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Audit finds employee abused city’s tax-free account

Monday, October 31, 2016 by Jo Clifton

Using the city’s tax-free account to reduce his sales tax bill by only about $100 has led to a city employee’s being placed on administrative leave, city officials say.

The Office of the City Auditor’s Integrity Unit continues to see a significant increase in the number of allegations it receives about fraud, waste and abuse by city employees and contractors, according to Nathan Wiebe, chief of investigations for the auditor’s office.

Wiebe presented the unit’s annual report to the City Council Audit and Finance Committee on Wednesday. He reported that the office had received 306 allegations during Fiscal Year 2015-2016, a 23 percent increase over FY 2014-15 and a 47 percent increase over FY 2013-14.

In response to a question from Mayor Pro Tem Kathie Tovo, he told the committee he did not know exactly why the number of complaints had increased, but he noted that the department has worked to advertise its presence and availability. He said the integrity unit receives about 50 percent of its allegations anonymously.

Wiebe noted that about 61 percent of the allegations the unit receives are outside its jurisdiction, including personnel issues, criminal issues and certain operational issues. The department conducted 29 investigations during the last fiscal year and completed 26 of those, he said. Of those, 16 complaints were substantiated. However, seven of those were determined to be minimal violations, while nine were considered material violations. The outcomes in four of those cases are still pending. Three cases that resulted in termination, suspension and probation or written reprimand were started in 2015 and concluded in 2016. Two conflict-of-interest cases related to the Neighborhood Housing and Community Development Department are still listed as pending, as are two cases related to allegations about employees in other departments.

In one of those cases, investigators discovered that an equipment repair and facilities supervisor at the Austin Water utility used the city’s tax-free account to purchase more than $1,000 worth of personal items so that he would not have to pay sales tax on those items.

The information is contained in an investigative audit delivered to the utility in September and obtained by the Austin Monitor last week.

After receiving the audit report in September, AW management placed Manuel Chambers on administrative leave, according to a spokesman for AW Director Greg Meszaros. The utility is continuing to review the report and considering appropriate next steps, the spokesman said.

The audit states that an informant told investigators that Chambers was using the city’s tax exemption in order to avoid paying taxes on his own personal purchases. Such an action would violate the city’s standards of conduct, which state that “no city official or employee shall use his official position to secure a special privilege or exemption for himself or others or to secure confidential information for any purpose other than official responsibilities.”

Auditors wrote, “We found evidence indicating Manuel Chambers used his position with the city to secure a special privilege for himself and misused city resources.” According to the report, auditors found that Chambers purchased 12 apparently personal items between August 2014 and the end of April 2015 and avoided paying approximately $100 in tax on those items.

The audit found that Chambers’ personal purchases using the city’s tax-free account included “perfume, phone and audio equipment, and camping equipment.” Chambers was not accused of using city funds to pay for the personal items, and auditors said they confirmed that he used his own personal credit cards for the purchases.

The audit states, “After admitting he purchased the personal items tax-free using the city’s account with an online vendor, Chambers stated that the personal purchases were mistakenly made on the city’s account.” However, auditors then cited evidence indicating that Chambers knowingly used the city’s tax-free account with the online vendor to purchase personal items.

The employee “used his city email account to send his wife, who is not a city employee, login information for the city’s tax-free account. When interviewed, Chambers stated he did so to possibly allow her to review purchases he planned to make.”

But auditors also discovered emails between Chambers and his wife in which they discussed items they planned to buy and send to Chambers’ work site. In one of those emails, Chambers informed his wife “that he does not want items that do not ship in an online vendor box because, ‘the clerks are going to remember that box, I’m worried that they will remember signing for it.'”

In a review of Chambers’ internet use, auditors looked at his browsing history and found that he had visited “approximately 70 different websites for personal use and that of those, over 50 were for personal shopping purposes, including luxury apparel, accessory electronic goods, car, and event ticket websites.” Auditors said they found that he visited and made purchases on some of those websites.

Auditors also said they found multiple emails discussing personal purchases with a peer city employee as well as a family member. When the auditors interviewed Chambers, the audit says, he “stated that he wanted to cover up the fact that they were personal items, because he thought that having personal mail sent to a work location was inappropriate.”

In addition to the apparent violation of the city’s standards of conduct, the audit indicated that Chambers violated city policy on the use of city resources and use of the internet.

In his formal response, Chambers stated that he disagreed with the results of the audit. However, he did not elaborate on how he disagreed. He could not be reached for comment on Friday.

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