{"database": "mytown-research", "table": "audit_findings", "rows": [[33, "wa-sao", "1021296", "fraud-investigation", null, "WA", "City of Rock Island", "City/Town", "0280", "5359180", "no_match", "Washington State Auditor's Office", "Fraud investigation \u2014 City of Rock Island", "Fraud", 2016, "2015-01-01", "2016-12-31", "2018-05-08", "misappropriation", "fraud_investigation", 37056.0, "misappropriation totaling $37,056", "Investigation Summary On November 28, 2016, the Mayor of the City of Rock Island notified our Office regarding a potential loss of public funds as state law requires. We investigated and determined a cash receipting misappropriation totaling $37,056 occurred at the City between November 2015 and Oct", "Investigation Summary \nOn November 28, 2016, the Mayor of the City of Rock Island notified our Office regarding a \npotential loss of public funds as state law requires. \nWe investigated and determined a cash receipting misappropriation totaling $37,056 occurred at \nthe City between November 2015 and October 2016. The misappropriated funds were all cash \npayments that were receipted, but not deposited. \nIn addition to the cash receipting misappropriation, we also identified questionabl e transactions \ntotaling $1,071 and a $225 deleted receipt that was unsupported. \nThe City did not file a report wi th the Douglas County Sheriff\u2019s Office . Our Office notified the \nDouglas County Sheriff\u2019s Office, and we will send this report to the Douglas County Prosecuting \nAttorney\u2019s Office. \nBackground and Investigation Results \nThe City, located in Douglas County, receives annual revenues of about $1 million. The City\u2019s \nrevenue comes from multiple sources but primarily utility sales. Other sources of revenue \ninclude lease payments, fees from building permits and licenses. The City has three full -time and \ntwo part-time employees. The Clerk/Treasurer is responsib le for overseeing the daily financial \noperations of the City with the support of a Deputy Clerk. The Clerk/Treasurer reconciles the \nelectronic accounting system to the bank records, while the Deputy Clerk handles most of the \ncash receipting duties and recording those payments in the accounting system. \nOur investigation focused on cash receipting. City staff issue receipts for payments made at City \nHall. Staff members then record and reconcile receipts in the City\u2019s accounting system. Our \ninvestigation focused on the following activities: \nCash receipts from January 2015 to November 2016 \nWe compared receipts recorded in the electronic accounting system to amounts deposited at the \nbank and identified a total of $37,056 in cash transactions that were entered i nto the accounting \nsystem but not deposited into the bank account. The investigation revealed the following: \n\uf0b7 State law requires governments to deposit funds into a bank within 24 hours of receiving \nthem unless the City formalizes a policy or resolution wai ving the 24-hour requirement, \nand allowing deposits no less than weekly. Rock Island had no such waiver. During the \nperiod we investigated, the number of days between receipt date and deposit date ranged \nfrom one to 119 days, with an average of 34 days. \n \n \nWashington State Auditor's Office\n \n \n\uf0b7 In October 2015, the City changed its deposit process, requiring checks and cash to be \ndeposited separately. The reason for this change, according to the former \nClerk/Treasurer, was a mutual decision between the Clerk/Treasurer and Deputy Clerk \nbased on in formation received at their accounting software vendor\u2019s conference in the \nfall of 201 5. The Deputy Clerk said she was directed by the former Clerk/Treasurer to \nchange the process. \n\uf0b7 After the deposit process changed, 25 cash deposits noted in the accounting software \nsystem were not actually deposited into the bank. The system allows users to select what \nreceipt batches were included in deposits made to the bank. The remaining receipt \nbatches remain in the system as \u201cunattached .\u201d The reconciliation reports sent to the \nMayor to review and approve did not include the 25 \u201cunattached\u201d cash deposits . \nHowever, these \u201cunattached\u201d deposits appeared on a screen for the Clerk/Treasurer to \nsee before printing the report. \n\uf0b7 The Clerk/Treasurer said that when she prepared the reconciliation reports, she was only \nchecking that deposited amounts on the bank statement were listed in the accounting \nsystem. However, using that approach and not including any unattached receipt batches \ndefeats the purpose of the Mayor\u2019s review of the reconciliation report. \n\uf0b7 On March 8, 2016, 10 deposits totaling about $8,350 in cash were deposited at the bank, \nwhich included cash receipts from November 2015, December 2015, January 2016 and \nFebruary 2016. This oc curred just prior to t he Mayor t aking over the duty of making \ndeposits in mid to late March 2016. \n\uf0b7 After the Mayor took over depositing duties , we did not identify any missing deposits in \nthe period from April 2016 to September 2016. Further, the number of days between \nreceipt date and deposit date averaged 14 days. \n\uf0b7 Before March 2016, it is unclear whose responsibility it was to take deposits to the bank. \nThe former Clerk/Treasurer said multiple City employees made deposits. The Deputy \nClerk said typically the Clerk/Treasurer made deposits. \n\uf0b7 Further, our investigation revealed the City\u2019s safe was not secured during business \nhours, allowing anyone within the building to access its contents. In addition, it was not \nclear who knew the safe combination and who ha d physical access to City Hall because \nthe City\u2019s inventory of keys might not have been accurate. \nManual Receipts from January 2015 to November 2016 \nAlthough the City regularly uses its electronic accounting system to record receipts, it also \noccasionally uses a manual receipt book. City staff later enter manual receipts into the system. \nWe attempted to compare manual receipts to transactions recorded in the system and subsequent \ndeposits. We were unable to trace $1,071 in receipts because the City did not consistently record \n \n \nWashington State Auditor's Office\n \n \nnon-sufficient-funds fees in the accounting system and did not deposit within a reasonable \namount of time. In addition, 10 receipts were missing from the receipt book , so we were unable \nto test those receipts. \nDeleted receipt transactions from January 2015 to November 2016 \nThe electronic accounting system allows transactions to be deleted to allow for human error and \nother reasonable circumstances. However, governments should document the reason behind \ndeletions to demonstrate that these inherently risky transactions are valid and appropriate. We \ncompared cash receipts to the deleted trans actions report and tested eight transactions for \nappropriateness. The City could not demonstrate the reason for one deleted $225 transaction. \nTo determine if any additional misappropriations occurred, we also examined other significant \nsystems at the Cit y, including payroll and general disbursements. We did not identify any \nadditional misappropriation. We also reviewed additional areas of cash receipting and did not \nfind additional misappropriation; however, we did identify additional internal control \nweaknesses related to physical access to City Hall and the safe combination. \nWe determined the City could not assign responsibility for the misappropriation due to control \nweaknesses over cash receipting procedures and safeguarding of public resources. \nContro l Weaknesses \nInternal controls at the City were not adequate to safeguard public resources. We found the \nfollowing weaknesses allowed the misappropriation to occur: \n\uf0b7 The Clerk/Treasurer and Deputy Clerk, who are responsible for cash receipting, data \nentry, bank depositing, and reconciliations, have the ability to make adjustments in the \naccounting system. Further, those adjustments were not reviewed by someone \nindependent of the process. \n\uf0b7 An accounting system weakness allows users to apply payments to custome r accounts, \nwhile the payment remains \u201cunattached\u201d within the system. As a result, the payments do \nnot appear on the monthly reconciliation activity report that lists all funds receipted for \nthe period, and which the City relies on to reconcile with the bank statement. \n\uf0b7 No one independent of the reconciliation process compared these \u201cunattached receipts\u201d in \nthe system to the Clerk/Treasurer\u2019s monthly bank reconciliation to determine if \nunattached items were reasonable and appropriate. \n\uf0b7 The Clerk/Treasurer was responsible for bank reconciliations and also delivered receipted \nfunds to the bank for deposit. \n\uf0b7 City staff inconsistently used manual receipts, and the City lacked oversight or \nreconciliation processes over those manual receipts. \n \n \nWashington State Auditor's Office\n \n \n\uf0b7 Access to City Hall\u2019s safe was not limited based on need. Rather, all City staff had access \nto the safe during the day. In addition, the City did not know who had a key to City Hall \nor the combination to the safe. \nRecommendations \nWe recommend the City stre ngthen internal controls over cash receipting , including adequate \noversight and monitoring to safeguard public resources and comply with City policies. At a \nminimum, improvements should include: \n\uf0b7 Appropriate segregation of duties and monitoring over cash receipting, bank deposit \npreparation and bank reconciliations \n\uf0b7 Adequate documentation of bank reconciliations to verify all amounts receipted are \ndeposited \n\uf0b7 Independent review of cash receipt adjustments in the system and verification that \nadjustments are reasonable and adequately supported \n\uf0b7 Consistent accounting treatment of bank and non-sufficient-funds fees. If manual receipts \nare used, someone independent of the receipting process should review these and verify \nthey were entered into the system and deposited. \n\uf0b7 Limited access to City Hall and the safe to essential personnel only \nWe also recommend the City seek recovery of the misappropriated $ 37,056 and related \ninvestigation costs of $11,165 from its insurance bonding company. Any compromise or \nsettlement of this claim by the City must be approved in writing by the Attorney General and \nState Auditor as directed by state law (RCW 43.09.260). Assistant Attorney General Matt \nKernutt is the contact person for the Attorney General\u2019s Office and can be reached at \n(360) 586-0740 or mattkl@atg.wa.gov. The contact for the State Auditor\u2019s Office is Sadie \nArmijo, Assistant Director of Local Audit, who can be reached at (360) 902 -0362 or \nSadie.Armijo@sao.wa.gov. \nCity\u2019s Response \nSubsequent to the departure of a former City Clerk/Treasurer, the then City Clerk/Treasurer and \ncurrent Mayor discovered that multiple batched cash receipts had been credited as received by \nthe City and correctl y applied to City customer utility accounts, but were never deposited in the \nCity bank account. The current Mayor and the Clerk/Treasurer were unable to account for these \nmissing funds and therefore contacted the State Auditor\u2019s office and requested an inv estigation \nbe conducted. This investigation was followed up by an investigation by the Douglas County \nSheriff\u2019s office to determine whether criminal charges should be brought against one or more \nindividuals. We understand from your report and from the Doug las County Sheriff\u2019s office that \n \n \nWashington State Auditor's Office\n \n \nyou were able to confirm that the cash was taken and remains missing, but neither your office \nnor the Sheriff\u2019s office were able to identify the person or persons who stole the cash. \nYou have identified several recommendat ions most of which we have already implemented and \nothers the City will be implementing soon. One of the challenges for the City is having a limited \nnumber of employees which is not ideal when handling the significant amount of cash we \nreceive. We have cha nged the locks on City Hall and the combination to the City safe and have \nrestricted access to keys to City Hall and have limited knowledge of the safe combination to only \ntwo City employees. We appreciate your efforts to identify the thief or thieves and are confident \nour new team at City Hall will do everything within our power and authority to prevent any such \noccurrence from happening again. \nState Auditor\u2019s Office Remarks \nWe thank City officials and personnel for their assistance and cooperation during the \ninvestigation. \n \n \n \nWashington State Auditor's Office\n \n \nABOUT THE STATE A UDITOR\u2019S OFFICE \nThe State Auditor's Office is established in the state's Constitution and is part of the executive \nbranch of state government. The State Auditor is elected by the citizens of Washington and \nserves four-year terms. \nWe work with our audit clients and citizens to achieve our vision of government that works for \ncitizens, by helping governments work better, cost less, deliver higher value, and earn greater \npublic trust. \nIn fulfilling our mission to hold state and local governments accountable for the use of public \nresources, we also hold ourselves accountable by continually improving our audit quality and \noperational efficiency and developing highly engaged and committed employees. \nAs an elected agency, the State Auditor's Office has the independence necessary to objectively \nperform audits and investigations. Our audits are designed to comply with professional standards \nas well as to satisfy the requirements of federal, state, and local laws. \nOur audits look at financial information and compliance with state, federal and local laws on the \npart of all local governments, including schools, and all state agencies, including institutions of \nhigher education. In addition , we conduct performance audits of state agencies and local \ngovernments as well as fraud, state whistleblower and citizen hotline investigations. \nThe results of our work are widely distributed through a variety of reports, which are available \non our website and through our free, electronic subscription service. \nWe take our role as partners in accountability seriously, and provide training and technical \nassistance to governments, and have an extensive quality assurance program. \nContact information for the State Auditor\u2019s Office \nPublic Records requests PublicRecords@sao.wa.gov \nMain telephone (360) 902-0370 \nToll-free Citizen Hotline (866) 902-3900 \nWebsite www.sao.wa.gov \n \n \n \nWashington State Auditor's Office\n \n \nPage 8", "https://portal.sao.wa.gov/ReportSearch/Home/ViewReportFile?arn=1021296&isFinding=false&sp=false", "2026-07-30 13:24:54"]], "columns": ["rowid", "source", "report_number", "finding_number", "muni_id", "state", "entity_name", "entity_type", "entity_ext_id", "place_geoid", "match_method", "auditor", "report_title", "audit_type", "fiscal_year", "period_start", "period_end", "published_date", "finding_category", "severity", "questioned_cost", "cost_basis", "finding_title", "finding_text", "report_url", "fetched_at"], "primary_keys": ["rowid"], "primary_key_values": ["33"], "units": {}, "query_ms": 2.1482770098373294, "source": "MyTown", "source_url": "https://mytown.theboringparts.com", "license": "CC BY 4.0", "license_url": "https://creativecommons.org/licenses/by/4.0/"}