April 1, 2021
Serving the residents and business owners of our community as City Auditor is an honor I do not take lightly. Each day I stand ready to ensure this office provides quality and professional service, and I take complete responsibility for the actions of my staff and myself. For the last several council meetings much has been said by a select few concerning an error made on June 26, 2020. The following represents a brief explanation and timeline as to what occurred.
Friday, June 26, 2020, while attempting to update a database (called Magic Writer) used to support our payroll administration, a process routing number associated with the Internal Revenue Service was deleted. This process was the function that directed money withheld from employee paychecks be sent to the IRS on a bi-weekly schedule.
Monday, December 14, 2020 my office received a letter from the Internal Revenue Service informing the city that their June 2020 payment was short $8,825.31 dollars.
Tuesday, December 15, 2020 believing that Magic Writer software application was working properly a payment was processed to the Internal Revenue Service in the amount of $8,825.31 dollars.
Friday, January 29, 2021, while preparing “End of Year” reports, my office discovered bi-weekly payments directed to the IRS had not been completed. Further inquiry determined the software application called “Magic Writer”, designed to make these payments, identifying no routing number for the IRS, sent IRS payments to the State of Ohio Department of Taxation for taxes withheld to comply with state tax obligations. Additionally, my office determined that from July 1, 2020 to January 31, 2021 $1,369,489.12 dollars that was owed to the IRS had been misdirected to the State of Ohio Department of Taxation. With the realization that the City was delinquent regarding taxes owed to the Internal Revenue Service I directed my staff to expedite a payment of $1,369,489.12 to the IRS.
Friday, January 29, 2021 To meet the IRS obligation we transferred $1,280,937.00 dollars from the General Checking Account to the Payroll Checking Account. Transfers of this type occur bi-weekly to facilitate payroll and may also be associated when we make payments to meet our employee pension obligations.
Friday, January 29, 2021, we continued our attempts to contact representatives from both the Internal Revenue Service and the State of Ohio Department of Taxation. Due to issues brought on by the pandemic, we were unable to talk directly with any staff members, therefore, we utilized electronic messaging to keep both agencies informed of the problem we were dealing with. Not being able to speak with a representative of the IRS did hinder our ability to recover the “deleted” routing number that is required to restore the electronic LINK between the City of Marion and the Internal Revenue Service.
Monday, February 1, 2021, with the assistance of Fahey Bank and a representative from “Magic Writer” software, my office was able to recover and re-enter the deleted IRS account number.
Tuesday, February 2, 2021, following guidance from a representative from “Magic Writer” we conducted a test of the IRS payment function. We sent a Prenote Payment of $ 0.0 (Zero dollars & Zero Cents) to the IRS to ensure the account was functioning properly. We were instructed to wait seven (7) days before we made a new payment.
Wednesday, February 10, 2021, an electronic check was sent to the IRS in the amount of $1,369,489.12 dollars.
Monday, March 1, 2021, my office was advised by a representative of the Ohio Department of Taxation they were in the process of returning our overpayment.
Monday, March 15, 2021, we received from the Ohio Department of Taxation $1,193,280.04
Subsequently, on Monday, March 29, 2021 we received the remainder amount of $184,734.88 from the Ohio Department of Taxation.
The total amount returned by the Ohio Department of Taxation to the City of Marion is $1,378,014.92 dollars.
Monday, March 29, 2021, we were able to speak with a staff member of the IRS regarding this incident and asked about possible penalties. We were advised that we would have to wait for the “process” to play itself out.
Research was conducted concerning the closing of the 2020 fiscal year and possible carryover to fiscal year 2021. $3,626,622.00 dollars was carried over from 2020 to 2021. Had 2020 not been closed out there would have been ample funds to pay the estimated $1,280,937.00 due the IRS.
In response to several questions from members of our City Council concerning the payment of invoices, bills and other city expenses that do not receive prior approval from City Council I would like to share the following. There are many instances regarding the payment of recurring bills and invoices by my office that do not receive individual votes by our city council. Annually my office is authorized to process payments to Ohio Edison that may exceed $788,000.00 dollars; to Columbia Gas for $52,000.00 dollars; to ATT, for over $37,000.00 dollars, and our employees’ Health Savings Account for over $80,000.00 dollars. My office can meet and pay these obligations as the City Council has approved the budget thus allocating funds to the various budget line items. There are many such transactions completed every month.
In response to the questions concerning what are the “costs to the city” so far. Staff was asked to calculate the loss of income the city would have received on interest paid to the city calculated from the average daily balance deposited in the general checking account. On January 29,2021, $1,280,937.00 was withdrawn and then $1,378.014.92 was deposited back into the account by March 29, 2021.
at was returned to that account with the two (2) payments received on March15,2021 and March 29, 2021 that totaled $1,378,014.92. Based on the interest normally earned during that time frame we estimated that the city may have lost approximately $170.00 dollars.
Given the rhetoric by certain members of City Council one can only wonder what questions they may come up with. We made a mistake, and we took every effort to minimize its impact on the city. With any similar incident we learn from it so we can better serve our community. We respect the Internal Revenue Service and fully appreciate that their penalties may be harsh. The City of Marion learned from an oversight involving the previous Auditor and her staff that cost the City of Marion $22,500.00 dollars due to late filings of mandated reports associated with W-2’s for all city employees.
If you remove all the politically motivated conversations and speeches, you will find that we discovered a mistake and attempted to correct it in a proper and timely manner.
Should there be any additional questions associated with this matter please contact our office.
Robert Landon, Auditor