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As the IRS theft case concludes, the city of Grove City comes to a settlement agreement with its insurance company.
The city accepted a settlement amount of approximately $555,000.
“The final settlement was nine times more than the initial offer, so we are pleased that we kept pressuring the insurance company,” said Grove City Mayor Richard “Ike” Stage.
Last month, Jacqueline Kincade, 62, pled guilty to three felony counts, including theft in office and tampering with records. Kincade was a payroll specialist. She began working for the city in 1987.
According to Franklin County Prosecutor Ron O’Brien, between January 2004 and December 2010, Kincade issued herself 26 unauthorized checks from the city’s payroll account for approximately $68,000. She also moved money from other funds or paid the city’s tax obligations late to avoid discovery.
During the investigation, the Grove City Division of Police executed a search warrant on Kincade’s residence. Investigators recovered city documents and personal bank records to confirm the unauthorized checks were deposited into her personal account.
Don Walters, business and community relations officer with the city, said officials quickly suspected Kincade.
“She was the sole caretaker,” said Walters. “All that was involved was only handled by her.”
As a payroll specialist, Kincade was responsible for preparing and issuing payroll disbursements to city employees. She was the primary keeper of the payroll account.
On Dec. 9, 2010, the city received its initial notice from the IRS stating the city owed about $700,000 in back taxes, late fees and penalties. The following day, Kincade was placed on paid administrative leave. The city also consulted with a law firm. On Dec. 13, 2010, the state auditor became involved and a few days later, a criminal investigation began. The city then brought on an independent audit-consulting firm. Kincade retired.
According to Stage, the cost of the theft to the city was over $900,000. He said the amount includes IRS penalties, special audits, legal services and police overtime. There is also $167,000 in unaccounted for funds that could date back several years. Even with the insurance settlement of $555,000, the city is still out approximately $345,000.
“Our major losses were the legal fees and the $167,000 unaccounted for funds,” said Stage.
The mayor said this case has taught him to question audits and exams.
“We had received numerous finance department awards from the state for many years. The outside forensic audit completed at the time the finance director retired discovered nothing,” said Stage.
Stage said if he had to do anything different, he would have asked more questions of the auditors to make sure the entire financial picture had been reviewed.
Overall, Stage said the city coped well with the investigation. He said officials had identified that there had been a theft within 48 hours of the initial IRS notice.
“We wasted no time in getting to the bottom of the issue,” said Stage.
The mayor said the city hired the best IRS attorney to fight the case and they were able to waive over $677,000 of penalties and interest.
“Our objective was to minimize the loss as best as we could,” said Stage. “The point is, the city responded quickly to this serious event, immediately enlisted professionals and implemented numerous safeguards to prevent future recurrence including a new payroll accounting system. The city remains one of the most financially sound communities in the state of Ohio.”
Kincade is scheduled for sentencing on Aug. 23.
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