A rocky financial past continues to be a headache for Mayor Scott Dudley as he may be the first mayor in Oak Harbor’s history whose personal signature won’t be on city checks.

As part of an internal policy change expected to be formalized sometime this month, one of the two signatures required on all city checks will no longer include that of the mayor.

Doug Merriman, city finance director, said the change is due to two factors. One concerns Dudley’s personal financial history, which has raised flags with the city’s insurance company, and the other relates to a 2010 state audit finding.

Most recently, Merriman received a call from the city’s insurance firm and was informed that a background check had been performed on Dudley. While it’s standard procedure for incoming mayors, or anyone else who would like to be a bonded signatory for the city, Dudley’s results dictated a higher premium.

“In the case of Mayor Dudley, his bonding price was high,” Merriman said.

The average cost to bond a person is about $600 a year. But because of Dudley’s financial history, which includes a 1997 bankruptcy, Merriman said he was told the rate might increase to about $4,000 a year.

At the same time, the city has been looking at tightening up its internal financial controls since it got dinged with a state audit finding in 2010. One of the ways city officials sought to strengthen financial safeguards was to limit the mayor’s historic ability to both authorize expenditures and sign checks, Merriman said.

Considering both issues, it made sense to remove the mayor from the signature signing process altogether, he said.

“We thought we could kill two financial birds with one stone,” Merriman said.

Dudley, who is a financial advisor by profession, was unaware of the policy change until late last week. While he said it was a little surprising to learn that it was in the works without his knowledge, he supports the move as a positive step for Oak Harbor.

“I applaud the change, it makes sense,” Dudley said.

He also said he has no heartburn over the issue because another policy at the company he works for, Edward Jones, prohibits him from assuming any additional fiduciary responsibilities.

“I didn’t anticipate signing any checks anyway,” Dudley said.

The only authorized signers of checks will now include the city’s finance director, clerk and administrator. All checks will need the signatures of at least two of the three senior level employees.

According to Merriman, this is the first time he knows of where checks will be signed by just employees and not the mayor, an elected official. However, that should not translate to a lack of accountability, he said. Before checks are sent out, they must be approved first by the Oak Harbor City Council through a voucher process.

“It’s a required step we do,” he said.

Merriman said the insurance company did not go into detail about Dudley’s background check or why it would result in a higher rate for the city.

However, at a city council meeting last week, Oak Harbor resident Layne Paul addressed the issue and called attention to Dudley’s bankruptcy. In a later interview, Paul said he doesn’t have a particular beef with the new mayor but that his personal financial history was concerning.

“I don’t have an axe to grind but I wanted to make sure there was some scrutiny on the mayor,” Paul said.

Dudley said he’s never made any attempt to hide his financial past. The bankruptcy occurred at a challenging time in his life, when he had a new business, two young children, and a wife who was out of work and going to school full-time, he said.

Also, Dudley pointed out his bankruptcy was not a chapter 7 filing, which is the abandonment of outstanding financial obligations. Rather, he filed for a chapter 13, which is a reorganization of debt. He claims he paid everything back by 2002.

According to Merriman, not having the mayor sign checks is an internal policy change and doesn’t require the city council’s approval. However, the issue may end up being discussed by the group anyway.

When asked what he thought about the change, City Councilman Rick Almberg said he thought the situation was “embarrassing” for Oak Harbor and he will likely ask for a full explanation.

Credit ratings are a sign of character and when they affect how city business is done, a public discussion is warranted, he said.

“I think credit ratings are important, especially when it’s for positions of trust,” Almberg said.