PANAMA CITY — Local officials have decided to appoint a firm to oversee an upcoming forensic audit in the city.
Panama City commissioners on Tuesday approved an audit agreement with Warren Averett CPA and consultants. Not only will it ensure that the city’s fiscal and operating systems are not manipulated by employees, but it will also uncover illegal spending or stolen funds.
The forensic audit stems from the Oct. 20 arrest of Michael Johnson, the city’s former community development director, who is accused of embezzling $470,000 from Friends of the After School Assistance Program, a nonprofit that supports the city’s after-school assistance program.
“If you’re not fixing the problem, then you’re building on a poor 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 councils don’t have to go back and right any wrongs of the past.”
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Street said the forensic audit should begin shortly after the new year. Panama City and the selected company must now negotiate a price for the service, which he 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 a silver lining: Panama City will get safer policies and procedures that will help it in the long run.
“As long as everyone is willing to comply and is willing to go through the process, we should have a stronger city on the other side,” Street said. “Is it going to be painful? Absolutely. You never want that to happen, but the problem Now that it has happened, how do you correct it to prevent it from happening again in the future?”
The city’s after-school assistance program account was found at the Hancock Whitney Bank with only Johnson on the signature card, police reported. Director of the project since 2012, he has exclusive access to its checkbook.
Johnson wrote checks for himself, the first of which was dated Feb. 1, 2012, for $9,839, according to the Hancock Whitney Bank statement. The largest sale, written on November 13, 2020, sold for more than $37,215.
Johnson resigned 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, and noncompliance with federal regulations related to Johnson’s local role in the U.S. Department of Housing and Urban Development’s community development block grant program. The program provides federal funding to the government to develop housing for urban communities.
Johnson’s mismanagement also led Panama City’s commissioners in late November to approve a $455,000 transfer from the city’s general fund to its Community Reconstruction Fund to correct his overspending.
Johnson now faces one count of 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 the FBI are investigating all programs and funds that Johnson was authorized to use or authorize.
“Will there be more to be discovered? It’s very likely that will happen,” Streeter said. “But part of the process is 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 government funding sets out, and making sure taxpayers can be confident that the money they’re giving our local government is getting the right, proper and legal use.”
