Audit reveals violations

Published 10:03 am Thursday, October 8, 2009

GATESVILLE – The annual audit conducted of Gates County government finances and practices has revealed several violations within the county’s Department of Social Services (DSS).

These issues, among others, are included on the agenda when the Gates County Board of Commissioners conducts their regular scheduled monthly meeting this week (Wednesday, Oct. 7).

At that meeting, a representative of Martin-Starnes & Associates, a CPA firm based in Hickory, will formally present the county’s FY 2008-09 audit. That audit discovered numerous internal control weaknesses and General Statute violations and Administrative Code violations regarding the DSS Trust Fund. That fund is operated under the auspices of Gates County DSS Director Colleen Turner.

According to the audit, the DSS Trust Fund is not reconciled to the bank statement on a timely basis. When the account is reconciled, the unidentified errors are not properly investigated.

The Trust Fund is not reconciled to a subsidiary listing of the trustees. (Note: This step insures the County of proper ownership of the trust assets.)

The Director is not duly authorized as a Deputy Finance Officer to execute checks.

The Director possesses a debit card and uses the card for transactions that do not possess proper authorization.

The Director co-mingled professional association transactions with the Trust Fund while serving in an officer capacity of the association.

Upon the death of a beneficiary of the Trust Fund, the Director did not turn over the beneficiary’s account balance to the Clerk of Court or other designee of the Estate.

After the death of a beneficiary, the Director authorized transactions and charged the transactions against the deceased beneficiary’s trust account.

The Gates County Department of Social Services was the named beneficiary of a life insurance policy. The proceeds were deposited into the Trust Fund, rather than the General Fund.

In the auditor’s opinion, Federal, State and local funds may have been expended improperly.

The Trust Fund is used for individuals who are deemed mentally or physically unfit to handle their finances. The monthly Social Security stipends received by these individuals are placed in the Trust Fund from where DSS pays all personal bills as well as allowing for a monthly allowance for the individual.

Currently, four Gates County citizens have Trust Fund accounts.

According to Gates County Manager Toby Chappell, he learned of the alleged DSS violations in early August and immediately notified the county’s Board of Commissioners. From that point, the county notified all appropriate agencies and an investigation was formally launched. Chappell said that investigation is ongoing.

Asked if there was any measure of financial fraud committed in this case, Chappell said, “We (county) are privy to some evidence, but not all. We will not prejudge any of that evidence in this situation.”

As far as if Turner, the county or both face reprimands – or in the DSS Director’s case, loss of employment – from federal or state officials, Chappell said it was too early in the investigation to tell.

“We want a thorough and complete investigation,” he stated. “If at some point there is discovery of financial wrongdoing, the county will accept the responsibility that is ours to take.”

In regards to Turner, Chappell made it clear that she doesn’t answer to the County Manager or the Board of Commissioners.

“She reports to her own three-member board,” Chappell noted. “Neither the County Manager nor the County Commissioners have the legal authority to remove the DSS Director. That is an issue for the DSS Board to address.”

Chappell added that no current County Commissioner holds a seat on the DSS Board. However, he stated, “In the very near future, there will be.”

As of Aug. 4, Chappell’s office has obtained control over the DSS Trust Fund.

“Management will implement stringent controls over the Trust Fund to prohibit debit card transactions, require timely reconciliations and other applicable controls,” Chappell wrote in response to the auditor’s suggestion. “As of August 4, 2009, all transactions related to the Trust Account are processed through the County purchasing/cash disbursement internal control system.”

Chappell called the Trust Fund “one of the simplest accounts to operate.”

“The Social Security checks come in and checks are written from the Trust Funds to pay the bills….these are very simple transactions,” he said. “Any other money coming into a Trust Fund account is wrong. Any other money going out is wrong.”

Asked if it was normal for a DSS unit to be named as the beneficiary of a life insurance policy in the name of a Trust Fund client, Chappell said not to his knowledge.

“It’s standard for the spouse or another family member to be named as a life insurance beneficiary,” Chappell said. “If there is no beneficiary, then that money should have been placed in the estate of the deceased. The county should not benefit from someone’s death.”