Newly formed Covington financial task force seeks restitution after alleged misappropriations

City wants their money and respect returned

COVINGTON, Ky. - In light of firing the city’s finance director Robert Due, Covington City Manager Larry Klein said leaders are pushing full-steam ahead seeking restitution. 

The city appointed a financial task force during Tuesday’s monthly city commission meeting, where they also voted to formerly oust Due -- finance director since 1999 -- for allegedly misappropriating more than $300,000 in city money between 2010-2013.

“[We] are going after everything, not just the money but the trust of the public,” said Klein. “[We] need to restore public confidence.”

Review. Recover. Recommend. That is the mission of the seven-member, all-volunteer task force that includes some Northern Kentucky-based financial heavy-hitters:

  • Chair Douglas Stephens, retired Kenton County circuit court judge
  • Sherry Carran, Covington Mayor
  • Steve Frank, Covington Mayor pro tem
  • Greg Engelman, former Covington finance director (1983-1999) and current chief finance officer for City of Erlanger
  • Linda Chapman, City of Florence finance director, former independent auditor for Covington (1996-2004)
  • Russ Hersley, Covington citizen
  • Shane Nenegard, CPA, audit committee chair

How Could This Happen?

According to the Kentucky State Auditor Adam Edelen’s office, cities are responsible for hiring an independent certified public accountant to audit its finances annually. 

For Covington, that was Cincinnati-based accounting firm Decosimo in fiscal year 2012. Prior to that the city used Von Lehman and Company in Fort Mitchell, Ky.

That audit, however, is only a snapshot of the fiscal year’s finances, not a thorough look at every transaction for the year, said Klein.

He described financial discrepancies, “like a needle in a haystack and [the city finance department staff] found the needle” last week in the amount of $300,000.

Where They Go From Here

The newly formed task force’s focus will be to strengthen internal checks and balances in the city’s finance department, hold the city accountable and promote reorganization, said Klein.

They will also be in charge of looking over new prospective accounting firms to handle the FY13 audit, which is slated for completion at the end of December.

The city, however, was well on its way to becoming more financially transparent even before last week’s alleged misappropriation was brought to the city’s attention, according to Klein. 

Covington implemented an internal auditor position or internal ‘watchdog’ on July 1, but has not filled the spot yet.

They replaced outdated financial software with New World Financial Software, costing the city $400,000 last year, in an effort to have “more sophisticated controls” over the financial department and future finance director, said Klein.

Accused Faces 20 Years

Due, 63, appeared in court Monday and pleaded not guilty to the theft, unlawful access to a computer, criminal possession of a forged instrument and official misconduct charges pending against him.

If convicted, he could face 20 years behind bars, according to Rob Sanders, Kenton County Commonwealth’s Attorney.

Attempts were made to contact Due, however, he was unavailable for comment.

Covington’s audit committee will meet Thursday at 2 p.m. to discuss the internal auditor position in detail, look at prospective independent accountants for their annual audit, as well as start working with the task force on how to retrieve the city’s money and respect for the public, said Klein.

In the meantime, Jerome Heist, finance department's accounting and operations manager, has been appointed as interim finance director.

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