Demorest has received its final audit for 2013 – the last year money went missing from city hall. Officials say more than a half million dollars was stolen over a four and a half year period between 2009 and 2013.
Joe Kitchens of Duncan and Kitchens CPA firm in Clarkesville delivered the audit to council members on Tuesday acknowledging it was a little unusual to release 2013 this late. “With all that has gone on and the investigations, it took a little longer,” he noted. Kitchens immeditately began talking about the “unique white elephant in the room”…the missing funds.
Following the money trail
Duncan and Kitchens LLC was hired by Demorest after Amos, Maney and Payne LLC resigned as the auditors due to a change in business focus. Joey Duncan and Joe Kitchens have audited over 200 Georgia municipalites and governmental organizations and have well over 30 years combined experience. When hired, Kitchens stated, “We wanted to find a computer error, we wanted to find a bookkeeping error,” but, “we just could not get away from it.” It was Duncan and Kitchens who went back over 2009, 2010, 2011 and 2013 to pinpoint when the money began missing and to determine if it was still being removed.
Click here to view full audit report
In an exclusve interview with NowHabersham Kitchens explains that they tested a bit into 2008. The books from 2012 had been audited twice, first by Amos Maney and Payne and then by forensic auditors Frazier and Deeter so, he says, they did not look further into that year. Duncan and Kitchens was able to identify the beginning date in 2009 and the ending date in May of 2013. When asked why and how the money was taken, Kitchens responds, “This was a crime of convenience. Someone got in a bind, or some trouble and took a little money. No one found out, so they took a little more.” Indeed the pattern is obvious. In 2009 over $64,000 was taken. It escalated by $20,000 more in 2010 to $87,000 and then jumped to double the previous year to $174,521 in 2011 and topped off at over $220,000 in 2012. When the investigations started in 2013 the stealing stopped at $53,000 for that year. According to auditors and a private investigator, a total of $601,867.70 was stolen from the City of Demorest.
How could so much be stolen for so long?
When asked how the money was stolen, Kitchens explains that the cash and checks taken in daily were separated and stashed in a file drawer. When the drawer got too full, one clerk was handed the checks and another was handed the cash to make deposit slips. The deposits were never reconciled with the city’s water billing computer sytem, so, there was no checking that what the computer said was taken in was what was actually being deposited. The thief – or thieves – would then go into the file drawer and simply take the cash and the batch (accounting) report that was wrapped around the cash. This happened 471 times. Kitchens says it was never caught because the thief knew that by taking the batch report along with the money, there were no checks and balances in place. Duncan and Kitchens were able to go into the computer system and compare the batch reports from the system with the deposits. That method allowed them to find the missing funds. “It also helped that we live here, we called folks and asked them, ‘Did you pay your water bill? How did you pay it?’ and then trace it from there,” says Kitchens.
When asked how the thefts went unnoticed for so long Kitchens explains that the bookkeeper, Altea Muller, was simply overwhelmed. “She would come to Demorest once a month and she only saw what she was given. She was not capable (of handling it all).” He says Muller became the city bookkeeper, basically, by default. He explains that Tommy Crosby – who had done the books for Demorest for many years – sold his practice eight years ago. Muller was one of the buyers and she “basically inherited the account.” Muller was fired in September of 2014 after the City launched the investigation into the missing money. Mayor Rick Austin said at the time that Muller was fired after finding “that the accounting/bookkeeping services provided to the City of Demorest did not meet accepted standards and delayed the city’s discovery of fraud.”
Praise and assurances
At Tuesday’s meeting, Mayor Austin praised Duncan and Kitchens saying, “Your firm, Joely Mixon and Mixon and Associates helped significantly. When others wouldn’t, your firm did.” Councilman Donnie Bennett said, “We learned more from you in two months than the entire time with others.” Kitchens in turn praised the mayor saying that this was, “the best addressed findings that I have ever seen.” Once the findings of the audit were provided, Austin spent hours going over the more than 18 findings and making sure each finding was corrected or in the process of being corrected. Austin noted that, “For the first time since 2009, every finding of the audit was addressed and fixed.”
Now Habersham asked Kitchens what assurances the citizens of Demorest have that this situation won’t happen again. He says that the mayor and city council members “have been the most aggressive I have ever seen” at fixing every issue. “They have really clamped down everywhere they can.”
Other issues noted in the 2013 audit include:
1. Employees, spouses, children and others were given memberships to Sam’s Club paid for by the City.
2. Cell phone bills were paid for multiple employees with multiple phones.
3. Files were not maintained in a central location. Duncan notes that, when asked, then City Manager/Clerk/Treasurer Juanita Crumley could not provide employee files showing pay rates for city employees.
4. When capital assets were sold, no adjustments were made to the accounting system.
5. When service charges, insufficient funds (NSF) fees and other adjustments came in on bank statements, no changes were made to the account balances in the City book.
This audit brings full circle the city’s investigation into the matter of the missing funds. The case now rests in the hands of the GBI and local prosecutors.
