BAY ST. LOUIS -- The U.S. Department of Justice found five improprieties in the city's handling of a federal forfeitures fund that is missing nearly $300,000.
On Tuesday, Mayor Les Fillingame's administration released a letter sent by the DOJ that contains preliminary findings regarding the Bay St. Louis Police Department's federal equitable sharing fund. In the letter, the DOJ notes it froze the fund Nov. 2 and orders the city to perform several corrective actions.
The police department's equitable sharing fund, which holds forfeiture money shared and regulated by the Justice Department, has been the subject of many heated City Council meetings as well as ongoing probes by state and federal authorities.
The "DOJ forfeitures fund," as the City Council calls it, had a last reported balance of $298,108 at the end of fiscal year 2014, according to federal documents the Sun Herald obtained through public records requests. Council members noticed that sum missing in August and called for authorities to investigate the situation. Shortly thereafter, the Office of the State Auditor dispatched investigators to the city, and the DOJ sent an assessment team to review the Bay's finances.
DOJ forfeitures are funds seized during operations such as drug busts conducted jointly by federal and local law enforcement agencies. Strict state and federal guidelines dictate how municipalities and local police agencies may use forfeiture money.
At an Aug. 18 City Council meeting, Fillingame said the forfeiture money had been placed in the city's general operating account.
Among the documents the Sun Herald obtained are annual DOJ affidavits signed by the mayor and Police Chief Mike De Nardo, certifying the amount of forfeiture money the city had in its account -- an amount the city's recent annual audit could not account for.
The police chief has maintained he never actually saw the DOJ money his agency earned over the years because he has never had personal access to the city's general operating account.
He said Fillingame's administration never supplied him with bank statements to show him the $298,000 was actually there.
Among the violations noted by the DOJ's assessment team, the city:
Did not properly report equitable sharing fund expenditures
Commingled the DOJ money with the city's general operating account, an action that is not permitted
Failed to follow internal policies related to documenting the proper approval for expenditures
Used DOJ money on expenditures that "were deemed impermissible"
Failed to provide sufficient supporting documentation for several expenditures
According to the Justice Department's directives, the city must update its policies and implement internal controls regarding its handling of federal forfeiture money. It also must establish a separate bank account or revenue code for its DOJ equitable sharing fund.
The Bay also must hire a third-party independent auditor to examine and reconcile its DOJ forfeitures account. The auditor must use formal bank confirmation or bank statements to perform the reconciliation and submit the results with supporting documentation to the DOJ Asset Forfeiture and Money Laundering Section.
Fillingame said he agrees with the DOJ's findings and blames the city's fiscal auditor for not discovering the situation earlier.
"The auditor that we've got has been failing to audit (the DOJ fund) for the nine years that they've been our auditor," the mayor said. "They obviously should have been doing that and they haven't."
Council President Joey Boudin refused to blame the fiscal auditor. He said a municipality's fiscal auditor has to work with financial samples rather than looking at every single financial record a city has.
"That's not their job," Boudin said. "They've done a good job. They're the ones who brought it to our attention."
If the second auditor discovers a city employee misspent the money and the DOJ requires that it be reimbursed, Boudin will ask the rest of the council to take the money out of that employee's bond.
"That's what the bonds are in place for," he said. "The taxpayers shouldn't have to pay this money back."