Finance staff reports Ohio Checkbook updated; IRS review centers on missing 1099s

City finance staff reported to the council's Budget and Finance meeting that the municipal Ohio Checkbook online posting is now current and that staff completed the month-end reconciliation for May while continuing work on related items.

The update is significant because it surfaced a previously separated Fifth Third Relief Fund holding $178,826.52 and identified outstanding checks and timing differences that explain apparent discrepancies between the software (books) and bank balances. Staff also told the committee an IRS review has focused on missing 1099 forms for contractor payments from 2022 that were not issued in early 2023; that omission prompted federal inquiry and could expose the city to tax-related liabilities if vendors do not satisfy their obligations.

Finance staff said the Ohio Checkbook upload is now current and walked members through the May monthly report. The city's Fifth Third Relief Fund was shown as a separate account with $178,826.52 and modest interest. Staff explained that the general-fund software balance must be read together with that relief account to reconcile totals. The reconciliation shows outstanding checks of about $23,869.12 that have been recorded in the city's accounting system but had not yet cleared the bank as of the May statement.

On payroll and benefits timing, staff explained the municipality records payroll and the city's portion of pensions and payroll-related obligations in the month they are calculated and often pays them the next month; that timing leads to regular month-to-month differences between the ledger and cleared bank items. The fire levy fund temporarily showed a negative balance because a usual Hamilton County deposit had not yet been received, staff said, and staff will check whether county distributions can be advanced if necessary.

Staff also disclosed that the IRS has initiated a tax review tied to missing 1099 information for work performed in 2022 but not included in 2023 filings. The city and its vendor Paycor are coordinating to identify affected payments and reissue appropriate information statements; staff estimated the gross exposure with interest could be on the order of tens of thousands to roughly $100,000 absent vendor action. Staff said many vendors have already cooperated and some have paid liabilities reported to the IRS, reducing the city's potential exposure.

The committee also discussed the state auditor's management letter, which routinely flags the city's present cash-basis reporting instead of the accrual basis most other municipalities use; staff said moving to accrual accounting is an option but involves a substantive transition and cost analysis.

Ending: Staff will continue the 1099 remediation with Paycor and vendors, provide a written reconciliation of the relief account, and check whether county fire levy distributions can be accelerated; the committee also agreed to shift Ohio Checkbook reporting to a quarterly update for council to conserve staff resources.