Auditor Finds $160,000 Missing in Greenville

Missouri State Auditor Nicole Galloway released an audit of the City of Greenville Tuesday, Nov. 27, which found more than $160,000 missing from city funds. The audit was initiated as a part of a law enforcement investigation, which resulted in criminal charges filed by the Attorney General’s Office this summer. Greenville is located in Wayne County in southeast Missouri.

The report details improper payroll and other payments improperly cashed checks and missing cash over a more than two year period. The activity occurred while former city clerk, Pam Birmingham, performed the financial accounting functions. The auditor did not only examine the city’s finances; the auditing team also looked into Birmingham’s personal financial records and detailed her expenses for the time period that was audited. 

“In Greenville, there has been a serious violation of the public’s trust, and they deserve answers,” said Auditor Galloway. “Our forensic accounting expertise provided those details and also aided law enforcement during the criminal investigation. My office remains ready to assist moving forward to ensure accountability.”

The audit revealed that while Birmingham was working for the city, she was not bonded. Public Official bonds are generally for the protection of the taxpayers.

Nearly $70,000 collected for utility and municipal court payments were not deposited in city bank accounts from Jan. 1, 2014 through April 14, 2016, and only $2 in cash was deposited into city utility accounts during this period.

Additionally, $39,000 in checks issued from various city accounts and made payable to the City of Greenville were improperly cashed, endorsed or negotiated by the former clerk. The former clerk provided falsified records to the board to conceal almost $26,000 of the improper payments and make it appear some of the checks were appropriate. There were also frequent transfers between banks accounts in an effort to conceal account shortages.    

Auditor’s identified approximately $44,000 in overpayments on checks issued to the former City Clerk and cash withdrawals made for the payment of wages that were inconsistent with timesheets and past city records and practices. The former clerk received an increased rate of pay without documented approval from the board of aldermen and received excess compensation when she appeared to have been out of state and not at work. Other improper payments to the former clerk included $3,000 in improper uniform allowances and $5,000 in reimbursement checks and cash withdrawals with no supporting documentation.

“Employees were paid weekly and checks were typically issued each Friday. Therefore, during the 2 years 2014 and 2015 a maximum of 104 paychecks should have been issued to each employee,” the audit reads. “However, the former City Clerk issued 190 checks to herself and withdrew cash for wages on 2 occasions during this time period. Many of these checks were issued throughout the week (not on Friday) and more than one check was issued to the former City Clerk on the same Friday in 16 instances. Forty-seven checks were written for whole dollar amounts and 79 checks did not have a purpose documented on the memo line. It would be unusual for payroll checks with tax withholdings to be written for whole dollar amounts. The former City Clerk was the only signer on these 190 checks.”

The auditor questioned checks that Birmingham wrote for vacation and compensentory time. 

“Fifteen of the 190 checks included memo line notations indicating the payment related to or included compensatory time; seven checks included memo line notations indicating the payment related to vacation time; and 1 check indicated it was issued, in part, for sick pay,” the audit reads. “Timesheets further indicated the former city clerk was paid for working five days each week during 2014 and each week during 2015, except for the seven work weeks of 32 hours, with two of the 7 weeks containing a holiday leaving 5 work days not reported on the timesheets.

“In addition, our review of the former city clerk’s personal bank account disbursement activity shows the former City Clerk made purchases on Monday, July 28, 2014, in Alabama and on Wednesday, July 30, 2014, in Georgia. Based on this information, the former City Clerk was likely out of state and, therefore, not at work; however, her timesheets indicate she worked 40 hours that week and did not report any leave taken. In addition, the former city clerk issued herself two checks just prior to and just after this time period. Personal bank account disbursement activity also shows the former city clerk made purchases at a resort in Biloxi, Miss., on February 2, 3, and 4, 2016, (Tuesday through Thursday). Based on this information, the former City Clerk was likely out of state and, therefore, not at work. However, the former city clerk issued herself two checks just prior to and just after this time period. The issuance of multiple checks at times the former city clerk was apparently not working is unusual.”

The auditor maintains Birmingham improperly negotiated checks.

“The former City Clerk improperly negotiated 123 city checks issued to the City of Greenville totaling $39,536,” the audit reads. “Bank officials provided our office with details regarding how these checks were negotiated. Bank records show that 120 checks were cashed ($38,723) at banks, 2 checks were used to purchase a money order payable to a dental provider ($713) for personal dental services, and one check was negotiated at a local gas station ($100). The former City Clerk was the only signer on these checks. The endorsement for 119 of these checks consisted of ‘City of Greenville Pam Birmingham’ written in Pam Birmingham’s scripted handwriting; three checks had no endorsement; and the remaining check initially had ‘City of Greenville Pam Birmingham,’ but that endorsement was marked through and the restrictive endorsement of a local gas station applied.

“Of these 123 checks, 54 checks had no purpose documented and some of the checks had multiple purposes documented. In addition, 23 checks were issued from the municipal court bank account with the purpose documented as municipal division cases, and four checks were issued with the purpose documented as taxes. While these check purposes seem to be legitimate reasons to transfer monies from one account to another, it is questionable why the former city clerk would cash these checks, and we found no evidence this cash was deposited into any of the city bank accounts. Legitimate checks for the transfer of funds between bank accounts were paid to the order of the City of Greenville, restrictively endorsed with a “for deposit only” stamp, and were appropriately deposited into various city bank accounts. Also, 23 checks were issued with the purpose of petty cash documented, and two checks were issued with the purpose of change documented; however, city officials indicated a petty cash fund was not used, and no documentation was retained to support these checks. Only one of the 17 checks issued for supplies was partially supported by an invoice. Check number 3367 was issued for $300 on June 30, 2015; however, documentation was retained to support only $193, and the remaining $107 was not supported. Additionally, 120 of these checks were issued for whole dollar amounts.”

A criminal investigation revealed the former city clerk deposited many of the checks written to herself from the city, cash, and other unrelated checks into a personal bank account and spent $62,416 from this account on various personal items. 

“The former city clerk falsified check details on at least 14 disbursement listings provided to the Board for its review and approval at monthly meetings,” the audit said. “This occurred to conceal 76 improper disbursements totaling $25,980. These listings pertained to the months January through August of 2014; October and November of 2014; and February, August, September, and November of 2015. Most of these disbursements showed a routine city vendor as the payee; however, 50 of the 76 improper checks were actually issued to the former city clerk (totaling $18,217), 25 of the 76 checks were actually issued to the City of Greenville and improperly negotiated by the former city clerk (totaling $7,318), and the amount of another check was altered from $1,755 to $1,500. Three of the 76 improper checks (check numbers 3011, 3110, and 3409) were included as voided checks on the disbursement listings, while the actual checks were written and cleared the bank for $250, $550, and $300. Two of the 76 improper checks (3014 and 3448) were listed as being issued for wages to other city employees for $378 and $197, while the actual checks were issued to the former city clerk for $250 and $280..

“Additional falsified disbursement listings may have been prepared during other months of 2014, 2015, and 2016; however, the city could not provide these records.”

Concerns about the former clerk were first identified by the city in 2016 and resulted in action to terminate her employment. The Missouri State Highway Patrol investigated and turned over evidence to the Attorney General’s Office, which requested the forensic auditing expertise of the State Auditor’s Office. As a result, the city formally requested the audit in March 2018.

The report also detailed a lack of oversight by the city, which allowed the fraudulent activity to take place and continue undetected. The report includes recommendations to improve oversight of accounting functions, documentation of financial transactions and record keeping processes. 

The city has made many changes in its oversight since Birmingham was discharged. A member of the city council currently documents the review of timesheets, reviews bank statements and all canceled checks and will document this review on the bank statements in the future. Dual signatures are now required on all checks, signature authority is limited to three oard members, and the city clerk does not sign any checks.

The city has also told the auditor’s office that it plans to have an annual audit. This is something that is required by law but the city had not been having done. The city has also ensured that all individuals dealing with public monies are bonded.

Many records were missing during the time frame audited. The city has said that it will retain all records and will review employee timesheets, vacation  and compensentaory records. In the future,the city has said it will ensure all monies are receipted, recorded, and deposited timely, with deposits made at least weekly. All court fees will be disbursed monthly and reports will be submitted monthly to the city council and the Office of the State Courts Administrator.

The complete audit report of the City of Greenville, which received an overall rating of poor, is available online at auditor.mo.gov. 

 

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