Written by A NOTE FROM MARION WATCH
At Marion Watch, one of our missions is to examine municipal audits, public records, and financial disclosures with a level of rigor that ensures every tax dollar is accounted for.
Working alongside community researchers, and our investigative network, we verify administrative claims and track financial patterns that affect local residents.
As far as we can determine at this time, Galion’s municipal controls have not shown signs of poor IT hygiene in recent years, at least not yet.
Financial hygiene, however, is a different matter entirely.
The following report focuses on the City of Galion’s 2024 Single Audit.
Behind the scenes, our team is reviewing the city’s audits spanning the last 7 to 10 years, a process we have been conducting for at least three months.
This subject is of statistically significant concern to Galion residents.
Given the city’s long and painful history with state fiscal oversight, the latest audit data shows a troubling shift back toward the same accounting maneuvers that once cost Galion its financial independence.
THE LONG SHADOW OF FISCAL EMERGENCY
To clarify the historical record, Galion does not hold the title for the longest fiscal emergency in Ohio history.
However, its crisis was exceptionally severe. When the Ohio Auditor of State released Galion from fiscal emergency in October 2018, the state noted it was the fifth longest in Ohio history.
Galion spent 14 years under state control, from August 2004 to October 2018. The original crisis was triggered by staggering structural deficiencies, including an $8 million cumulative fund deficit, a $4.4 million treasury cash deficiency, and internal control failures tied to the criminal embezzlement of public funds by a former finance official.
For more than a decade, residents endured drastic emergency measures. These included deep municipal staffing cuts, a 3 year employee salary freeze, and new taxes required simply to stabilize basic operating ledgers. Capital maintenance was deferred, and the city operated under strict oversight from a State Financial Planning and Supervision Commission.
The city was released in 2018 after implementing rigorous internal controls and strict statutory budgeting. Yet only 6 years later, the 2024 Single Audit shows that several old administrative habits are re emerging. These include shortcuts in procurement, reliance on interfund debt, and budgetary overspending.
THE 2024 AUDIT: A RETURN TO RISKY ACCOUNTING
The 2024 Single Audit provides an Unmodified opinion on the accuracy of the financial statements. This means the numbers themselves are presented according to accounting rules. However, the audit notes reveal several troubling financial practices that carry significant risk and expose taxpayers to potential financial harm.
BYPASSING ANTI CORRUPTION SAFEGUARDS ON A FEDERAL CONTRACT
The audit issued a Qualified Opinion and identified a Material Weakness in Internal Control Over Compliance for the city’s major federal program, the COVID 19 Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing 21.027.
The city applied federal ARPA funds to a construction project that had already been contracted using local money. When federal funds are used, cities must comply with federal procurement rules. These rules exist to prevent fraud, corruption, and misuse of federal dollars.
The audit found that Galion failed to check the federal SAM.gov database to verify whether the contractor was suspended or debarred. This failure occurred on a vendor contract totaling $779,165, which represented 89.5 percent of the city’s total federal program disbursements for the year.
The city also failed to include mandatory Build America, Buy America clauses in the contract and did not secure a federal waiver. These clauses ensure that federally funded infrastructure projects use American made materials unless a waiver is granted.
THE RISK
Bypassing federal anti corruption safeguards on a contract of this size is a major breakdown in oversight. It exposes taxpayers to federal clawbacks, where the U.S. Treasury could demand repayment of the $779,165 from local funds. If this occurs, Galion’s General Fund would be forced to absorb the loss.
This finding also reveals a deeper administrative flaw. Applying federal funds retroactively to locally bid projects without reviewing contract terms creates immediate legal and financial exposure. It indicates a lack of change control procedures within the city’s grant administration.
THE 4.3 MILLION DOLLAR INTERFUND SHELL GAME
One of the most concerning findings involves how the city is financing its utility operations. Our recent infrastructure assessments of Galion’s industrial pretreatment programs and stormwater compliance have shown physical strain on the city’s systems. The financial strain is equally serious.
Enterprise Funds such as Water and Sewer are required to operate as self sustaining businesses funded entirely by user rates. In 2024, both funds operated at significant losses.
The Water Enterprise Fund posted an operating loss of $156,270.
The Sewer Enterprise Fund posted an operating loss of $206,220.
To keep these utilities functioning, the city is using the General Fund as an internal bank. The audit shows that the General Fund is carrying $4,373,637 in interfund receivables, meaning other funds owe this money back.
The Water Fund owes the General Fund $1,956,197. The Sewer Fund owes $710,121. The Electric Fund owes $127,136. The Storm Water Fund owes $30,900.
The city also transferred $600,000 directly from the General Fund to the Water Fund to cover baseline operations.
THE RISK
This practice artificially inflates the General Fund’s assets while hiding the true insolvency of the utility funds. If the utilities cannot generate enough revenue to repay these millions, the debt becomes worthless paper. This means general taxpayer dollars, money meant for police, fire, and parks, have been quietly diverted to subsidize failing utility rates.
This dynamic mirrors the accounting conditions that contributed to Galion’s 2004 fiscal emergency. At that time, the city carried large uncollectible interfund balances that distorted its financial position.
AUTHORIZING PHANTOM MONEY
Ohio Revised Code 5705.39 prohibits cities from authorizing spending that exceeds the certified money they actually have. This rule exists to prevent municipal bankruptcy and ensure fiscal discipline.
The 2024 audit found that Galion violated this law in 6 separate funds, over appropriating hundreds of thousands of dollars.
The Street Maintenance and Repair Fund was authorized to spend $295,716 more than it had available.
The Police and Fire Income Tax Fund was over appropriated by $78,705.
The Airport Grant Fund was over appropriated by $60,821.
The Fire Pension Fund was over appropriated by $42,137.
The FEMA Grant Fund was over appropriated by $591.
The Urban Paving Fund ended the year with a $421,818 deficit.
Budgeting money that does not exist is the exact accounting behavior that triggers state takeovers. It indicates a breakdown in internal controls and statutory compliance.
PAYING FOR FAILED PROJECTS FROM DECADES PAST
The audit notes reveal that Galion taxpayers are still paying for long abandoned projects.
The city is carrying a $300,420 debt for the failed American Municipal Power Generating Station project, a proposed coal plant terminated in 2009. Galion is locked into paying its share of these impaired costs through 2028.
The city is also still paying off a $67,390 pension liability originally incurred in 1967. This legacy debt continues to draw on local resources more than 50 years later.
IN CONCLUSION
The most disturbing takeaway from the 2024 audit is the timeline. Galion was released from fiscal emergency in late 2018 under the premise that its accounting systems had been permanently repaired. Yet within 6 years, the city is showing a clear return to risky financial management.
Ignoring statutory spending limits, failing to perform basic anti fraud checks on major federal contracts, and quietly using the General Fund to float millions of dollars in utility debt are not minor clerical errors.
They are systemic administrative failures.
While Galion currently has the cash flow to avoid immediate collapse, these practices represent the same lack of financial discipline that cost the city its independence 20 years ago.