BWL hired an auditor to watch its accounts, then fired him for credit card abuse

Editor's note: The Lansing Board of Water and Light had an internal auditor prior to hiring Frank Macciocca, this story has been updated to reflect that, as well as correct the previous credit card maximum and the board's management relationship to Macciocca.

LANSING — The Lansing Board of Water and Light hired an internal auditor in May 2022 to help plug a potential problem identified by an external auditor: Management.

But within a year, the utility's board became concerned about his spending habits and eventually fired accountant and attorney Frank Macciocca, claiming he had abused his utility-provided credit card with thousands of dollars in unauthorized expenses.

"These expenditures were unnecessary to conduct BWL business and appear to be little more than personal expenditures," said Dusty Horwitt, a former BWL board member and former chair of the utility's finance committee, in an April letter to utility board members. "He charged to his P-Card (the company credit card known as a purchasing card) parking and meals associated with a class at Cooley Law School.

"These expenditures were outside the scope of the addendum to his contract that otherwise authorized the class. Macciocca charged multiple meals to his P-Card when he dined alone and with his assistant," Horwitt added.

Amy Adamy, a spokesperson for the utility, said Macciocca was fired "for cause" and declined further comment. No criminal charges were pursued, and the utility so far has not asked for reimbursement. She said "we are exploring options, including insurance coverage."

The utility has not provided a final dollar figure for how much of the spending it deemed inappropriate,but Human Resources Director Michael Flowers, in an April 24 email to Macciocca, objected to at least half of the total.

Macciocca, who declined to comment, returned to Pennsylvania and continues to work there as an attorney. Adamy said General Manager Dick Peffley and board members, including the chair, Semone James, would not be available for comment ion the subject "because this is a personnel matter."

Moving on from the situation

Since Macciocca's May firing, the utility, which serves about 100,000 electric customers and 58,000 water customers in the Lansing area, has hired a new internal auditor, Elisha Franco, who starts Nov. 6 and the board has changed BWL's credit card policies based on the previous internal auditor's actions, rather than his recommendations.

Over the summer, the utility restricted credit card allowances for the internal auditor to $10,000, instead of $25,000 per year, and introduced additional financial oversight of the three utility employees who report directly to the board: the internal auditor, the general manager and the secretary of the board.

BWL also hired the Miller Canfield law firm for nearly $30,000 for a separate investigation. The utility has not released the results of that investigation, citing attorney-client privilege.

How BWL reached this point

The utility selected Macciocca as internal auditor in May 2022, after advertising for someone who would be "responsible for providing the Lansing Board of Water & Light independent, objective assurance and consulting services designed to add value to and improve the company's operations," according to a position description provided in BWL's 400-plus page response to a Freedom of Information Act request about Macciocca's firing.

"It furthers the company's objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. This position also provides an independent assurance function for the BWL," the listing said.

Macciocca's salary was set at $190,000 and he was given a $20,000 moving account, as well as a tuition reimbursement option.

Macciocca's January memo outlined concerns

Before BWL began investigating him in February 2023, Macciocca was implementing internal audit controls and authored a January memo that said BWL was slow to make progress in that regard.

He said most internal auditors reported to management while he reported only to the board, an arrangement that will not change with his replacement.

He also wrote in the letter that management was a leading concern.

"Management override of internal controls is the highest significant risk area highlighted by the external auditor," Macciocca wrote. "Without this direct access to information, data, and people by the Internal Auditor, the risk of undetected malfeasance (for example, error or negligent behavior) malfeasance (for example, collusion, internal omissions, misrepresentations, override of internal controls, forgery) increases significantly."

Spending prompts investigation

BWL, however, had Macciocca under investigation by February, when he was asked to resubmit some of his expenditures, according to records provided by BWL in response to a FOIA request.

Many of his emails indicate he was spending on meals, rent and several trips to Pennsylvania with the intent of deducting the cost from his moving allowance. He sent in a spreadsheet covering 26 days, starting in mid-January and included four full weekends. In that time, Macciocca filed 23 meal and coffee reimbursements totaling $756, averaging about $29 a day, including weekends.

His credit card was suspended shortly afterward.

Records show Macciocca racked up about $30,000 on his BWL credit card in about eight months after being hired, and BWL officials questioned much of the spending — including about $12,000 in Michigan State University tuition, two out-of-state conference trips and a pattern of meal reimbursements that utility officials didn't believe were related to work.

College classes and training at issue

Macciocca attempted to defend himself once his spending was questioned. In emails to board members, he said he was allowed to take continuing education classes without authorization and his contract and an addendum allowed for the educational and travel costs.

An addendum to Macciocca's contract states he could attend Cooley Law School and obtain continuing education necessary to maintain his licenses and certifications without further authorization, but the contract does not name MSU courses.

"BWL Management and Employees are most likely not aware that this Addendum exists, and that Internal Audit has relied upon it when using the P-Card to pay for expenses and departmental expenses these past months including Commissioner and get-to-know employees lunches," Macciocca said in a March email. "This lack of awareness may have generated expense propriety concerns."

Contact Mike Ellis at mellis@lsj.com or 517-267-0415

This article originally appeared on Lansing State Journal: BWL hires new internal auditor after ousting previous official over credit card use