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How did this happen and where is the financial oversight?

Fairfield County Council appears to have a deeply cemented culture of not paying attention to how our taxpayer dollars are spent. Besides a lack of oversight, how else can one explain an interim Administrator approving checks for over $1 million to the IRS without Council knowing about it for seven months? Or did Council know about it? How else can more than two years pass after the first IRS notification of a violation and Council being aware?

Discovery Announced Right Before Christmas

At the regular Fairfield County council public meeting December 11, 2023, interim Administrator Laura Johnson notified the taxpayers of Fairfield County and a seemingly unaware Council of $1.4 million in penalties and interest that had been levied by the IRS. You can watch the clipped video here, or at the bottom of this article. These violations were due to late and/or incorrect healthcare tax forms, and late quarterly reports (Form 941), for tax years 2017, 2019, 2020, 2021 and 2022.

A review of documents obtained through a FOIA request shows the county issued three checks to the IRS in 2023, all co-signed by Laura Johnson, totaling $1,202,416:

May 4, 2023 for $386,379.51 (for tax year 2017)
June 15, 2023 for $786,709.94 (for tax years 2019 and 2020)
September 22, 2023 for $29,327.66 (for tax year 2021)

In addition, Johnson told the audience there is another violation for tax year 2022 that will add at least another $214,000 to this total, but the final bill had yet been received from the IRS.

More than seven months passed between approving the first payment and Council being aware. Or were some or all council members aware early on and simply did not communicate the issue to the public? During an awkward, finger-pointing exchange at the January 8, 2024 regular public meeting between Laura Johnson and Council members, Johnson claimed Council members were informed of this situation. No documentation was received from the FOIA request to confirm this to be the case. But it gets worse.

Affordable Care Act Partly At Fault?

Per the FOIA documents reviewed, the first letter from the IRS regarding violations for tax year 2017 was dated August 16, 2021 and addressed to Fairfield County Council c/o Anne Bass (Finance Director at that time). Quoting this letter,

“To: FAIRFIELD COUNTY COUNCIL As of August 16, 2021, we haven’t received your overdue tax after sending several notices to you. You must pay your balance [$355,982] before September 16, 2021 or we will levy (seize) your property.”

Being addressed directly to Council, it is difficult to believe at least some Council members were not aware of the issue in the summer of 2021. It is unrealistic that 28 months passed between August 2021 and December 2023 and not a single Council member knew.

Much of the issue was initiated by new healthcare forms required to be submitted to the IRS as a result of the misnomer known as the Affordable Care Act, or ACA. This is the act forced upon United States citizens by then President Barack Hussein Obama, which of course turned out to be anything but “affordable”, and a bureaucratic nightmare for Fairfield County. In an email dated December 11, 2023 to Council from Anne Bass, Finance Director from April 2020 through February 2023, Bass provided the following statement:

“The ACA returns were filed each year, the electronic documents are on the shared file on the county server. There were notifications received on some of them being rejected with errors. I was able to complete the appeal on one year [confirmed to be tax year 2018], supplying supporting documentation to resolve the errors. Often it would be things like a person’s name being different on the County employee record compared to how they file their taxes, or a name or address change that didn’t match up. Any assessed fees were relieved for this year. It was a long process, but thankfully was resolved in the County’s favor.”

Appeals Process

Bass successfully appealed the violation for tax year 2018 just prior to her departure as Finance Director at the end of February 2023. So, we taxpayers could have lost more of our money had Bass not taken action to appeal these fines. Beverly Mozie replaced Bass as Finance Director in 2023. In the same email to Council, Bass stated, “Mrs. Mozie asked me how I would handle subsequent years with errors, and my answer is I would continue to work through the appeals process.”

So this begs the question, if the violation for tax year 2018 was successfully appealed, why wasn’t the same done for tax year 2017? Well, it turns out there was a lot of back and forth between the County and IRS, but the result was the County failed to follow IRS timelines and instructions for filing the necessary healthcare forms.

County Fails to Respond to IRS

As mentioned earlier, the first IRS letter to Council was dated August 16, 2021. It appears the County had responded to that letter because another IRS letter dated October 18, 2021 stated, “Your response indicated that you already filed information returns, [ACA] Form 1094-C and Forms 1095-C, however, we have no record of processing these returns.” The IRS provided further instructions, stating, “If the returns were rejected, please take steps to correct the filing and resubmit the information returns. After you receive confirmation that the information returns were “accepted” or “accepted with errors”, please provide us a copy of that confirmation.” A response was required within 30 days, but the FOIA documents provided do not include any such response. However, another IRS letter dated February 10, 2022 further addressed the 2017 violation, and indicated a claim (from the County) was received March 31, 2021. “We can’t process your claim for the tax periods listed above [Dec. 31, 2017]. Although you stated that the forms were filed timely, our records show that the 2017 Forms 1094-C and 1095-C were successfully filed electronically on 9/13/2021.” The amount due at that time was $360,917.26.

Finally, on June 8, 2022, the IRS responded to the County’s inquiry dated September 28, 2021 (copy of the County’s inquiry was not provided). In that letter, the IRS stated, “Our records show that you failed to timely file and furnish Forms 1094-C and 1095-C…so penalties were assessed. You were allowed an additional two years to file your Forms, but did not file until September 13, 2021, over three years late.”

Where’s County Council?

All of this was occurring from mid-2021 through mid-2022 and was never brought to the attention of Council? Then, once the IRS made its final decision in June 2022 and imposed the fines, it took one more year before the first payment was made on May 4, 2023, which increased the interest due. Ultimately over $386,000 was paid for this 2017 violation. If the delay was due to the county appealing this decision, no documentation was provided to support any such appeal.

It is very difficult to place blame on any individual at this point, and that is not the intent here. There were many different people in various positions throughout this timeframe, from the Finance Director, Administrator, interim Administrator and individual Council members. But at the top of the pyramid is County Council, and this current Council must break this chain of unacceptable performance, whether caused by ignorance, incompetence, lack of oversight, lack of communicating with the public, lack of a full-time Administrator, and/or lack of effective processes and procedures.

What Fairfield County Council Needs to Do:

There are two specific actions the current Fairfield County Council needs to take. One is to provide much more rigorous, frequent oversight of how our taxpayer money is being spent. The Administration & Finance Committee that already exists should, by its title, be the group to lead this oversight on behalf of the Council. The current members are Doug Pauley, Clarence Gilbert and Shirley Greene. Councilwoman Greene confirmed this committee met only once during 2023, which is a clear indication this group is void of any effectiveness. That needs to change. There needs to be a monthly financial report from the Finance Department, with year-to-date budgeted amount and actual spending, with any and all variances quantified, and larger variances explained. Also, large negative variances need to have recovery actions identified by the responsible department. Large positive variances need to be examined for potential spending reductions in future budgets.

The second action is completing a forensic audit by an external entity. Laura Johnson started communications with such a firm about such an audit, and Councilman Ruff suggested at a recent public meeting to have one done, but that so far has gone nowhere. Now it appears that Laura Johnson has retired after her interim contract expired this January, based on Council Chair Doug Pauley wishing her well in retirement at the end of the regular public meeting January 22. Why this situation was allowed to occur for such a long time needs to be identified, and any weaknesses with people, processes and procedures need to be clearly defined and fixed. Only an external entity can objectively complete such an audit.

How many more financial surprises will this Council allow? It’s time for this Council to take specific and effective action to make sure that number is zero.