TALLADEGA — A special audit detailing the theft of more than $91,000 from the Water and Sewer Board was released Thursday by the Talladega County District Attorney's Office. The document sheds some light on the controversial termination of three board employees last summer."It is unclear to us why these shortages, which were identified on bank reconciliations as deposits in transit, were not recognized as shortages and brought to management's attention much sooner," the audit reported. "For example, through November 2001 all deposits in transit were traced by the bookkeeper to the next month, or months, bank statement. There were five months where deposits in transit cleared 14 to 24 days after the end of the month. One deposit in transit on the November 2001 bank reconciliation did not clear the bank until January 14, 2002, 45 days after the end of the month."
Former board bookkeeper Carolyn “Cookie” Adair countered the assertion that management was not informed in a written statement Thursday night.
"The monthly reconciliation schedule was delayed in January 2002 due to the full-time work with the auditors to complete the annual audit for (the previous fiscal year)," Adair wrote. "The January records were available only in February and February in mid-March. The discrepancies were brought to the attention of management in mid-March, but were thought to be computer errors in entry, which by management procedure, the bookkeeper could not address. When I recognized the deposits in transit were actually cash shortages and not differentials caused by inaccuracies in computer reporting or other justifiable reasons, I turned this matter over to management.
"Over the years," Adair wrote, "with general knowledge of the auditors and management, reports were sometimes completed without the availability of complete records for confirmation, by using computer reports and other information notes which were provided at the discretion of the head cashier. I will note that the bookkeeper, by policy of management, had no access to the accounts receivable computer during the last few years. Monthly computer totals and other cashier documents were provided by the head cashier."
In sum, "the bookkeeper had insufficient access to and availability of comparison records and no authority to obtain them, even though that authority was requested. Many of the procedural remedies now suggested by the auditing firm were requested for months and years prior to this occurrence."
Water and Sewer Board general manager George Montgomery refused to discuss the audit face to face with The Daily Home Thursday night. When a copy of the audit was passed to Montgomery through board secretary Cathie Fuller, Montgomery kept it for approximately 40 minutes before returning it, through Fuller, with the words "no comment" written on it.
When reached at home following Adair's statement, he again refused to comment.
The audit was released by the District Attorney's Office after a grand jury concluded its probe of the theft Thursday without returning any further indictments. One former board employee, Patricia Borden, was indicted for theft of property in the first degree in connection with the lion's share of that money last year.
Borden entered a guilty plea to that charge last month. No sentencing date has been set.
The board is bonded for up to $100,000, so the stolen money was restored to the board coffers.
Of the $91,430.27 total that turned up missing between August 2001 and May 2002, $83,004.52 was traced by a special audit directly to Borden. When she pleaded guilty, however, she contested the amount, claiming she believed what she had taken was closer to $20,000. She said she had used the money she stole to buy Georgia lottery tickets.
The balance was traced back to another cashier, Janet Haywood.
According to the audit, which was conducted by the firm of Camp and Associates P.C., Borden and Haywood "would take (or borrow) current receipts and cover them with collections from a later date. As they got further behind, they were forced to use collections from the first of the next month. This caused instances where the customer would receive a bill with no payment being reflected.
"Customers would then go to the board office and say they had paid for the prior month," the report continued. "Probably, in most cases, by then the receipt for the prior month would have been deposited and posted in the computer. The cashier taking the receipt would research the customer's account and tell the customer they were correct. The cashier would then mark through the balance due on the receipt stub and write in the correct balance due. We noted numerous instances where the balance due as shown on the receipt stub was marked out and a lesser amount indicated. This was probably the reason."
For the period between August 2001 and May 2002, the audit found "223 combined instances where there were periods of time ranging from five days to 109 days between the date of receipts and the date the receipts were deposited. In an attempt to determine when this began, we selected certain days in the years 1999 and 2000, and found instances where this occurred as early as January 1999.
"Both cashiers admitted that there were shortages in their work," the audit states. "Borden admitted to us (the auditors) that she had taken the money, but she did not think she had taken as much as shown above. Haywood contends that she personally took none of the money missing from her collections. She had, in her possession, personal checks from Borden that both women said represented cash, which she had taken from her drawer and given to Borden."
These four checks, totaling $740, were written between Jan. 30, 2000, and May 7, 2002. There are no dates on the middle two checks, based on the check numbers.
Haywood "also had, in her possession, other slips of paper indicating various dollar amounts. It appeared she was attempting to keep a record of the cash she had given to (or loaned to) Borden out of her drawer, and the money Borden had repaid," according to the audit. "None of this information indicated a total given to Borden or how much she currently owed."
District Attorney Steve Giddens declined to comment for the record on why there had been no indictment returned against Haywood. He did say after he released the audit Thursday that he believed very strongly "that the public absolutely has the right to know where their money has gone, and how their water system is being run."
How it was done
Starting in February 2001, the audit found "instances where deposits in transit were deposited five or more days after the end of the month began to appear on bank reconciliations of the indenture revenue fund," where most payments from consumers go. A deposit in transit is one that has been made but has not yet been posted by the bank and therefore is not yet reflected in the account balance.
There were apparently two such transactions the first month, with the later of the two clearing the bank on March 5, 2001. These two deposits totaled $4,157.30.
The problem apparently grew from there. In July 2001, for instance, there were 14 in transit deposits, totaling $24,206.88, with the last deposit not clearing until Aug. 23 of that year. The following month, 12 in transit deposits are shown, totaling $24,959.83, with the last deposit clearing the bank on Sept. 19. The number of late deposits for September and October dropped, but by November, auditors found 16 in transit deposits, totaling $23,606.62. These deposits, according to the auditors, "in most cases were covered by collections from the next month. We traced each of these deposits into subsequent months bank statements."
The reconciliations, prepared by Adair, for December 2001 through May 2002, "contained large and unidentified items" of increasing size, beginning with $40,294.06 in December and ending with $91,673.77 in May 2002. "This is within $433.50" of the total amount missing, the audit observes.
Background
After the audit was completed, three board employees, Borden, Haywood and Adair, were terminated. When The Daily Home requested copies of the audit and these employees’ personnel files, Montgomery refused to comply. When the paper filed suit in Talladega County Circuit Court, attorneys for the board claimed that the board was not subject to the Alabama open records law, and even if it was, the personnel records requested fell under the recognized exceptions to that act, pending criminal investigation (in Borden's case) and sensitive personal information (in the case of the other two employees).
Circuit Judge Jerry Fielding rejected the board's arguments regarding the exemption, but upheld them in relation to the sensitive information exception. Fielding's ruling stated that he would revisit this issue once Haywood's and Adair's appeal hearings were completed, but the board filed an appeal with the Alabama Supreme Court before that could happen.
That appeal, and a cross appeal filed by the paper asking for clarification on the pending investigation exception, are still pending, with no hearing date set.
Borden was indicted shortly afterward. Haywood, who has never been reached for comment, did not appear to have ever filed an appeal, since she emptied her account with the state employees retirement service almost immediately after being fired.
Adair did appeal her termination, and per board regulations an ad hoc committee was assembled to hear the case and make a recommendation. Procedural differences between the committee and board attorney Steve Adcock, who insisted on presiding over the hearing, led to the committee disbanding before they could hear the case in full. The board subsequently acted without a recommendation from the committee.
