A daily check of void reports in the County Collector’s Office would have exposed a theft of money that was occurring long before $10,000 was misappropriated according to a recent audit study. The suggestion that such a daily check would catch thefts more quickly was one of several made in an internal cash control study by CPA Charles Buchanan.
The County Commission met with Buchanan to hear his findings Tuesday morning in a three-hour session. Sharp words were exchanged between county officials at times during the meeting.
The report began with a discussion of whether the county offices should accept cash payments.
The auditor is recommending either eliminating or at least reducing the cash payments it will accept. This will help eliminate the temptation to steal money, Buchanan said.
Commissioners Bill Bradley and Ron VarVera both said they were in favor of eliminating it altogether, however County Collector Pamela Williams pointed out that some offices accept fees as low as 50 cents.
Buchanan suggested drawing a line at $25 on accepting cash payments as a possible compromise.
The commission decided to take the recommendation under advisement. They will discuss it with other officeholders and see what kinds of problems the recommendation might present.
The next suggestion the auditors had for the county was to create some separation of duties in all its offices where cash is handled. One person should not be handling money from the time it enters the office to the time it is paid out, and in some cases that is what is happening.
One possible way to create such separation of duties would be to have bank statements opened by someone outside of the particular office in question, such as the county auditor. The auditor could reconcile the statements, review the checks and then return them to the individual officeholders, Buchanan said.
Presiding Commissioner Jim Henson questioned whether that would even be something they could legally require of officeholders. An officeholder, by law is 100 percent responsible for his office.
Commissioner Bill Bradley said if he was that officeholder he would be offended by that.
Commissioner Ron VarVera said he did not believe having someone outside the office was practical for the county.
Buchanan said that having an outside person open the mail was just one possible way to create separation of duties.
Commissioner Bill Bradley said he believed that all the officeholders should already have their offices set up so that one person doesn’t do everything with the money from start to finish.
“That would be fine,” Buchanan said. “But that’s not happening.”
“Well I have another dumb question,” Bradley said. “How come $10,000 got missing and no one noticed?”
“I could tell you, but I cannot comment on it,” County Collector Pamela Williams interjected.
“You told me how it happened and the collector told me it was not true,” Bradley said. “I do not know who to believe.”
Buchanan said he knows exactly how it happened, if commissioners want him to elaborate.
“You supposedly have a confession in the newspaper,” the special auditor said, “so I don’t know what investigation I can impede by saying how it happened. I have investigated the paperwork, I know how it happened.”
Buchanan said the method by which the money was taken is connected to one of his later recommendations, dealing with the voided receipts.
Bradley said he would wait until then for the explanation.
Commissioners at this point decided that separation of duties would become a moot point if the county stops accepting cash for payments. This recommendation was taken under advisement as well, for further study.
The next recommendation dealt with how insufficient funds checks are being handled by the collector’s office presently.
When a taxpayer’s check is bounced for insufficient funds, the bank calls the collector’s office. An employee takes money from the cash drawer over to the bank to cover the check. The taxpayer is informed that the check bounced and is given the opportunity to pay the check that day without it being handed over to the prosecuting attorney. The taxpayer is expected to bring either cash or a money order to cover the check.
The problem here, Buchanan explained, is that the audit trail is stopped here. There is no record that the check bounced at the bank, nor is there a record that the taxpayer came in and made the second payment. Since it is a cash payment, and no receipt is issued for that payment, there is no way to trace these payments.
He believes the collector’s office should have the bank process the insufficient fund checks. He said that such checks are normal and should be part of the usual reconciliation process.
Williams said she does not believe the procedure is a problem and that it is the most efficient way to handle things. She said that she would have to wait 10 days to give the check to the prosecutor the way Buchanan suggests she do it, whereas this procedure allows her to get payment the same day. It would also change her bank statements and things would not balance, Williams said.
Buchanan said that at the least, the taxpayer’s payment should be immediately voided in the collector’s system when the check bounces and that when the taxpayer comes in to make the check good, a new receipt should be made, so that these cash or money order payments can be tracked.
Bradley said he was convinced personally, but pointed out the collector obviously was not. “Where do we go from here?” he asked. “Lawfully, does she have to do what we say?”
“I think that is something where we need to sit down with Wendy(Wexler-Horn, Prosecuting Attorney),” Williams said. Williams said the responses she gave in the report are really just her opinions.
The next recommendation the auditor made was for one person to open the mail in the collectors office and for that person to make a list of every payment that was mailed in.
Williams said that would not be cost effective, because she would have to hire two employees to perform that task due to the volume of mail received. Many of the mailed payments, in addition, are from escrow companies which might be for hundreds of properties, so it is not as simple a matter as it might appear.
Currently, Williams said, the mailed in payments are processed at a particular terminal and thus bear a unique identification number on them, identifying them as mailed payments. As a result, she does not see a particular value in listing all the mailed payments.
Buchanan said the problem with that is no one person is ever responsible for determining what came in the mail. It would leave an opening he believes should be closed. He said in addition, mailed payments are not marked as to how they were paid.
Williams said mailed payments are generally checks.
Buchanan conceded this particular control might not outweigh the costs of implementation.
Buchanan’s next recommendation dealt with the handling of voided receipts.
Employees in the collector’s office are all allowed to void receipts. They do not need a second signature from a fellow employee, nor a supervisor’s approval.
This is the loophole that Buchanan says was exploited to steal $10,000 from county funds. Some of those who paid in cash had receipts voided in the computer system after they left the building with their receipt. That erased the record of their payment from the computer system.
In this case, the taxpayer’s account becomes unpaid. If the cash is removed from the drawer, all the collection reports will balance and everything appear in order.
Buchanan said every employee should not be able to void receipts. Williams said at times the office has only one or two employees, so all of them must be able to void.
Williams said there are legitimate reasons to void receipts and to take the payments in the system, they must be able to handle that issue on the spot.
Buchanan said in that case, a daily check of the void reports is a necessity. The voids must be checked against the records for the day, and all paperwork pertaining to voids, including cash receipts must be kept, along with a copy of the taxpayer’s copy. Missing receipts or a missing copy of the taxpayer’s record are an immediate indication that something should be looked into.
Williams said she would be requesting the software company change things so the reports would print daily instead of monthly.
St. Francois County Auditor Judy Ellis pointed out the collector has had access to those reports all along. She believes the theft should have been caught earlier. “There are procedures in place,” Ellis said, “You can do a void report every day. That should be a normal report you run every day. You should be doing a reconciliation every day.”
At this point, several people in the meeting were beginning to talk at once. One of the county officials made the comment that hindsight is 20/20.
Bradley said the reason they did the internal control report was to learn something, and here he felt, was something that had been learned.
In an interview after the session, Williams admitted that a daily void check was not part of the usual routine in her office. Nor was a monthly check.
It was not part of the usual routine, Williams said, because “it had never been a problem in the past.”
Wiliams said she could not discuss when she began to suspect a problem in her office because investigators had told her she could not discuss anything specific related to the case. She said when the investigation concludes she can be more specific.
She also would not discuss how the repayment of money from Sandra Wells was handled for the same reason. She said only that the taxpayer accounts had to be repaid.
During the meeting, Williams said she is requesting a change to the software so that the void reports will now automatically print daily and she will be incorporating a thorough check of them into her routines.
Also, a recommendation was made that internal audit reports show what payments taxpayers made and when be printed daily. The data is not being printed, and is in fact erased after the daily reports are closed. Voided payments should not erase the record of a payment being made, Buchanan said. The data should be kept at least three to six months.
Williams said changes are being discussed with the software company. She will be deciding what new procedures can be implemented.
A last recommendation was that taxpayer refunds not be made by removing cash from the drawer and purchasing a cashier’s check on the spot. Instead, a credit memo should be issued to the taxpayer and, during the normal bill-paying process, a check mailed to the taxpayer.
Williams said her office is changing that procedure.
Another issue was that some checks had been held for up to five months. Buchanan believes the checks should be deposited daily.
The held checks happen because of split or partial payments arising, for example, when an owner sells off portions of a property and the new owner is now responsible for a portion of the tax bill on the original tract of land. If one of the owners does not pay their share, the land could go up for bid at a tax sale, so the collector has not been depositing the partial payments right away.
County Assessor Damon Black said that his office really has nothing to do with the collection of the taxes or how they are handled. Prior to the meeting, Black indicated he did not like being “drug” into the matter of how money was collected in Williams office, because his office has nothing to do with that.
During the meeting, Black told Williams that he would work with her in any way his office could, but added that they have their own work to do.
Williams responded that she was not asking his office to do anything.
Black said, “Well problem solved then, I guess, if you are not asking us to do anything.”
In a prepared statement, handed to a reporter before the meeting got under way, Black said his office is only responsible for the production and development of the annual assessment books. “The assessor plays no role in the processing or collecting of property taxes. However, since all values originate with the Assessor, the Assessor has developed a split value form for the convenience of the Collector.
Black further said the entire matter has put a “cloud of suspicion” over the entire courthouse. “While many of us feel that we have completely misjudged the character of some, we should not hold accountable the honest officeholders and their employees that serve the people of St. Francois County.”
Black explained that employees in his office have been accused of being thieves by people who come into the office, and he feels this is a very unfair situation for them. “What are they supposed to say to that?” he asked.
In the prepared statement, he said he commended both Buchanan and Ellis for “doing such a great job against a lot of obstacles on this audit.”
“From your information (the auditors) we have discovered that 523 tax receipts were voided for the year 2003, with another 1,137 voided and canceled for the year 2002. In addition, we have learned that taxpayers were paying taxes and receiving receipts only to have them canceled and voided after the taxpayer had left the building. They remained in an unpaid status until on or about July 28th, 2003, when many from that voided report were then posted paid. As we are approaching tax seasons once again, we are hoping that some taxpayers do not receive a bill for two year’s taxes, when they will only owe for one.”
Ellis also had a prepared statement to make at the meeting.
She was disappointed by the obstacles auditors faced as they tried to do their work. She says many questions asked were unanswered because employees had been directed not to answer specifics that might touch on the criminal investigation.
In preliminary findings that Buchanan presented to the commission a few weeks before, the special auditor also made a note of such difficulties. However, at this latest meeting, he did not mention it.
Ellis said she was also concerned that the bookkeeping coming out of the collector’s office does not reflect actual transactions that she knows took place. There was a shortage in May 2002, but the bookkeeping doesn’t really reflect that, Ellis said.
Commissioners cut short discussion of this, saying that as far as they are concerned the auditors were not hindered, that they could look at anything they wanted to.
Bradley asked Ellis if investigators told her not to talk about something if she would still talk about it.
Henson said it was “wrong, wrong, wrong” to make innuendoes. “Just as wrong as stealing,” he said.
Ellis indicated after the meeting that she still has concerns as the auditor of the county and indicated she would be reviewing them and making a further report about it in the future. She wants time to discuss the matter with legal counsel.
Commissioners said they thought it was important that the Daily Journal print that no money had been found missing in 2002.