During a candidates forum on Thursday night, incumbent Mayor Frank Brocato and his challenger, police chief Nick Derzis, were asked about the Kroll Report, a forensic accounting also known as a forensic audit, conducted by the City in 2024.
Brocato spoke about the report, making at least three false or misleading claims within a two-and-a-half-minute timespan.
The first point was addressing the report's age, noting it was “two years old, three years out,” despite the original findings being presented less than a year ago, and a secondary series of questions being answered only five months ago. Brocato also said that the report was a “deep dive” and that it found no “misrepresentations” of City finances; the report itself also contradicts both of those statements.
Brocato misstated the report's age by a factor of two.
“When I received the report on the Kroll report in 2023, by the way, this is very old,” adding that it was “two years old, three years out.”
Timeline as follows:
- April 9, 2024 – The decision to hire Kroll was made via an email sent from John Lyda to council members on April 9, 2024.
- June 5, 2024 –1819 News broke the news of the audit when Councilwoman Khristi Driver revealed it in sworn testimony.
- August 5, 2024 – Mayor Frank Brocato's first public acknowledgment of the ongoing audit
- August 24, 2024 – Kroll Report released
- November 5, 2024 – City Council takes up $236,152.00 bill for Kroll Report but tables payment after requests for townhall
- November 18, 2024 – City Council approves payment of $236,152.00 for Kroll Report
- March 7, 2025 – Kroll releases answers to citizen questions after residents request for townhall denied
SEE FULL TIMELINE HERE: City of Hoover appears inconsistent on forensic audit as public question period closes
Brocato went on during the forum to say, “I wanted to know if there's any kind of misbehavior, any fraud or misrepresentation or any misuse of funds, and there were none. None. It's over with.”
While misbehavior is hard to define, the report did conclude that there were “repeated issues and failures.”
The report also stated, ”It is also our understanding that fund balances and other items reported on financial disclosures and at City Council meetings were overstated or misrepresented on more than one occasion, including once by more than $36 million.”
Furthermore, Brocato's saying that the report was a “deep dive" contradicts this, stating, “A comprehensive period-to-period review and analysis of the financial filings/reporting, including tracing and re-calculating amounts and transactions back to internal accounting records and source documents has not been performed to date.”
The type of report Brocato is referencing would have occurred if the city had chosen to conduct a full forensic audit or had called in the state to do one. This report does not qualify as one city councilor recently found out.
According to the Rules of the Department of Public Examiners, “If a municipality has an independent audit or examination of the books, records, vouchers, and accounts of the municipality conducted, the governing body of the municipality, upon receipt of the final report of the independent audit or examination, shall provide a copy of the report to the department within 60 days after completion.”
When Hoover City Councilman Steve McClinton inquired with the state about whether Hoover had complied with the state law, he was told that the city hadn’t provided the state a copy.
1819 News inquired about this further, and the state explained that there are differences in the standards used for forensic accounting and forensic auditing. What the City of Hoover underwent was a “Forensic Accounting and Review and Analysis of the Finance Department Operations,” not a forensic audit and therefore the report, frequently called the Kroll Report or forensic audit, wasn't actually a forensic audit by industry standards.
The report itself on "Page i" states a “Restricted Use Warning” in which it gives a series of disclaimers about the limitations of the report including, “This report does not constitute a recommendation, endorsement, opinion, audit or approval of any kind with respect to any transaction, decision or evaluation and should not be relied upon as such in any circumstances.”
Further in the Kroll response to questions posed by residents the response restated that their investigation was a forensic accounting not an audit saying, “Also note that “forensic audit,” “forensic accounting” and “audit” are used throughout the below questions, but Kroll assumes that these terms are used interchangeably and takes it to mean the forensic accounting work performed by Kroll (and not the financial audit performed by BMSS, LLC, unless this firm is specifically referenced).”
Rachel Riddle, the chief examiner for the State, said in a statement that said in part, “An internal review would not be required to be submitted to our Department’s repository. These are not statutorily required audits or examinations that would require such submission.”
In his response to the same question, Derzis incorrectly stated that Driver asked for the report. Driver made the first public declaration of the report, but the report was initiated by the chief financial officer.
He went on to cite from a recent Facebook post from former Hoover chief financial officer Melinda Lopez. Lopez gave 1819 News permission to reprint her comment, asking that it be printed in full within the context that it was written, in response to a Hoover Sun article published July 31. To date, the Hoover Sun has not issued an update or correction to their story or followed up on Lopez's comments.
When a false narrative is given, I feel it must be corrected, especially for the future of our City.
In reference to the snapshot below from the Hoover Sun article, it is important to ask HOW the perfect storm occurred.
I was the CFO who Mayor Brocato referenced as retiring.
I did not retire and he knows that. In May 2020 I left with only 2 years to go before I could retire.
Why would someone leave with 23 years?
Because of poor leadership from the administration:
They created an unprofessional work environment.
They forced hiring and promoting unqualified people for jobs.
They restricted employees from being held accountable for their jobs.
They listened to unqualified people vs. the people who knew how things should be done.
They carried this forward to the new software implementation, and that spelled disaster, which is what occurred with the payroll problems for over a year.
In sum, poor leadership…led our city away from its STANDARD OF EXCELLENCE. The lack of leadership CREATED the perfect storm.
I warned that if things did not change, I would leave.
Thankfully, the Lord led me to leave and has taken great care of me to know it was the right decision.
The full video of both Brocato and Derzis’ answers can be found on The Hoover Channel’s YouTube page.
To connect with the author of this story or to comment, email [email protected]
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