The City is examining Centro San Antonio's Public Improvement District finances following the discovery that an employee allegedly embezzled $175,000 over two years from the nonprofit's accounts.
Centro San Antonio is doing its own audit as part of wider criminal investigation into a scheme that involved a fake audit and at least one other person posing as an auditor. Pat DiGiovanni resigned as Centro’s president and chief executive officer last week when the matter became public, although Centro board members said he had no involvement in the alleged scheme.
The City Council's Audit Committee met Tuesday to get an update on the City’s audit, which is being led by the firm Grant Thornton, which handles the City’s financial audit.
District 10 Councilman Clayton Perry said the issue is not just about a loss of funds, but erosion of public trust in how the private sector works with the City.
"In future audits, we need to take a closer look, and not only at Centro," he said. "We fund a lot of different nonprofits and agencies throughout the City here. There's a lot of money being used from public taxpayer funds."
Centro's attorney, Michael Bernard, said last week that the $175,000 that was allegedly stolen appeared to be only from the Centro San Antonio organization and not the Public Improvement District, which was created in 1999 to levy assessments for improvement of the downtown business district.
After the City collects the PID assessments from downtown businesses, Centro San Antonio bills the City for services each month, and the City’s Center City Development and Operations (CCDO) Department reviews those invoices.
The City audit is going over the accounting books that both the City and Centro keep on the PID fund. In addition to checking the PID fund for any fraudulent activity, Grant Thornton will assess the the annual service plan that covers the range of services and projects supported by the PID fund around downtown, including beautification services and collecting trash.
“It’s a complete review from end to end,” Ben Gorzell, the City’s chief financial officer, told the committee. He added the City would cap its audit expense at $50,000.
The City hopes to return to the committee within the next month or two with its audit findings, Gorzell said. Accounting firm RSM had been conducting the audit for Centro.
Centro officials have not named the employee accused of embezzlement, but identified her as a female accountant. The employee, who was terminated after the alleged scheme was discovered, was supervised by Tony Piazzi, Centro’s chief operating and financial officer, DiGiovanni previously told the Rivard Report.
In August, the Council Audit Committee studied a 2015-2016 contract compliance audit that reflected what Councilman John Courage (D9) described Tuesday as questionable accounting and management by Centro. Centro officials told the committee then that while accounting practices appeared less than ideal, no money was missing or pilfered.
“I felt at the time when we saw that audit, it showed really poor management of that contract, and I believed it showed really poor management of the overall organization,” Courage said.
City Manager Sheryl Sculley said the 2015 audit contained "shortcomings" on the part of both Centro and CCDO, but that City staff had sought to address those issues.
Courage and fellow committee members called for a higher degree of scrutiny and for a review of the contacts that the City has with Centro and nearly 300 other nonprofits.
“Going forward, we need to look at those faults that we see, and we need to start acting beyond what seems to be the original aspect of our audit," Courage said.
Courage said he wishes the audit committee could have reviewed the 2015 audit much sooner, and be able to pose more pointed questions to Centro San Antonio about it.
"We just need to look more diligently when we find problems as dramatic as those problems were," he said.
Perry urged the City and Centro to communicate with the approximately 600 members of the Public Improvement District about the audits and discuss possible outcomes. Bernard told the committee that Centro's board members have been briefing PID board members, but that the general PID membership has not been updated.
"I just think it's important to get information out to the members ... on what's happened, what we know today, what we're doing, and what would be the end process," Perry said.