City works to improve finances after audit cites mismanagement

The city of Homewood received a report from the Alabama Department of Examiners of Public Accounts in January, casting a shadow of doubt on the city’s handling of finances.

The report analyzed the city's financial system in relation to the use of city credit cards and the fraudulent misappropriation of funds by former Finance Director Robert Burgett.

Key findings from the review included a lack of or ineffective management oversight, a lack of internal controls, poor record-keeping and inconsistent policy adherence.

“Just after we initiated our deeper dive and discovered troubling shortcomings in the control of city finances, we started the process of strengthening our policies,” Homewood Mayor Alex Wyatt said. “We have already met with the state examiners and appreciate their work because their recommendations will help us continue our efforts to make sure our finance department works more securely so that expenditures of public funds are properly tracked in strict adherence to sound business and audit standards.”

Burgett retired in March 2024 and was arrested for misappropriation of funds 10 days later. Homewood officials said the city was the first to uncover evidence of Burgett’s embezzlement and immediately notified local and federal authorities, who began an investigation.

According to the audit, Burgett attempted to steal $1.8 million from city bank accounts but succeeded in embezzling $947,059.46. He concealed his conduct by moving the funds into a commercial bank account before transferring them into his personal account. Burgett also altered city bank account statements and made false journal entries in city accounting records. He is awaiting sentencing after pleading guilty to three federal charges of wire fraud.

Insurance has covered $500,000 of the stolen funds, and the city is working to recover more.

To prevent future issues with wire transfers, the city now plans to avoid them if possible.

“Wire transfers will only be initiated as a last resort for the movement of funds,” Wyatt said. “In situations where it is necessary to use electronic wire transfer, multiple approvals will be required that are independent of the regular cash management processes.”

As for the issue of credit cards, Homewood’s City Council started a review of the use of city credit cards by city employees in October 2023 after possible irregularities were uncovered. Substantial personal reimbursements have already been made to the city, and the city is conducting a review of an outstanding financial obligation of approximately $1,300 by an employee. Burgett is also responsible for nearly $10,000 in disputed credit card charges. Both credit card cases are being referred by state auditors to the Alabama attorney general for collection.

Following the council’s credit card use review, it voted in November 2023 to strengthen policies on the use of city cards, which include:

• Reducing the number of cards in use.
• Requiring cards to be used only for official, preauthorized city expenditures and prohibiting their use for personal expenditures, cash advances or alcohol purchases.
• Allowing cards to be used for eligible travel costs, including conference registration and associated fees, lodging and transportation. Meal expenditures are limited to $75 per day with fully itemized receipts.
• Banning card use for purchases that can be made through normal purchasing procedures, except in emergencies or for purchases personally authorized by a department head or the mayor.
• Requiring monthly audits of card purchases by the finance department.
• Enforcing disciplinary action and recovering funds through paycheck reductions for policy infractions.

The state report reviewed the city’s credit card use from Oct. 1, 2022, to Sept. 30, 2023, under the credit card policy implemented in July 2010. Based on those findings, the report recommended that the city follow the new policy.

In addition to the credit card policy, the city began making changes to the finance department immediately after Burgett's retirement and the subsequent embezzlement findings. New Finance Director Lester Smith and the city have additional improvements planned to prevent future issues and optimize operations.

Smith, who was hired in October 2024, took on the role amid an investigation and public scrutiny.

“Homewood is a beautiful city located in a great community with outstanding schools, businesses and people,” Smith said. “I didn’t view the finance director’s position with the city of Homewood from the standpoint of a city under scrutiny, but rather as an opportunity to use whatever skills I may have to contribute to a unique and special community.”

He has been evaluating the city’s internal control environment to identify areas for improvement and provided recommendations to improve fiscal security during a January finance committee meeting.

Among the first improvements is updating the city’s accounting software, Encode. The upgrade was scheduled before Smith’s arrival, but he has continued the city's efforts to improve the finance department and overall operations.

In addition to the software update, current priorities include addressing major financial risks by implementing controls to prevent, detect or correct actions that could threaten the city’s finances. A key change involves switching to Synovus Bank, which will create a new workflow to prevent and detect risks in real time, reducing fraud and improving financial management.

“The switch to Synovus Bank will allow for a number of improvements to the city’s finances,” Wyatt said. “First, we will be reducing the number of accounts that the city maintains, which will allow for better tracking of finances. Synovus also has a dedicated Government Solutions Team. The team will allow the city to work with bankers who are highly skilled and knowledgeable about government finance and can provide expertise on day-to-day issues that arise. That team will work with the city to review city systems and workflows to design a system that meets the needs of the city. They will also add an onsite depository to make the deposit and reconciliation processes cleaner and safer.”

These services will integrate with the city's upgraded accounting system, scheduled for May 1, 2025. Features include approval flows for online transfers and credit card payments, secure cash handling for city hall deposits, and detailed tracking of fund management. These improvements aim to strengthen financial oversight and control.

The city is also considering outsourcing payroll services to take advantage of payroll providers’ expertise and resources, such as employee onboarding.

Professional management oversight of the city is also expected to strengthen with a city manager/council form of government, which voters approved in a September 2024 referendum. The city manager will assume chief executive duties, and the new government structure will be implemented in November. The city has started a search for an interim manager, who could begin in March.

“A full-time city manager will bring an experienced professional in public administration with budget management skills and significant supervisory experience to the city,” City Council President Walter Jones said. “This is a meaningful step as the city council continues to review financial issues to assure that taxpayer dollars are correctly spent in an accountable manner.”

To review the state’s full report, visit bit.ly/homewoodstateauditreport.