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A state auditor's investigation, launched by a complaint from activist Dan Schroeder, found Ogden city administrators improperly spent $434,000 on capital improvement projects without first getting City Council approval.
The city had a "significant deficiency" in internal controls — which is considered less severe than a "material weakness," but "important enough to merit attention by those charged with governance," according to an Aug. 18 letter from state auditor Auston Johnson.
According to state and city statutes, the City Council must approve funds for capital improvement projects over $10,000 — recent Ogden ordinance tweaks raised that cap to $30,000.
The audit focused on expenditures related to three projects between June 2007 and October 2009.
The city received a $200,000 Recreation Arts Museums and Parks (RAMP) grant for an Ice Tower project and incurred $36,000 in engineering and design costs, only to find that RAMP funds could not be used for such expenditures. The administration spent $27,000 more for the same purpose without City Council approval.
The project ultimately unraveled due to lack of private support, but a donor covered the administration's $63,000 debt.
"It looked like it was plainly illegal handling of funds on the city's part," Schroeder said of the motivation behind his complaint.
The state auditor launched the investigation about a year after Schroeder's initial complaint and by that time, he had two other incidents he asked that office to scrutinize.
The second incident — a $96,000 rail car renovation for use as a welcome center at Ogden's FrontRunner station — also was funded without Council approval.
The third and most costly expenditure was $275,000 in bond funds earmarked for storm water improvements, which the city shelled out to lay the groundwork to get a $3 million grant to restore the Ogden River.
Ignoring internal controls and state and city statutes "could result in the misuse of funds," the audit warns.
In response, the city said it had already corrected the problem.
"We recognized that we needed to make a few changes and started meeting with council staff in 2009," said Mark Johnson, Ogden's new chief administrative officer. The three incidents involved extenuating circumstances, Johnson added.
According to the city's written response, Ogden would have missed out on the $3 million grant if the administration had failed to act quickly. And the city learned of the RAMP grant constraints after it had already spent the funds. The train car was funded due to a misinterpretation of the city's Capital Improvement Project ordinance "and is not anticipated to reoccur," the city wrote in its response.
A certain amount of preliminary study is needed to see if a project is viable — officials agreed recently to raise the $10,000 capital improvement project cap to $30,000 to give the administration flexibility to fund such studies without prior council approval.
Schroeder is satisfied with the audit. "As far as it goes, their report is accurate and fair," Schroeder said, "and they've done all they have the power to do."
However, Schroeder believes the ball is now in the City Council's court to function appropriately.
"If the council wants to defend its role as the branch of government that controls the budget, they need to take responsibility for holding the administration accountable."
Twitter: @catmck —
Audit's red flags
Three instances were found where the city failed to get the required City Council approval for capital improvement project expenditures Those included:
• The Ice Tower, $63,000
• The train car renovation for the FrontRunner Welcome Center, $96,000
• The River Restoration Project, $275,000
Source • State Audit Report