State audits have uncovered $3.4 million in missing funds over the past decade at 77 governments across the state, including several in the Miami Valley, a report released today by the Ohio auditor’s office says.
The report lays out schemes used by public employees at local governments and schools across the state to pocket public funds.
Many of these cases were linked to theft, resulting in the conviction of 53 public employees.
The report exposes weaknesses uncovered by state auditors in oversight of how money is collected and deposited into government accounts, and ways officials “can shut the window of opportunity for thieves.”
“Time and again rogue employees have successfully robbed governments because they were entrusted with total, unchecked control over fiscal operations,” Auditor of State Dave Yost said. “It’s time for more administrators to take up shields and involve themselves in the defense of their financial resources.”
And the public can help too. Several of the ploys identified in the report would be harder to pull off if people making payments to local governments simply requested a receipt.
This is especially true of smaller governments where clerks and fiscal officers face less oversight, the report notes. Of the 77 governments listed, 22 are villages, followed by school districts that account for 15 of the cases.
Opportunities for theft exist in larger governments too. The report notes it was a customer with a utility receipt who brought to light a Montgomery County clerk who was taking cash payments from customers and then voiding the transaction so it wouldn’t appear in the county’s books that money was missing. Residents received water shutoff notices even though they had a receipt showing they made a payment.
The clerk, Rozalin Smith, was sentenced in 2016 to community service, five years’ probation and ordered to repay $12,725 in restitution.
The report says Smith used a “Void Scheme,” that can be prevented by requiring employees to have supervisors review and approve voided transactions, and by requiring employees to provide receipts for every transaction.
“A dishonest employee will be far less likely to steal from an incoming payment if the customer’s receipt makes it impossible to erase the paper trail,” the report says.
Twenty of the 77 cases of missing funds involved utility transactions, leading to 15 convictions, according to the report.
Another common method for siphoning off government money is called the “Adjusting Journal Entry Scheme,” the report says. It involves a fiscal officer taking a payment, lowering the customer’s balance and then keeping the difference.
A utility clerk in the village of Ripley used this method to drain nearly $1 million from the small Brown County community. She was indicted in 2010 and sentenced to 13 years in prison.
Still another method was called the “Check-Substitution Scheme” by the auditor. An employee intercepts one-off payments such as rebates or an insurance claim, records it as a customer payment and keeps the money from the actual payment.
To prevent these schemes, the report recommends having more eyes on the money: splitting up responsibilities among employees and having different people review and handle different parts of the receipt and deposit of funds.
Area governments where audits determined money was missing, according to the report:
Montgomery County Environmental Services: An employee use a void scheme to steal utility payments. The employee was charged criminally in 2016. The total amount collected but not deposited was $15,079.
Village of Germantown: A 2011 audit identified $9,454 in missing utility payments and unexplained account adjustments. No one was charged criminally.
Clark County: A 2011 audit determined $8,368 was missing in concealed carry and background check payments collected by the sheriff’s office. No one was charged criminally.
Talawanda City School District: A 2017 audit identified $5,313 in missing revenue from athletic event ticket sales. The former athletic director for the district who was cited for the shortage resigned from the district but was not charged criminally or ordered to repay the funds.
City of Springboro: A 2012 audit determined $2,088 was missing from the building and zoning department. No one was charged criminally.
Franklin Municipal Court: Multiple shortages in court collections and deposits totaling $2,203 were identified in a 2011 audit. No charges followed.
Warren County: An employee stole Medicaid spend-down payments, according to a 2011 audit that says $75,661 was collected but not deposited. The employee pleaded guilty and was sentenced to four years in prison.
Village of Gratis: A former village mayor and fiscal officer was given probation after pleading guilty to theft in office after a 2011 audit identified $60,714 in missing utility payments.
Village of Verona: A village clerk pleaded guilty to theft in office charges after a 2014 audit found she stole utility funds then tried to destroy the evidence. The report says she failed to deposit $36,096.