News Story

Mandated Payroll Fixes And Oversight Committee Didn’t Stop Detroit Embezzler

Staffer heading to prison for embezzling $265,000 from taxpayers

A former city of Detroit employee was sentenced to 18 months in prison in August 2018 for embezzling $265,000 from her employer.

Masharn Franklin worked for the city’s audit and payroll department in 2016 and 2017, where she oversaw salary garnishments of city employees.

Franklin caused the city to issue checks to her relatives, in amounts that she dictated, which were then deposited into bank accounts she held jointly with them, according to the U.S. Department of Justice.

She committed the crimes while the city’s finances were supposed to be under the supervision of the state Financial Review Commission, an office created by the Michigan Legislature in 2014, a year after the city of Detroit filed for bankruptcy. In 2016, lawmakers extended the commission’s oversight powers to the insolvent Detroit school district as part of the district’s own state bailout.

According to the Michigan Department of Treasury, the review commission “ensures both [the city and schools] are meeting statutory requirements, reviews and approves their budgets, and establishes programs and requirements for prudent fiscal management, among other roles and responsibilities.”

The law requires state oversight of the city to last no less than 13 years. But according to the city’s annual financial report, the level of oversight has been reduced over the past year. On April 30, 2018, the commission gave Detroit a “waiver of active oversight.” The annual waiver extends through June 30, 2019.

Detroit’s federal bankruptcy court settlement stipulated that the city must update its payroll system, which the court described as archaic. Reportedly, the payroll system was so inefficient that it cost the city $62 to process a payroll check, well above what the court called “the general average of $15 per check.”

John Roach, a spokesman for the mayor’s office, said the city implemented an entirely new payroll system in November 2018. He also said the city has set up a system of checks and balances in the garnishment process.

“There is a complete separation of duties between the person preparing the garnishment payment file, the payment approval and the accounts payable processing,” according to a statement from the city.