GRATIS — The Village of Gratis was issued a “noncompliance citation” after receiving an audit from the State of Ohio for the years of 2013 and 2014. According to the report, the village council’s actions in approving an income tax ordinance were in violation of Ohio Revised Code.
The complete report was released on Feb. 9.
The state found Gratis to have a “material weakness” within that time frame, resulting in “a deficiency, or a combination of internal control deficiencies resulting in a reasonable possibility that internal control will not prevent or detect and timely correct a material misstatement of the village’s financial statements,” as defined in the auditor’s report.
Also according to the report, during the village’s meeting on Sept. 19, 2013, Gratis Village Council considered an income tax ordinance, which would increase the income tax to one percent as of Jan. 1, 2014. Council considered the ordinance an emergency and they voted to forgo the three readings.
However, by Ohio Revised Code standards, a vote to suspend three readings of an ordinance must pass by three-fourths majority. In the September meeting, it was only approved by four out of six council members, falling one vote short. Council also did not specify the reason for the emergency measure in the reading, which is also in violation of the ORC.
The village began collecting the one percent income tax on Jan. 1, 2014, despite the incorrect actions.
Current Gratis Mayor John Johnston said the village’s former solicitor wasn’t present at that meeting and did not attend many of the meetings during his service to the village.
“Nobody even thought anything about three-fourths majority back then,” he said. “Nobody even questioned it at that point and then when there were questions raised about it, it was misunderstood what they were talking about. We had our solicitor at that time give us an answer and it still looked like we were all okay and everything was good until the last year when they started questioning more things about it.”
Johnston was referring to the meeting one year later, on Sept. 4, 2014, when council tried to retroactively pass the three readings “due to recent controversy,” as stated in the meeting minutes.
Council at the time only consisted of four members because two members had resigned. Three of the remaining four members were present at the meeting. The vote passed but council once again did not amend the language or include a section explaining the need for an emergency passage of the ordinance.
Furthermore, according to the audit report, passing an ordinance as a retroactive income tax violates the Ohio Constitution (Article II, Section 28), “which provision prohibits the passage of retroactive substantive laws by municipal corporations as held by Ohio courts.”
“That’s when we turned it over to our solicitor that we had at that time, who has now been replaced with another one. They both said that we were okay and right in what we thought we were going to do. We wanted to make it right,” said Johnston.
The solicitor has since been replaced and the village is currently served by Brian Muenchenbach.
Another noncompliance citation the village received regarded negative fund balances. At the end of years 2013 and 2014, it was shown that the general fund had a negative cash balance. A resolution was passed in 2015 to allow the current fiscal officer to move line items within a fund to eliminate the negative balances, however.
“We’re just trying to make sure that from now on, we do things right. We all make mistakes and mistakes were made, I guess,” said Johnston.
The full auditor’s report can be found on ohioauditor.gov.
The Village of Gratis is currently facing a lawsuit because of the actions taken in enacting and collecting on the 2014 income tax ordinance.
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