Lake Nebagamon treasurer fired after clerk flags payroll issues

Oct. 25--Lake Nebagamon Administrator and Treasurer Swan Dawson has been terminated after a recent audit uncovered payroll and and retirement plan issues that could cost the village more than $500,000.

In an Oct. 1 review for the Lake Nebagamon Finance Committee, certified public accountant Curt Forse estimated the cost of back pay, taxes and retirement contributions could reach $250,000; potential penalties relating to the Affordable Care Act could exceed $400,000.

The audit was prompted by a "whistleblower-type" complaint the Village Board received in a resignation letter from Clerk Amy Huber, according to Village President Sonda Strom-Larson.

"We did some internal investigating and determined that there was merit to the complaints and brought in a professional accounting firm out of Superior," she said.

After receiving Forse's preliminary report, the Village Board during its Oct. 2 meeting terminated Dawson's nearly 38-year employment with the village.

According to Strom-Larson, Dawson was in charge of the village payroll, which covers six employees -- five following Dawson's termination.

Huber resigned, but was asked to remain in the clerk position until a full investigation is complete and the position of administrator, treasurer and clerk are posted and filled.

"We asked her to stay on in the interim and she accepted," Strom-Larson said. "We will be posting both positions."

Although Strom-Larson hasn't heard from residents about the issue, some Village Board trustees have.

"They're wondering what our next steps are, as far as repercussion and restitution, and we don't know those answers yet," Strom-Larson said.

Of Forse's findings, a village benefit plan that paid all employees $800 per month -- $9,600 per year -- tax-free to help them buy health insurance, with no written plan in place dictating how the money was to be spent, could make the biggest financial mark.

In 2015, the Affordable Care Act prohibited any employer from reimbursing employees tax-free for any type of health care with no plan in place. That penalty -- up to $37,000 per employee per year -- could exceed $400,000 if the IRS were to investigate, Forse found.

According to his review, amended wages could cost the village close to $45,000 in Social Security and Medicare taxes, and another $30,000 to the Wisconsin Retirement System. He also discovered that not all employees were paid as required under the plan.

"It looks like about $110,000 is owned to some employees," Forse wrote in the review.

Employees would also be forced to amend all personal tax returns dating back to 2015 once the corrected forms are issued.

Another accounting issue dates back to 2011, when Wisconsin Retirement System rules changed to require employees to pay into the retirement system. The village did not make that change and has paid about $85,000 funding mandatory employee contributions through the last payroll, Forse found.

Village employees would be affected, as the retirement board will require them to reimburse the village for retirement contributions they should have made dating back to Jan. 1, 2018.

Other findings revealed one employee has been paid $500 per month for about four years, but that money was never included on the employee's W2, and some employees have accrued up to six months of vacation time because there is no cap.

During a closed session Oct. 2, the Village Board took steps to address the issues, abolishing sections of the employee handbook dealing with the health benefit and increasing employee pay by $800 beginning this month. Mandatory retirement payments will be taken out of paychecks as of Oct. 1, according to the minutes.

Forse is conducting a forensic investigation of the village books back to 2011, including the volunteer fire department and sewer commission.

"Dawson is also a captain on our volunteer fire department," Strom-Larson said. As administrator, she was also involved in the sewer commission.

No timeline was available for when the investigation will be complete.

"We hope it's quick," Strom-Larson said.

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