The $353,000 IRS Penalty – 8 Management Failures

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City_of_Cincinnati_FY2025_Management LetterL_FINAL_Redacted

Transmittal 202500945 Final Budget Adjustments 2025

122-2025 signed

Federal Income Tax Withholding Remittance Audit

 

This is a follow up to the March 27, 2026, Management Letter from the city’s external auditor concerning the fiscal year ended June 30, 2025. I posted the memo on my blog page a couple nights ago. I wanted to make a few additional observations about the reported $353,000 IRS penalty noted in the letter, as follows:

A penalty of that nature, and in that amount, for a municipality, is not common.

Management Failure No.1:  Neither the Management Letter nor the ordinance explains exactly what happened to incur such a penalty except that it is related to late federal tax withholding in 2023.

Management Failure  No.2:  Not a single member of city council asked any questions about the penalty, at least not publicly. This is not surprising despite the fact that  it is city council’s job to exercise oversight of the administration.

Management Failure No. 3:  The Management Letter refers to an “adjudication.” No records concerning the adjudication have been made public even though it involved mismanagement that cost the taxpayers $353,000.

Management Failure No. 4:  The city’s Internal Audit Manager issued an audit report on September 28, 2026 titled, “Federal Income Tax Withholding Remittance Audit.” It says that the field work was carried out in July and August. There is not a single reference in the report to the IRS penalty even though a problem with “withholding taxes,” is reportedly the issue at hand with the penalty. There is not even a footnote about it in the report.

Management Failure No.5:  It is not clear whether the September 2026 audit findings relate to the IRS penalty or are additional findings about problems with federal tax withholdings.  According to the Management Letter dated March 27, 2026, the city had already fixed the problems with the federal tax withholding matter. That was 6 months before the September audit results. So, it creates a very confusing situation for the public trying to understand the IRS penalty.

Management Failure No. 6:  At some point, given the number of management failures, especially the ones concerning transparency, there is, at least, an appearance that the government is not being forthcoming.

Management Failure No.7:  Consider this – the transmittal memo for the Ordinance, reported that there is a non-personnel need for the potential $400,000 IRS penalty. But it also reported that the cost would be offset by “personnel savings” in three divisions in the Department of Finance. Does that mean that one or more employees lost their jobs? Who knows?  If there were personnel actions or threatened personnel actions associated with the tax withholding matter, that would be even more significant than the $353,000.Without greater transparency, the public is just left to speculate about what is truly going on with the city’s Department of Finance.

Management Failure No. 8: What does this say about the Internal Audit Committee, whose members are appointed by the Mayor? How could the Committee, for example, agree with a complete lack of any information in the September audit report about the tax penalty matter. To what extent did the Internal Audit Committee review the report and conduct their due diligence. Did the Committee make any reommendations or even comments on the report?

Sometimes cover-ups occur in plain site.

 

 

 

 

 

External Auditor’s “Management Letter,” for FY 2025

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City_of_Cincinnati_FY2025_Management LetterL_FINAL_Redacted

Transmittal 202500945 Final Budget Adjustments 2025

Ordinance 202500945 122-2025 signed

Federal Income Tax Withholding Remittance Audit

 

Tonight (10.19.26) I am reporting about another matter resulting from the FY2025 Financial Statement Audit of the City.

I was able to finally obtain a copy of the external auditor’s most recent “Management Letter,” which covers Fiscal Year 2025.

The purpose of the external auditor’s Management Letter is to communicate to the Mayor and City Council compliance and internal control problems it identified during the course of their audit, that in their opinion, did not rise to the level of a “Significant Deficiency,” or “Material Weakness.” But nonetheless required reporting.

I was expecting to see the Management Letter included in the City’s Annual Comprehensive Financial Report  (ACFR).  I did not find it  there. Apparently, in Ohio, the Management Letter goes to the Mayor and City Council separately, not as part of the ACFR. I found that the public has to request the Management Letter directly from the Auditor of State.  So that is what I did.

I have posted the letter above. It shows the following:

  1. Findings concerning the City’s IT Security posture have been redacted, which is appropriate. In order to protect the city from a ransom-ware attack, for example, we do not want details about our IT systems made public.
  2. Findings that the City paid a $353,000 IRS penalty in FY25 based on an unspecified failure in the City’s process for withholding and remitting federal payroll taxes.
  3. Findings that the City is not complying with requirements related to employee fraud awareness training.
  4. Findings that the auditor tested a sample of ten (10) city officials who are required by the City Charter to file financial disclosures every year by April 15th. The Auditor found that 100% of their sample failed to comply with the requirement. It is not reported how many of the sample were elected officials. That should have triggered further testing but it is not reported whether that occurred.

The City passed an ordinance on May 14, 2025 authorizing the payment of the IRS penalty by  a 9-0 vote. The Council passed it as an emergency matter and voted to suspend the 3 readings. The funds for the IRS penalty was included in item 202500945, the “Final Budget Adjustment for FY2025, which made $23.9 million in adjustments, including $400,000 for the IRS penalty. In other words, the penalty was buried among other adjustments. No word from any city council members about the penalty.

Remarkedly, the City’s Internal Auditor issued an audit report in September 2026, just a few weeks ago, about federal witholding taxes and made no mention of the $353,000 IRS penalty or any details about the obvious breakdowns in the process.

The management letter indicates that the city has taken steps to fix the problem. Since the city has not disclosed any further details, I will see what I can find out and let you know.

Parking Safety Alternative: Transparency, Prevention and Performance (October 5, 2026)

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We submitted an alternative to the Mayor and City Council concerning the recently adopted ordinance concerning safety mandates for private parking lot and garage operators.

The proposal is based on the following 5 principles:

TRANSPARENCY

PREVENTION AND PUBLIC AWARENESS

MARKET INCENTIVE

ACOUNTABILITY AND MEASUREMENT

TARGETED ESCALATION

 

Cincinnati_Parking_Safety_Proposal_FINAL

 

 

Is Cincinnati Really “Sponge-Worthy?”

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If you’ve been following along, you may recall that after the terrible flooding of our Eastside neighborhoods this summer,  I submitted a request to the city for records concerning the city’s payments to Green Umbrella.

According to its IRS Form 990, Green Umbrella is “Cincinnati’s Regional Climate Collaborative – a network of people, organizations and governments taking action  in the face of climate change.”

The transparency website,  www.ohiocheckbook.com shows that since 2021, the city has paid more than $1.5 million to Green Umbrella. So, my  request for records was meant to determine what Green Umbrella has done for the city for $1.5 million.

In contrast, during the same period, Hamilton County has paid Green Umbrella a total of $4774.00, i.e., less than $5000.

Based on that, I have concluded that Cincinnati must be considered more “sponge-worthy” than the county.

In its July 27, 2026, report about the floods, the Enquirer interviewed the Director of Green Umbrella who said that Cincinnati is at the top of the list of areas in the nation that will experience the most extreme rainfall changes in the coming decade.

The City Manager’s Office told the Enquirer that “Cincinnati can create a ‘sponge city,’ meaning a city with nature-based projects that allow stormwater to infiltrate soil instead of entering the sewer system.”

I actually think, not just climate change activists,  but many other nonprofit organizations in the city and county, view the city the same way.

It is my guess that Green Umbrella was substantially involved in the city’s 2023 Green Cincinnati Plan (GCP), which committed to 25 green-infrastructure projects by 2028 in heat/overland-flood-vulnerable communities.

However, the 2025 GCP progress report included many “accomplishments” of its numerous other commitments but there was no progress sited on commitments to mitigate flooding.

Anyway, the city denied my July request but told me that a change in the Ohio Revised Code would  take effect on September 23rd , and that if I resubmitted my request after that date, the city should be able to produce records responsive to my request.

Apparently, for some reason, prior to September 23rd, Ohio law said that the city could withhold records pertaining to economic development projects.

I don’t know why the law was such, and I don’t know in what way the records concerning Green Umbrella are related to economic development, but I do know that if the City is able to withhold records from the public, it will, even if it does not have to. So, today (9.26.26) I submitted another request that is pictured below.  I will report what I find out.

 

September 26, 2026 record request

 

CoC_OES_AR25_FINAL_singles

 

Green_Cincinnati_Plan_2023_spreads_compressed

Cincinnati Southern Railway Trust Distributions – Timeline

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Railway_Trust_Detailed_Chronology_Sept_9_2026_

CO11494-060826 Railway investments

Additional Supporting Documents for the Timeline

2026-Feb-CSRT-Minutes-Approved

Final-Letter-to-CSH-7.9.26

August 28 ltr to Clark, Schaefer, and Hackett re Investment of Railway funds

City Finance Letter to CSRT Board 1.23.26

Ltr to CSRT 12.17.25

Muething ltr 2.2.26

Statement of balances for Fund 712

 

On December 17, 2025, I recommended that the Cincinnati Southern Railway Board of Trustees, consider implementing a “draw-down” process for distributing the city’s annual allocation of Trust investment proceeds.

I made this recommendation based on the media reports indicating that the city was not deploying railway funds in a timely way. As a result, the city has been depositing its unspent railway funds into its own investment account.

We have subsequently discovered that the interest earnings on those invested railway funds is going into the city’s general fund. The city is unable to tell us how much interest income is being generated by those funds.

In other words, those investment earnings have lost their identity as Railway money and thus loses the restricted use of the railway for “existing infrastructure.”

The city’s response to a record request I submitted in June 2026 was received on August 27, 2026, which confirms this observation.

This issue has been evolving since I first alerted the CSRT Board in February 2025 (18 months ago) that the city was going to be unable to spend the millions of dollars from Railway Trust that are being distributed to the city every quarter.

In preparation for the September 15, 2026, meeting of the Board, I have prepared a timeline that traces how the issue has evolved and provides my assessment of where things stand with the “draw down” recommendation.

I sent the timeline to the Board yesterday and will be attending the Board meeting next week to follow up.

The time line and response to my records request are posted above as well as supporting documents for the timeline.

Where Does the Chief Washington Case Stand? (8.25.26)

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Annotated Outline of District Court Summary-Judgment Decision dtd

Washington_Case_Where_It_Stands_REVISED dtd

Washington_Charge_1_Chronology_Table dtd

Washington-v.-City-of-Cincinnati_-2025-U.S.-Dist.-LEXIS

Washington-v.-Cincinnati-Appeals-Court-8.13.26

 

I have found that not only is the Chief Washington case very important for Chief Washington and for the City,  but it is also very complicated.

Now that the 6th Circuit, U.S. Court of Appeals has remanded the case back to the U.S. District Court, I wanted to know exactly what that means and where the case stands.

What I found is that former Chief Washington won a significant ruling that City Manager Long violated his Constitutional rights in this process, but now the District Court will determine whether or not the city even had “cause” to fire him in the first place.

I created 2 tables, with the help of AI. One is a timeline about the Women Helping Women (WHW) “training” program, which played a  central role in the City Manager’s case against Chief Washington. I have raised questions as to whether the City Manager “weaponized” WHW against Chief Washington.

The other table shows where the case stands for each of the issues being litigated. The column on the left, represents the outline of the same structure used by the District Court in their August 2025 decision. The middle and right columns show the status and significance.

The third analysis is a more detailed explanation of the status of rhe case.

I have reviewed the District Court and Appellate decisions, and I found that the tables and more detailed explanation are accurate.

Did the City Manager Weaponize ‘Women Helping Women’ Training in the Chief Washington Matter?

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FYI memo 3.24.23 Chief Washington

FYI Memo 3.24.23 attachment Chief Washington

Fired chief allowed ‘boys club mentality’ at fire department, Cincinnati Enquirer, March 26, 2023 annotated

Lawsuit Pureval, Long conspired to fire Washington April 27 2023 annotated

City payments to Women Helping Women 2022-2026

WHW President Compensation 2019 – 2025

 

If you go back and look at news reports about City Manager Sheryl Long’s firing of Chief Washington, there is an “Evaluation Report,” by  Cincinnati Non-profit organization, “Women Helping Women,” that apparently played a central role in the City Manager’s decision to fire the Chief.

In a memo dated March 24, 2023, the City Manager  informed the City Council of her termination of Chief Washington. Attached to the memo was the executive summary of the Evaluation Report. According to the summary, “there were key discussions by officers that fell into three main themes.”

The third theme was,  “ Sentiments that the problem lies with key leadership, namely Fire Chief, and that needs to be addressed in a comprehensive way before it can be modeled across the Department.” The problem cited by Women Helping Women was that an “umbrella of gender-based violence are present in the Department. “

I have been unable to find the entire “Evaluation Report,” online but I am sure there must be a complete report somewhere.

As it stands, the City Manager enlisted a non-profit, for which the city is a major benefactor, to conduct “training” for the Fire Department concerning cultural issues and then used the summary of an “Evaluation Report” as a basis to remove the Chief. At least that was how the Enquirer reported it.

According to Ohio Checkbook (https://checkbook.ohio.gov),  during the period 2022  to present, the city has made payments to Women Helping Women of more than $1.5 million, including $1 million in Leveraged support, which are essentailly operating subsidies.

According to IRS filings, during that same approximate period, the compensation of the president of Women Helping Women increased 109% ,  from $106,143 in 2019 to $222,292 in 2025.

In my opinion, it looks like Women Helping Women may have been used by the City Manager to do her bidding with respect to Chief Washington. I hope this arrangement is the subject of a formal  investigation.

AI Assisted Comparison of the March 2023 Deferred Maintenance List and Cincy on Track

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Deferred maintenance List March 2023

Cincy on Track Proposed Spending Plan

Cincy_on_Track_Crosswalk_Analysis

After the Eastside neighborhoods experienced such serious flooding earlier this summer, I was surprised to find that Cincy on Track, the city’s infrastructure spending plan for the railroad money, does not include any projects for sewers, water or stormwater management. Notwithstanding any explanation, that was a surprising finding.

That revelation got me wondering what other deferred maintenance may have been left out of Cincy on Track. I first wanted to check the city’s list of deferred maintenance. I asked AI to do a crosswalk analysis of two documents:

1) a deferred maintenance list issued by the city administration in March 2023, pursuant to a request from the city council which totals appx.$250 million; and

2) the Cincy on Track Plan, which also totals appx $250 million.

I wanted the analysis to determine the extent to which the Cincy on Track Plan included items on the deferred maintenance list.  The results are interesting.

I have not yet checked the analysis for accuracy but at first glance I did see that the $40 million upgrade of the Fleet Maintenance Garage is not in Cincy on Track according to the analysis, but the city and the media have reported that the upgrade is in process.  Maybe the city is not using railroad money for the project? We will try to resolve any of those types of discrepancies we find in the analysis.

The entire analysis and source documents have been posted above. Feel free to try your own AI analysis or check for errors or omissions.

There is a lot more work necessary to enable the public to see exactly how the rairoad money is being accounted for and exactly it is being used for being used for – not just the plan.

Last I checked, probably somewhere between $50 million and $80 million is being comingled in the city’s investment account. There needs to be accounting rules in place to ensure compliance with the state law but the city is not cooperating. We want the proceeds from the Trust Fund to be treated like all the other restricted funds but apparently the city wants as few strings attached to the railroad money as possible.

 

Washington v. Cincinnati and Sheryl Long, Individually – Court of Appeals decision 8.13.26

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Washington v. Cincinnati Appeals Court 8.13.26

This is a really tragic case. It could not be worse for the City Manager or the City. The decision of the U.S. Circuit Court of Appeals here in Cincinnati found very serious misconduct by City Manager Long that the City Council will have to deal with.

According to the decision, City Manager Long violated Chief Washington’s civil rights and more than likely defamed him. And on top of that, the Court ruled that Ms. Long did not have qualified immunity for those violations. WOW!

The city’s HR office should already be looking at the potential rule violations by the City Manager, and the City Manager should be recused from anything to do with it.

A question that I have is what kind of government leader disregards advice of the city’s own legal team, that specifically told her that Chief Washington was entitled to a hearing concerning his proposed termination, and then the “leader” turns around and requires that same legal team to defend her violations of civil rights and her possible defamation of Chief Washington?

She should have been required to pay for her own attorneys and should now be required to reimburse the city for all the costs incurred by the Solicitor’s Office in her personal defense.

The document I posted is from the website for the Brian Thomas Show on 55KRC. Today’s “Smithervent” was devoted to this case, and I believe the copy of the decision I have posted is from Christopher Smitherman. There are some very helpful highlights in the document that are worth reading, especially page 16.

 

 

Lawsuit Asserts Violations of Ohio’s Open Meetings Act (8.4.26)

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Zinser’s OMA Complaint as filed

This is the complaint as filed in Hamilton County Common Pleas Court on August 4, 2026.  There are additional documents about the lawsuit that I will be posting in connection with Episode 57 of “Citizen Watchdog with Todd Zinser,” coming soon.