Who discovered the $3 million loss?

City blames laid-off employee for mistake
By: Carol Feineman, Editor
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Who discovered the General Fund’s $3 million unrealized investment losses is one of several questions now being asked by the public about the city of Lincoln’s accounting. The answer some community members give is different from the answer given by city officials. “The potential $3 million (loss) to be allocated to the General Fund was found during a review and presentation of the audited financials to the finance committee in spring 2010,” said Assistant City Manager/Chief Financial Officer Anna Jatczak on Dec. 13. “What did not occur was that the then assistant director of finance needed to have spread out and reallocated the investments to other funds that participate in those investments.” Councilman Spencer Short and Mayor Paul Joiner are on the finance committee, along with City Manager Jim Estep and Jatczak. Jatczak, who wouldn’t name the former assistant director of finance on Dec. 13, said then that she “did not know” why the former employee didn’t reallocate the funds from the General Fund to other city funds. However, The News Messenger learned this week that the city’s former assistant finance director, Johnny Ea, sent an e-mail to the city’s financial consultant, VTD, on May 17 talking about reallocating “the full $3.2 million loss rather than only the Lehman portion to all other City funds. It will significantly up the General Fund, fund balance ….” And in a June 1 e-mail to an unnamed former city employee, Ea wrote, “I mentioned this while I met with you and Anna for the bad news last week Some how they’re trying to delay this correction. I will take a look at it some more but this correction will bring back about $3.1 million to the General fund and potentially save some jobs. I will get you a copy to share with the higher up.” Both Estep and Jatczak said Tuesday they didn’t hear about Ea talking about using the $3 million misallocation as a way to save jobs. They said they did not see the May 17 e-mail to the former city employee. Ea could not be reached by The News Messenger. But new Lincoln Councilman Gabriel Hydrick spoke up in Ea’s defense. “I understand that the former assistant finance director was discouraged at the lack of response from the assistant city manager and CFO of VTD addressing the misallocation of the $3 million and therefore went to other city employees seeking help in efficiently and effectively addressing this issue,” Hydrick said. And Noreen Skillman praised Ea’s work and ethics this week. Skillman is newly elected City Councilman’s Stan Nader’s chief of staff. “The city’s financial consultant did not bring up the $3 million misallocation; the former assistant finance director found it. Johnny Ea was slated to be let go but was let go earlier when he responded to (then Councilwoman) Linda Stackpoole and surveyed surrounding cities about how they allocated losses,” Skillman said. “The city thought he was stirring up trouble, I think, but if you met Johnny, you’d see he only wants the best for the city.” Ea was trying to find other solutions to raise income for the General Fund, according to Skillman. In her opinion, that did not make Ea popular with his bosses. “Ana (Jatczak) blew off his other revenue ideas. She just understood tax, tax, tax,” Skillman said. “I think they thought if they kept Johnny, he would say that Measure K would not be necessary if the $3 million was allocated appropriately into the different funds.” Without Ea as an employee, Skillman doesn’t have much faith in how the city’s top managers are handling the finances. “One thing the city could do is admit they’re in way over their heads and that they shouldn’t have let Johnny Ea go,” Skillman said. Newly elected City Councilman Gabriel Hydrick shares Skillman’s frustrations regarding Ea and the city. “I’m disappointed that first he was let go and then pushed out the door a month early. I’m disappointed because he has the academic and professional background that we need,” Hydrick said. “I’m disappointed that he was let go and other people were kept on, over him, who negatively talk about sitting City Council members. Not only that, these are the people who are praised and held on, and given promotions by our upper management.” Like Skillman, Hydrick quickly complimented Ea’s work, saying “he caught things up front.” “It appears he caught the $3 million. Now the city gives the credit to VTD,” Hydrick said. “I don’t think it matters to him as far as who gets the credit. In the few times that the assistant finance director came up during various discussions with the city, the city’s upper management described him as a disgruntled employee. I am confident Johnny’s not.” What’s unsettling is that, at least in an experience Hydrick told The News Messenger this week, the city’s top staff is trying to discredit Ea. A few weeks ago, Hydrick met with the city’s independent auditor. “It was supposed to be, in Anna’s words, a meet and greet and objective view of how things are,” Hydrick said. “But during the course of the meeting, the auditor talked about employee personnel issues that weren’t in her scope, at the encouragement of Anna.” The auditor tried to badmouth Ea, according to Hydrick. “I didn’t like this meeting for a number of reasons. It wasn’t in the auditor’s scope of work. I was told by Anna that this meeting was to see how things really are but, as of yet, the audit for this year is not completed. Therefore, we had little to discuss,” Hydrick said. “I felt I was set up so they could push blame or make a scapegoat of a former employee for the $3 million.” The other newly elected Councilman, Stan Nader, also met with the same auditor to talk about the audit three weeks ago. Nader said the auditor also implied that Ea didn’t do his job. “She indicated the former assistant finance director or the person directly under that person had given the Richardson Company the false impression that the city of Lincoln’s books were in good shape,” Nader said. “In checking the timelines of her statement, I did find some errors so that did raise some concerns for me. I have not had the opportunity to discuss this situation with the city manager but I do plan on having that conversation and more with him soon.” Nader also said Ea “has a good track record.” “Johnny Ea has done work in other cities with more complex problems,” Nader said. “To say that a lot of this is his fault is not right. I’m thinking I’m only one of five but I’d like to consider bringing him back.”