The following is the investigative report of Eason Investigative Services to the City of Demorest. Eason is the firm hired by the City to investigate the missing funds now totaling just under $600,000. NowHabersham received the report through a public document request. The report is presented, verbatim, in its entirety.
Management Report
City of Demorest
November 21, 2014
On October 7, 2014, Eason Investigative Services was authorized by the Mayor and Council of the City of Demorest to conduct and investigation of the loss of funds from the City of Demorest Water Fund. We have met with the current city auditors and reviewed audit documents for the periods of 2009 through 2013 concerning the stolen money. We have interviewed over a dozen individuals concering the procedures and practices of the City of Demorest. During our investigation to date we have found serveral issues that contributed to the loss of over $580,000.00 of the city water revenue.
These issues are summarized for the Mayor and Council herein.
Fiscal Procedures
* The handling of funds received in the front office of City Hall was loosely controlled and lacked a basic check and balance system.
* No daily collection report was generated or used to determine the amount of funds collected eaach business day. (This report was available in the Water Billing Software)
* The funds were stored in a file drawer with little security and a key was maintained in a common location accessible to anyone in the office 24/7.
* There was no deposit schedule used for transferring funds from City hall to the bank to ensure the safety of the city funds and secure any accruable interest on the account.
* Deposits were made by Mrs. Crumley, however occasionally city employees were asked to carry deposits to the bank for her. These included Mr. Charles E. Stockton, Mr. Brian Popham and various Police officers.
* Handling of the funds when removed from the drawer to compile deposit was done in a open area of the office most of the time with large piles of cash and checks stacked on a desk in view of the office staff, city employees and the public entering City Hall to transact business.
* Deposits that were not completed at the end of the business day were placed in an unsecured desk drawer overnight by Mrs. Crumley.
* Employees were allowed to cash checks in the cash batches on a regular basis.
* The batches of water payments placed in the drawer were not logged or inventoried to ensure that all were accounted for in order to prepare the deposit.
* Sometimes the number of batches in the drawer exceeded the capacity of the drawer.
General Management Procedures
* There were no written policies and procedures for the operation of the office and how funds should be handled.
* The access to City Hall after hours was not monitored and controlled.
* Key control was not managed and no one can state how many keys were given out to employees and elected personnel until this issue was identified.
* Software capabilites were not used to prevent the loss of funds.
* The capability of generating funds collected in a daily report existed in the software from the date of purchase.
* Software that would link the two databases together was available for purchase with the initial software and it was not purchased.
* Failure to address concerns of the handling of funds by a city employee.
* Auditor recommendations of processes were not followed.
* Burgular alarm was not used on a regular basis.
* Camera systems recently installed were in-operative for almost two weeks without knowledge of City Hall Staff.
* Auditors failed to find the funds missing for several years.
* Training on the software by the vendor was not sought for new employee (Andrews)
* Concerns with the inmate cleaning services were not addressed by Mrs. Crumley to anyone.
General Notes
1. Samples of deposits were reviewed and deposits sometimes in excess of $50,000 and occcasionally $120,000 were made by Mrs. Crumley.
2. Over 450 individual batches of cash payments were stolen.
3. The random sampling indicates that there were at least three or more thefts per month during the fifty three (53) months that thefts occured. This means that between 160 and 450 individual thefts occurred during this time period.
4. Former employees were not required to surrender keys to City Hall.
Our investigation is continuing and we have established strong relationships with the Habersham County District Attorney and the Georgia Bureau of Investigation. City of Demorest employees have been very cooperative in this matter.
