PANAMA CITY – Local officials have decided to hire a company to oversee the city’s upcoming forensic audit.
Panama City commissioners on Tuesday approved an agreement with Warren Averett CPAs and Consultants to conduct an audit. It will not only make sure that the city’s fiscal and operating systems cannot be manipulated by employees, but will also try to identify illegal spending or stolen funds.
The forensic audit stems from the Oct. 20 arrest of former city community development director Michael Johnson, who was accused of embezzling $470,000 from the Friends of After School Assistance Program, a nonprofit that supports the city’s After School Assistance Program.
“If you don’t fix something, you’re building on a bad foundation,” said Commissioner Josh Street. “We have to do what we have to do to make sure that future team members, future city leaders and future commissions don’t have to go back and right the wrongs of the past.”
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A forensic audit should begin shortly after the new year, Street said. Panama City and the chosen firm must now negotiate a price for the services, which it expects to cost between $100,000 and $200,000.
Street also said that while it is unfortunate that the city was forced to undergo an audit, there is one thing. Panama City will acquire more secure policies and procedures to help itself in the long run.
“As long as everybody is willing to submit 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. You never want something like this to happen, but the question is now that it’s happened, what are you doing to fix it so it doesn’t happen again in the future?”
Police reports state that an account for the city’s After School Assistance Program was found at Hancock Whitney Bank with only Johnson on the signature card. As program director since 2012, he had exclusive access to its checkbook.
Hancock Whitney Bank statements show Johnson wrote checks to himself, the first of which was dated Feb. 1, 2012, for $9,839. The largest was written on November 13, 2020 at over $37,215.
Johnson resigned as community development director about two weeks before his arrest after City Manager Mark McQueen confronted him about management practices. These include a lack of policies, procedures and documentation, as well as a lack of compliance with federal regulations related to Johnson’s local role with the U.S. Department of Housing and Urban Development’s Community Development Block Grant program. The program provides federal funding to governments 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 the Community Redevelopment Fund to correct its overspending.
Johnson now faces 19 counts of grand larceny over $100,000, money laundering over $100,000 and misappropriation of city CRA funds.
In addition to the upcoming forensic audit, the Panama City Police Department and the FBI are investigating all programs and funds Johnson had access to or had authority over.
“Will there be more revelations? It’s very possible that it will happen,” Street said. “But part of this process is going to be looking at each of us and making sure we’re doing everything we’re supposed to be doing, making sure we’re following the protocols that are set out by government funding, and making sure taxpayers can be confident, that the money given to our local self-government bodies is spent correctly, properly and legally.”