It Takes A Thief

A recent revelation of theft, falsifying records and exorbitant sums of money spent on “cleaning chemicals” by the county jail all serve as clues of an ongoing crime scene in Shelby County, Alabama.

The State of Alabama Auditor’s Office released the results of the Shelby County audit on October 8, 2010. The report reveals theft of county funds by an “unidentified” county employee on 19 separate occasions totaling $15,403.61. Fictitious adjustments to a bank reconciliation were done to help to hide the evidence. A separate finding of the audit  showed that the county jail spent $187,950.00 on “chemical supplies” in a no-bid contact that had expired.

CURRENT FINDINGS
♦ 2009-01 relates to a former employee of the Commission making fictitious adjustments to bank reconciliations and making unauthorized withdrawals from bank accounts.
♦ 2009-02 relates to the Commission’s failure to properly bid purchases in accordance with the Code of Alabama 1975, Section 41-16-50.

Explanations from the county were less than contrite and somewhat non-sensical, as most alibis usually are;

"The account involved was a low volume low dollar balance account."

"The employee in question was a valued member of the department that had been assigned the oversight responsibilities for this particular account."

"As part of those assigned duties the employee also took on the monthly reconciliation function. When the unauthorized activity was discovered County Management took immediate disciplinary action which resulted in termination. Appropriate charges were filed with law enforcement." (Oct 8 Mobile Press-Register, sources attribute these comments to the County Manger, Alex Dudchock)

“It’s a difficult situation when a trusted employee violates their fiduciary duty I think we handled it appropriately upon the discovery of the missing funds. The county has been made whole at this point, and the employee is no longer with us.” said Shelby County Commission Chairman Lindsey Allison (Oct. 12 Birmingham News)

“Valued” and “trusted” are very unusual words to apply to a thief, but we do recall some the same descriptors used in the Enron scandal and we all know how that turned out. If this had been one theft, an isolated incident, then maybe it was a case of a good man gone bad, although that’s a stretch because it is what it is, but this was not an isolated incident--it was 19 separate thefts compounded by a another crime of falsifying records.

Any good CPA will tell you that “low volume, low dollar” accounts are just what they imply and theft from these types of accounts is much easier to detect. Who was asleep at the switch and what reason do we have to believe this is the only creative accounting that has occurred, or is occurring in the county?

Note that Ms. Horton (the previously unidentified employee) withdrew an odd amount ($15403.61).  That tells us that she was making exact payments for something.  If an employee was taking money just for "mad money" the amounts withdrawn would have been even and neat and tidy ($500, $1200, etc.)  The extra $3.00 and the extra 61 cents seems to suggest that there were specific payments for specific things.

If we had to guess, the withdrawals were most likely to an identifiable person or entity (as opposed to a cash withdrawal). Ms. Horton could have made the checks out to herself or to a third party. She may have been paying for a specific bill (plasma tv or repair bill, for example), either directly to the third party or as a reimbursement to herself.

As a general rule, checks require two signatures. There could have been one signer, but most likely the other one is a supervisor of some sort. The requirement of two signatures is a typical internal control device.  If two signatures weren't required, it's a sign of weak internal control. If two signatures were required, who was the other person? Bank reconciliation and check writing functions should always be assigned to two different people. One person should never do both--this is a sign of terrible internal control.

Shelby County should already know this--it's been standard procedure for years.

With taxpayer's money involved and the commission of a first degree theft in this incident (as defined by Alabama Code) the checks should be produced showing what they were specifically written for and to whom they were written.

The projected county revenues for 2011 are $81.7 million which leaves a lot of room to be “creative” with the numbers, and fiddle with the books. If the county can mishandle their accounts to this extent, and not have the most basic accountability controls in place to prevent this type of crime, what faith does is demonstrate to the public that this will not happen again with some other accounts or, more interestingly, that this is an isolated incident?

The county maintains they have "fixed the system." Systems are only as good as the people who set them up and maintain them. The county may have fired the thief, but there is no change in the rest of the personnel and supervisors who implemented this faulty system in the first place. That's not reassuring on any level and it does little to restore the tarnished trust of the public perception of the county's abilities to institute proper checks and balances in the management of their accounts.

If this former employee (thief) had the financial means to repay the money then why steal it in the first place? Was it paid back all at once or is there an arrangement for restitution in place that the public is not privy to? After all, there are some things that they aren’t privy to because the name of the employee was not released until 3:56 pm Oct 12, four days after the release of the audit and when the story first appeared in print, in the Press-Register. And even then, it was only after the story was published that the county DA and prosecutors decided to release the information, which they may not have ever done if there wasn’t some media pressure applied.

Which brings up another point--why did a newspaper over 220 miles away from the scene of the crime break the story first? Did the Birmingham News and Shelby County Reporter, the two newspaper outlets closest to the chalk outline, shut down for the Columbus Day weekend? Nope, that’s not it. Was there only one reporter at the Birmingham News who could have covered the story? No to that too.

There seems to be a collusive and concerted effort to protect this person (and perhaps others) and the county by everyone involved including the press, with the honorable exception of the Press-Register. If they had not broken the story, it very well may have never been exposed to the bright light of public attention.

The county knew they were required to have no-bid contracts in securing a vendor, but chose to ignore Alabama Code and hire whoever they wanted however they wanted.

What is missing from any of these stories is more probative questioning on the $188,000.00 (rounded) spent by the county jail for cleaning supplies. That’s a compelling clue to what may be larger crimes that has gone uninvestigated.

Let’s do the math;
$188,000.00 divided by 365 days = $515 per day.

Wouldn’t it be more cost effective to hire a janitorial service to do the cleaning? We did some checking with some local companies who do that and no one gave us a figure anywhere close to what the jail is spending now on just the cleaning supplies (they have plenty of cheap labor at their disposal.) It would be interesting to compare what they spend per day on the inmate’s nutrition to the cost of the really expensive Pine Sol.

Shelby County is spending more on soap and mops for the jailhouse than they spend on their entire Storm Water Management Program for which they budget a measly $45,000 In a county with 167 industrial sites and booming development “two part-time employees and an annual budget of $45,000” is woefully inadequate to the task at hand and a pretty obvious case of neglect by underfunding

It’s comforting to know the county has its priorities straight. Not.

The Birmingham News article on October 12 states that “County Finance Manger Butch Burbage said Monday he was advised by county’s legal staff that he would have to defer to the Shelby County DA’s office on any release of the employee’s name.” The story describes that particular Monday was Columbus Day, the DA’s office was closed and “efforts to reach prosecutors for comment were unsuccessful.”

What DID happen on that Monday (when most county and city offices are closed in observance of the holiday) is that the Shelby County Commission met and elected a new chairman. Lindsey Allison was out and Corley Ellis was in. The chairman’s term is for one year, and Ms. Allison has served three of the last four years as chairman.

The timing of this leadership change seems odd to us, as does the fact that it occurred on a national holiday. Did the news coverage of the audit play a part? Wouldn’t it be reasonable to presume that the public would not come to this meeting because most people would assume the commission wouldn’t meet on a holiday?

The county couldn’t make the DA or prosecutors available to the press on an important story of public interest, but they could hold a commission meeting and replace their chairman and vice-chairman?

The state Attorney General usually steps into these types of cases when the judge, prosecutors and other local legal authoritative figures know the perpetrator. Justice becomes blind when there is familiarity. Since this wrong-doer was a long term fixture in the county’s employ, chances are high that anyone involved with prosecuting and hearing this case knew the offender.

That may account for the county wanting to handle this “in system” and it is cause for scrutiny by the state’s chief law enforcement officer. The county has shown how maladroit it is at handling things and the public should be outraged about this.

We don’t think there is any doubt that some of these funds were from citizen revenues (mostly in tax form) and the public does not take kindly to elected officials or their employees stealing from them. Anyone who does this should not be protected in any way and this case should have been referred to the state AG’s office immediately upon discovery, in our opinion.

It took the release of the state audit and the Press-Register to bring it to light.

The county thinks they’re slick and using the language of “the county’s been made whole” serves another purpose. According to the website of the Department of the Examiners Board if the money has not been accounted for or recovered “the audits are certified to the Attorney General or District Attorney and presented to the next Grand Jury.” That invites much more scrutiny and would certainly kick things up a notch or two.

What we would like to know is this: why would the county not want it to happen? Public opinion would be overwhelmingly in support of the harshest examination and punishment possible for this crime, and the questionable high expenditures of their money.

There seems to be a concerted effort in downplaying this offense, omitting information and it says "Let’s just make this go away as fast as possible."

An additional note is that when the story finally ran within the county’s only newspaper it did so with no mention of the jail’s cleaning supplies expenditures.

We wrote in an earlier posting (entitled the “The Kingfishers of Alabama’s Mainstream Newspapers”) that news organizations have an obligation to their readers to present the news fairly and accurately without hidden agendas and special interests influencing (or omitting) their coverage.

The evidence speaks for itself in this case;

• A crime was committed repeatedly and not caught until it racked up 19 incidents.

• The thief was not named until long after the fact.

• The issue is being downplayed by county officials.

• Newspapers that should have run the story first... did not.

• Successive stories have omitted the jail expenditures (the local area paper did not mention it at all.)

• Legal representatives for the county have not made any statements to the press.

• An expired no-bid contract was in place for the jail expenditures (which is against Alabama Code.)

• The county has adopted a “circle the wagons" defensive posture.

• Serious financial oversight issues have been exposed and the county’s judgment is subsequently called into question.

It’s theft of more than just money--it’s a theft of the public’s trust and it raises some real issues about the county’s ability to properly acknowledge the seriousness of the crime to the public.

Their attitude seems to be "Never you mind, it's okay now, we took care of it and fixed the system."

Well, we don’t buy it for a minute and we think that with some proper, unbiased authorities investigating this, what eventually will be revealed is that sometimes it takes a thief to catch a thief.