of a few bad actors. It has been the victim of a broken system that its leaders, for decades, have failed—or refused—to fix.
The question is no longer “what is broken?” The question is “who will finally demand a full, independent, forensic audit to determine how much this culture of failure has truly cost the taxpayers?”
Works Cited:
2000-2022 Ohio Auditor of State Audits:
https://1drv.ms/f/c/583c034329af8bb0/EkPA0ZoHRH1CnJfwQJn335IBX3XwcPNtfEMqyIr_KsiHlQ?e=6hZfJs
1983-1999 Ohio Auditor of State Audit Archives:
https://drive.google.com/drive/folders/1t9G_JyojeV0bY5Pbw4veXGaKbZW7kDqi?usp=drive_link