PANAMA CITY – Local officials have decided on a firm to oversee the city’s upcoming forensic audit.
Panama City commissioners on Tuesday approved an agreement with Warren Averett CPAs and Advisors to perform the audit. It not only will make sure the city’s fiscal and operations systems cannot be manipulated by employees, but also look to uncover illegitimate spending or stolen funds.
The forensic audit stems from the Oct. 20 arrest of Michael Johnson, the city’s former community development director, who was accused of embezzling $470,000 from the Friends of After School Assistance Program, a nonprofit organization that supports the city’s After School Assistance Program.
“If you don’t fix something, then you’re building on a bad foundation,” Commissioner Josh Street said. “We need to do what we need to do to make sure that future team members, future city leaders and future commissions don’t have to go back and correct any sins from the past.”
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The forensic audit should begin shortly after the new year, Street said. Panama City and the selected firm must now negotiate a price for the services, which he expects to cost between $100,000 and $200,000.
Street also said while it is unfortunate the city was forced to undergo the audit, there is a silver lining: Panama City will gain more secure policies and procedures to help it in the long run.
“As long as everyone’s willing to comply and willing to go through the process, we should come out a stronger city on the other side,” Street said. “Is it going to be painful? Absolutely it is. You never want something like this to happen, but the point is now that it has happened, what will you do to correct it to prevent it from happening in the future ever again?”
Police reports state an account for the city’s After School Assistance Program was discovered at Hancock Whitney Bank with only Johnson on its signature card. As director of the program since 2012, he only had access to his checkbook.
Statements from Hancock Whitney Bank show Johnson wrote himself checks, the first of which was written on Feb. 1, 2012, for $9,839. The largest was written on Nov. 13, 2020, for more than $37,215.
Johnson resigned from his position as community development director about two weeks before his arrest, when City Manager Mark McQueen confronted him about unrelated management practices. These include a lack of policies, procedures and documentation, as well as noncompliance with federal regulations related to Johnson’s local role with the US Department of Housing and Urban Development’s Community Development Block Grant Program. The program provides governments with federal funding to develop housing for urban communities.
Johnson’s mismanagement also led Panama City commissioners in late November to approve a $455,000 transfer from the city’s general fund to its community redevelopment fund to correct his overspending.
Johnson now faces one count of grand theft over $100,000, one count of money laundering involving more than $100,000 and 19 counts of official misconduct related to the misuse of city CRA funds.
In addition to the upcoming forensic audit, the Panama City Police Department and FBI are investigating all programs and funds Johnson had access to or authority over.
“Will there be more that’s uncovered? It is highly possible that that will happen,” Street said. “But part of this process is going to be looking at each and every one of us and making sure that we’re doing everything we should be doing, making sure that we’re following through with the protocols that are set with government funding, and ensure that taxpayers can be confident the money they give to our local government is being spent correctly, appropriately and legally.”