Audit: County funds mislabeled, missing
The News-Dispatch
Posted: Thursday, February 27, 2014 - 12:00 am
Posted: Thursday, February 27, 2014 - 12:00 am
LaPORTE — With the Indiana State Board of Accounts requesting nearly $200,000 from a former La Porte County deputy auditor, the state attorney general and the county prosecutor are looking at possible civil and criminal charges to recoup the missing funds and punish the defendant.
On Feb. 21, the state board of accounts filed its audit report on the La Porte County Auditor’s Office.
Amidst millions of dollars worth of mislabeled funds and other errors between Sept. 19, 2011 and Dec. 31, 2012, field examiners found $153,000 in missing money from the county auditor’s office.
In the audit report, investigators said there were 150 instances where less cash was deposited than receipted. Investigators said former deputy auditor Mary Ray was suspected because she was the primary employee responsible for receipting money and recording funds during this time. She was also mainly responsible for taking cash and checks down to the treasurer’s office for deposit.
On Sept. 6, 2013, Ray’s assets, including four vehicles and a house, were frozen after a temporary restraining order was filed in La Porte Count Circuit Court. She was accused of embezzling more than $150,000 at the time.
The investigation began after a bank deposit bag was discovered with $3,200 in missing cash in a local library. When a $1,800 discrepancy between receipts and deposits was found, examiners from the State Board of Accounts launched a preliminary audit.
According to the report, Ray tried to conceal the cash removal by not receipting some cash and checks, using voided checks to replace cash, writing receipts to departments and not posting them to the records, receipting lower amounts than were on the checks, holding receipted checks and turning them over to the treasurer at later dates, and not receipting electric fund transfers to the records.
Case is up to prosecutors
Saying the Indiana Attorney General’s Office essentially acts as a collection agency for the state, public information officer Bryan Corbin said its involvement with the case will be on the civil side, and could result in the filing of a civil complaint against Ray.
“We will carefully review the audit,” he said, “and will likely take appropriate legal action soon to recover the misappropriated funds to reimburse the public treasury.”
He said his office can collect funds by placing liens on property and going after bank and retirement accounts. He said bond money sometimes covers the entire amount, and sometimes there is no bond money, so the repayment becomes the sole responsibility of the defendant.
La Porte County Prosecuting Attorney Bob Szilagyi said his office will handle the criminal side of the case if it determines charges are necessary. He said his office has to wait until the state police finishes its investigation. He added his office needs the original interviews and documentation to make its decision.
He said Ray faces up to three years in jail if convicted on a charge of unauthorized control of funds (basically theft). But if charges are elevated to a class C felony, he said she could be facing between two and eight years in jail.
But Szilagyi said he will most likely ask for a special prosecuting attorney to handle the case because he knows Mary Ray. He said his wife also works in Ray’s former office. His wife handles accounts payable.
“So I don’t want to create an appearance of any impropriety,” he said.
La Porte County Attorney Shaw Friedman said the county intends to cooperate with the state to recoup any money owed.
The State of Indiana also incurred an additional audit cost of $45,815 related to the investigation, so the State Board of Accounts is requesting the defendant pay that amount, too, for a total of $198,817.
Problems don’t end there
The report listed more errors related to the auditor’s office, including a negative cash balance of $4.9 million in the excess tax fund, which is used to refund residents for overpaid taxes.
Mike Mauer, La Porte County chief deputy treasurer, said this error was a “snafu” on behalf of her office. The tax money simply wasn’t placed in the fund during settlement time. She said her department was distracted trying to get six years worth of tax bills out in two years because of the county-wide tax situation. She said checks written to residents during this time were still good, and the funds weren’t mislabeled or put in the wrong account.
But the report also listed a disbursement error of $5.7 million from the major moves fund in 2012 that wasn’t corrected until 2013, and $23.6 million worth of major move fund transactions posted as “transfers in” on the funds ledger and later included as part of the cash and investment balance, among other deficiencies.
Former county auditor Craig Hinchman, who served during the period of the errors, said some of the day-to-day operations of his office suffered because it had to get out three years worth of tax bill in 2012, or else get the county fined $1 million. And the office was short handed, needing at least two more employees to handle the workload.
“When I took office no auditor in the history of the state of Indiana found their office in the turmoil I did,” he said. “We were four years behind in collecting tax monies and had major assessment problems. The department of local government and finance created these problems because they did not follow their own rules.”
He said he did not believe Ray took the money.
“I have known Mary Ray for over 30 years,” he said in his response. “She was a very good employee. Mary Ray is a very smart person, and would know that you could not tamper with the deposits and not get caught. Plus she was my friend and would realize that the missing funds would put a black eye on my administration.”
But he said he could not explain how the cash was deposited but not receipted.
Current La Porte County Auditor Joie Winski, who took office after the errors allegedly occurred, said she suspected misplaced money on her second day in office. She said her office has since put in place a check-and-balance system to ensure it will never happen again, which includes a reconciliation of bills with the treasurer’s office on a monthly basis, a change in the receipting portion of the financial program and another level of security for vendor software. She said most of their errors were regarding mislabeled, not misappropriated, funds.
More controls needed
But the report also contained suggestions for preventing these issues in the future, such as depositing checks and cash on the same day they are received, instituting a credit card policy and introducing controls to make sure the financial transactions are recorded timely and properly. The field examiners noted instances where the funds hadn’t been deposited until five days after their receipt.
La Porte County Attorney Shaw Friedman said the commissioners approved a credit card policy in December, and the auditor’s office has since developed a policy where checks and cash are immediately recorded and brought to the treasurer’s office for deposit.
He said neither his office nor the current group of commissioners were in charge when these problems occurred, and said it was their first act of business during the Jan. 3, 2013 organizational session to hire Cender & Company to help them get their arms around the county’s financial situation.
“In addition to doing projections on estimated revenue and expenditures,” he said, “(Cender & Company) was instrumental in working with the auditor’s office and the treasurer’s office to help us get to the point where the bank records were reconciled with the county’s ledger.”
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