A fraud investigation by the Washington state Auditor’s Office revealed $22,783 in misappropriated funds and $33,730 in questionable expenditures by a former utility clerk for the City of Tenino, according to an investigative report published April 13.
The case will be referred to the Thurston’s County Prosecutor’s Office, according to the auditor’s office.
According to a news release from the city, the employee, who was not identified in the report, was placed on administrative leave when financial activity was discovered by a resident who volunteers for the city in 2019. A police report was filed with the Tenino Police Department, according to the city.
The Chronicle has identified the former city employee as Denise Nelson through a public records request.
When asked about the transactions on Dec. 27, 2019, Nelson acknowledged they were inappropriate, according to the report. Her employment was terminated Jan. 15, 2020.
The fraudulent and questionable activity occurred between January 2016 and December 2019, according to the auditor’s office.
The auditor’s office found that Nelson misappropriated the funds using several methods, including processing negative cash payment transactions, utility escrow payments, processing accounting system adjustments, applying business and occupation (B&O) tax payments to customer utility accounts and transferring and writing off customer utility accounts.
“On February 2, 2023, we interviewed the former utility clerk,” auditors wrote in their final report. “She said she knew processing some of the customer adjustments was wrong. However, when we asked her to explain the reasoning behind specific examples that involved customer adjustments and missing cash receipts, she did not provide any information. Instead, she asserted that our office could not pursue her to recoup the missing funds because ‘it was past the statute of limitations.’ Four days after our interview, the former utility clerk sent a text message to the mayor asking for a meeting to discuss repaying the city.”
The auditor’s office cited control weaknesses including inadequate segregation of duties for cash receipt and bank deposit preparation, a lack of oversight or monitoring of the utility clerk and a failure to monitor B&O and utility close-out payments.
“We recommend the city strengthen its internal controls over cash receipting to ensure adequate oversight and monitoring to safeguard public resources,” the auditor’s office wrote. “The city should segregate duties between those responsible for cash receipting and those responsible for preparing bank deposits, or implement increased monitoring to ensure transactions are supported and accurate. In addition, we recommend the city implement processes or procedures to ensure adjustments, transfers or other non-cash transactions are adequately supported and independently reviewed.”
According to the news release from the city, Tenino is seeking recovery of the funds through legal action and the city’s insurance pool.
“The city takes internal controls, transparency and maintaining public trust very seriously,” the city wrote in the release. “Theft of public assets, in any form, is unacceptable. The city has increased internal controls. The City of Tenino has made many changes to secure our financials, such as secondary reviews. All writeoffs and adjustments must be approved and signed off by a second person. The City of Tenino currently has a financial committee that meets quarterly to review all receipts, expenditures, bank statements and reconciliations. All control weaknesses and recommendations have been addressed and implemented prior to this report being issued. The City of Tenino will continue to be diligent by improving and strengthening the internal controls and monitoring of funds through all available resources to prevent any fraudulent activities in the future.”
It’s not the first time the City of Tenino has faced financial fraud in recent years.
The city was scammed out of $336,968 in 2020, though some of that money was recouped.
The money left the City of Tenino’s bank account in 20 payments to multiple out-of-state bank accounts between March 19 and May 4, 2020, on the authorization of former Clerk-Treasurer John Millard, according to state patrol’s investigation.
Millard received an email on March 19, 2020, from what he reportedly thought was the Washington Municipal Clerks Association requesting a loan to pay for some expenses for their 50th anniversary celebration, according to previous The Chronicle reporting.
The Washington Municipal Clerks Association sent out an email to all of its members — including Millard — that same day notifying them of the scam email and warning them not to make any payments, according to previous reporting by The Chronicle.
