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State audit finds fault with Yacolt Town’s handling of finances criticized

By Marissa Harshman, Columbian Health Reporter
Published: December 1, 2009, 12:00am

Yacolt has received a scathing report from the state auditor’s office that criticizes how the town handled its finances and its oversight of the clerk/treasurer.

The auditor’s report looked at various aspects of town business from Jan. 1, 2005, through Dec. 31, 2007. During the audit period, Brenda Finnegan served as the town’s clerk/treasurer. In June 2008, Finnegan pleaded guilty to four counts of first-degree theft for stealing nearly $70,000 from the North Clark Little League.

Finnegan could not be reached for comment Monday.

While the auditor’s office criticized the town for various deficiencies with its internal controls, the office did acknowledge that the town has taken action to correct some of the problems, such as updating accounting software and creating a finance committee.

The Washington State Auditor’s Office released its findings in two documents Monday. The auditor’s office could not express a formal opinion on the town’s financial statements because documentation was missing and, in some cases, had been destroyed.

“We cannot tell if the financial information they gave us is accurate and complete,” said Mindy Chambers, spokeswoman for the state auditor’s office. “… A lot of the stuff, you can’t tell what happened because there is no paperwork.”

The auditor’s office did not have any evidence of criminal wrongdoing and did not pass information on to the county prosecutor’s office, Chambers said. But if the town council members have concerns about specific issues raised in the audit, they will turn over information to law enforcement agencies for further investigation, Mayor Joe Warren said Monday night.

While Finnegan is listed as the town’s clerk/treasurer in the report, the job title — not a name — is mentioned multiple times throughout the report.

In late 2007, the Clark County Sheriff’s Office was investigating Finnegan for theft from North Clark Little League, where she served as the volunteer treasurer. Finnegan was placed on administrative leave briefly and then allowed to return to work. When she returned, she was allowed access to all town bank and financial records for two months, according to the auditor’s report. Finnegan was later replaced by the town’s current clerk/treasurer, Lynne Oldham, who was hired April 2, 2008.

Finnegan was sentenced to eight months in the Clark County Jail in June 2008 and was ordered to pay the Little League $68,000 in restitution, the total amount she took. At her sentencing, Finnegan apologized for stealing the money but told the judge she was desperate because of her husband’s health problems.

Finnegan was placed on administrative leave in October 2007, immediately after town officials learned of the sheriff’s office investigation, and the town’s part-time deputy clerk assumed the clerk/treasurer duties, Warren said. Finnegan was allowed to return to work at the end of November 2007, and continued to work on a limited basis through December and January 2008, Warren said. She was then restricted to offering telephone support through part of February, when she submitted her resignation, he said.

Warren said Finnegan was one of two full-time town employees and other staff members had limited knowledge of the day-to-day operations of the town and its finances — duties usually completed by Finnegan. Her services were deemed necessary on a short-term basis, the town wrote in the auditor’s report.

While in town hall following the administrative leave, Finnegan was supervised by other employees or the mayor at all times, Warren said. She was allowed to assist the deputy clerk, but did not have direct access to town finances, he said. The town also changed its banking codes within “a very short amount of time” and the lock on the clerk/treasurer office within about a week, Warren said.

The auditor’s office reported the mayor did not restrict the clerk/treasurer’s access to the town financial system and accounting records.

The town’s clerk/treasurer performed all cash receipting and cash disbursement duties, with little monitoring by management, according to the report. The town did not have internal controls in place to ensure money was properly accounted for and spent for a public purpose, the auditor’s report said. The deputy clerk was asked to monitor the clerk/treasurer but did not have the training necessary to understand the financial system or accounting procedures, according to the auditor’s report.

In the report, the auditor’s office claims that the clerk/treasurer failed to send invoices to local businesses to collect business license fees in 2007, resulting in a loss of $1,200 in revenue. Warren said the town did collect some business license fees but said the amount the town should have collected comes down to a difference of opinion between town staff and the auditor’s office.

The town and auditor’s office also have a difference in opinion concerning the amount of revenue that should have been generated from the town’s Fourth of July celebration in 2007. The town recorded $427 in revenue and the auditor’s office believed it should have raised about $5,600 more. Warren said the event was not intended to be a moneymaker.

“I don’t see how they could have matched what the estimates were from the auditor’s office,” Warren said. “As far as missing funds, I have trouble believing there are large funds missing, if any at all.”

The auditor’s office also questioned why Warren hired two immediate family members as town employees, a violation of the town’s personnel policy. Warren said he gave the clerk/treasurer and public works director the authority to hire part-time staff. While he was not involved in the hiring process, he did approve the hirings. His mother-in-law was hired as deputy clerk and his father worked as a part-time maintenance worker for the town, he said.

His mother-in-law worked for the town for about a year before the clerk/treasurer was placed on administrative leave. At that time, Warren became his mother-in-law’s direct supervisor. When a new clerk/treasurer was hired in April, Warren’s mother-in-law was replaced as well.

Warren’s father worked for the town for about three months before suffering a heart attack on the job, the mayor said.

“At this point in time, and in the future, we will not have employees that are related (working for the town),” Warren said.

During the last 18 months, the town has taken steps to address some of the deficiencies.

The town has replaced all accounting software with a system created primarily for the use of towns and cities. The new software has the ability to perform an audit trail of all transactions. Warren said the town’s antiquated system was the reason for some of the accounting errors outlined in the auditor’s report.

The town has also created a finance committee made up of two town council members. The town clerk and public works director serve in advisory roles. All money coming into or leaving the town is reviewed by the committee, Warren said.

The mayor and finance committee will review bank statement reconciliations and work to improve internal controls and monitoring for cash receipts, according to the report. The town has improved other internal policies and procedures for financial transactions and record keeping, such as backing up all computer information and retaining all required documentation.

“The concern will be there and I know it will be,” Warren said. “But I want our public to know they can rest-assured that it’s being handled properly.”

The town council will address concerns at its meeting at 7 p.m. Monday at town hall.

The town is usually audited every two years but because it had a record of clean audits prior to 2005, the state office let an extra year lapse before conducting the scheduled audit, Chambers said. The auditor’s office will re-evaluate the town of Yacolt in its next audit, scheduled to take place in 2010.

Marissa Harshman: 360-735-4546 or marissa.harshman@columbian.com.

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Columbian Health Reporter