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More Than $500,000 Stolen From County Governments in Tennessee Remains Uncollected

 

Report shows Montgomery County had $7,752 Shortage of Cash in 2012

Tennessee ComptrollerNashville, TN – In the 2012 Report of Cash Shortages, auditors found that $563,372.50 of funds stolen from county governments, some dating back several years, had not been recovered.  Details about the missing money can be found in the report, which was released today.

The news in the report wasn’t all bad: For the reporting period, auditors reported new thefts of $106,495.27 – down from $213,635.66 the year before. And – thanks to the recovery of $279,817.21 last year – the statewide balance of uncollected funds dropped from $736,694.44 cited in last year’s report to $563,372.50 in this year’s report.

Information about cash shortages is collected from the annual financial reports and special reports for the state’s 89 counties audited by the Comptroller’s Division of Local Government Audit and the six counties audited by private accounting firms.

In addition to a county-by-county breakdown of cash shortages, the report also provides explanations of how the shortages were detected, how the money was stolen, corrective steps taken by counties and legal actions taken against those responsible for the thefts.

“While it is good to see that the number of new thefts was down last year and a substantial amount of money was recovered, there’s absolutely no reason to be complacent about these statistics,” Comptroller Justin P. Wilson said. “It’s important for our local government officials to constantly remain on guard against the potential theft of taxpayer money. That means they need to have good checks and balances – what our auditors refer to as ‘internal controls’ – in their procedures for how money is collected, recorded, deposited and spent. If adequate safeguards aren’t in place, the amount of stolen money identified in future cash shortage reports is likely to rise.”

You can view the report online.

Montgomery County – Office of Juvenile Court

In the spring of 2012, the Comptroller of the Treasury’s Office was notified of an ongoing investigation regarding embezzlement of restitution payments collected by a Montgomery County Juvenile Court Probation Officer.
The allegation was investigated by the Tennessee Bureau of Investigation and resulted in a probation officer resigning his employment with Montgomery County on July 29th, 2011. During the course of the investigation and before charges were initiated, the former probation officer made restitution payments to the victims totaling $5,613.

The former probation officer was indicted by the Montgomery County grand jury on May 8th, 2012, on charges of official misconduct and theft over $5,000. On June 27th, 2012, he pled guilty to official misconduct and agreed to pre-trial diversion. He received a suspended sentence of three years along with three years of supervised probation.

Montgomery County – Animal Control Department

The Montgomery County Animal Control Department charges fees for adoptions, impound, spay, neuter, etc., and accepts donations. These collections are transported by courier to the Montgomery County Office of Accounts and Budgets for deposit with the county trustee.

Auditors examined receipts, deposits, and cash disbursements of the Animal Control Department from July 1st, 2011, through June 30th, 2012. This examination concluded that receipts totaling $2,139 were not deposited with the county trustee or otherwise accounted for.

Accounting standards provide that internal controls be designed to safeguard assets. Our audit of the Animal Control Department noted the following deficiencies that are the result of a lack of management oversight, which increases the risks of theft:

A. Duties were not segregated adequately. Employees who were responsible for maintaining accounting records were also involved in receipting and depositing funds. Accounting standards provide that internal controls be designed to give reasonable assurance of the reliability of financial reporting and of the effectiveness and efficiency of operations.

B. Multiple employees operated from the same cash bags and cash envelopes maintained at the Animal Control Department. Also, funds were not adequately safeguarded because collections maintained in these bags and envelopes were accessible to all employees. Sound internal controls dictate that each employee have their own cash drawer, start the day with a standard fixed amount of cash, and remove all but that beginning amount at the end of each day. This amount should be verified to the employee’s receipts at the end of each day. Failure to adhere to this control regimen greatly increases the risk that a cash shortage may not be detected in a timely manner. Furthermore, in the event of a cash shortage, management would not be able to determine who was responsible for the shortage because multiple employees were working from one cash drawer.

C. The Animal Control Department did not issue official receipts for some donations as required by Section 9-2-104, Tennessee Code Annotated (TCA). Department personnel advised that receipts were not issued for donations unless requested. Also, in some instances, the office used generic receipts that did not display the official name of the office. The failure to issue receipts for all collections and the use of generic receipts exposes the office to risks that collections may not be accounted for properly.

D. Official prenumbered receipts were issued for collections other than some donations as described above; however, we noted some instances where the duplicate copy of the receipt was missing. Section 9-2-103, TCA, requires official prenumbered receipts to be issued when collections are received and duplicate receipts to be maintained by the office. Without access to duplicate receipts, we were unable to determine if all funds had been accounted for properly.

E. Receipts marked as “void” did not always have the original copy attached to the duplicate copy.

F. Several duplicate receipts were manually altered with ink and/or correction fluid to change the original information. Section 39-16-504, TCA, states that it is unlawful to “knowingly make a false entry in, or false alteration of, a governmental record.”

G. Collections for the Animal Control Department were not always deposited within three days of collection. Section 5-8-207, TCA, requires county officials to deposit public funds within three days of collection.

H. Auditors were advised by department personnel that some refunds to customers were made from available cash on hand. Section 5-8-207, TCA, requires disbursements to be made by official prenumbered checks. In addition, the Montgomery County Commission did not appropriate these cash disbursements. Section 5-9-401, TCA, provides that “All funds from whatever source derived, including, but not limited to, taxes, county aid funds, federal funds, and fines, that are to be used in the operation and respective programs of the various departments, commissions, institutions, boards, offices and agencies of county governments shall be appropriated to such use by the county legislative bodies.”

On July 16th, 2012, management terminated the employment of the director of the Animal Control Department for failure to perform the essential functions of the position of a department head. Due to a lack of internal controls, we were unable to determine who may have taken the funds.

Montgomery County’s insurance deductible is $2,500; therefore, the county has written off the remaining $2,139.


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