Convoluted audit tale shows conflicts of interest, but no harm

Two city employees violated city conflict-of-interest rules when one of them routed funds meant for the city through a nonprofit he set up. However, according to an audit conducted by the Office of the City Auditor, the funds were sent on to the city and neither the employees nor the nonprofit made money from the maneuver.

The two employees, Benjamin Guhin and his wife, Marni Wilhite, both worked for Communications & Technology Management on a two-day technology conference called the Civic Futures Summit, which was held in early October 2019.

Auditors received allegations that money from the summit was going to “unknown people” in September 2019. The first investigation did not find any evidence of a conflict of interest. However, when auditors received a second, more detailed allegation in December 2019, they reopened their investigation and discovered the conflicts of interest.

According to the audit, organizers sold tickets through an online event platform, which offered several options for withdrawing ticket proceeds. At the time they set up the summit, they had a nonprofit research group willing to receive ticket revenue from the online platform. “However, prior to the event, organizers said the research group dropped out of the summit. As a result, Guhin said, they needed a nonprofit organization to take the research group’s place as the summit’s ‘third-party’ financial partner,” auditors wrote.

Auditors reported that managers in CTM gave Guhin inaccurate information about transferring ticket revenues directly to the city. Guhin was told that the city could not accept cash payments from outside entities, so he figured out a way to transfer money indirectly.

First, Guhin transferred ticket revenue from the online platform to his own company’s bank account. Then he created a nonprofit, opened a bank account in its name and transferred nearly $10,000 in ticket revenue from his company’s account to the nonprofit’s bank account. He paid expenses for the event with funds from that account.

Auditors say Guhin told them he transferred the ticket revenue into his bank account first because “the nonprofit’s bank account did not exist when the online event platform was set to pay out the funds. Guhin noted that the funds had to go somewhere because the event platform was going to pay out the summit’s ticket revenue on a set schedule after the event.”

Although he did not make money through the transfers, auditors said Guhin violated city code by making the financial decisions that affected his company’s accounts. His wife also had a conflict of interest because of her “substantial interest in Guhin’s company through their marriage.”

Auditors note that according to the city Controller’s Office, departments routinely accept payments from external parties as revenue. In this case, “CTM could have treated a check or direct deposit from the online event platform as a ‘cash receipt.’ In addition, a Controller’s Office manager said they would have suggested CTM ask the Controller’s Office for help in managing a payment like this one.”

In their response, Guhin and Wilhite said they agreed with the results of the audit and made the following suggestion: “To support city employees in future efforts, we recommend that the city establish a guide on how to host cross-sector events that can be funded by multiple city departments and entities outside of the city of Austin. It can also be helpful to review and revise its content on a regular cadence, such as every 1-2 years.

“We have observed that a majority of events related to civic technology and ‘smart cities’ are organized by prominent technology vendors and other large corporations to benefit from the attendance of city employees, at the potential detriment of smaller companies who cannot afford to attend. We hope that the city of Austin will continue to take a leading role in organizing technology events in the civic space.”

It seems unlikely that CTM will follow their advice. Chris Stewart, interim chief information officer, wrote in a memo to Brian Molloy, chief of investigations for the auditor’s office, “If another event is planned by CTM staff, which is unlikely, the appropriate guidance will be sought from the Controller’s Office. The individuals responsible for the event will receive information, in writing, on how to go about collecting and recording any third-party transactions.”

Although Guhin worked at the city for more than four years, he is described as a temporary employee working on technology policy. Guhin left his job earlier this month, according to the audit. Wilhite was a senior IT project manager in the department for more than four years when she left the city last December. The pair were married in March 2019, according to the audit.

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