The former city clerk in Riverton is under investigation after a state audit revealed almost $331,000 in fraud.
The Fremont County Sheriff’s Office is investigating Carol Jennings after an investigation by the Iowa State Auditor’s Office found $330,997 in improper and unsupported disbursements and undeposited collections. Included among the alleged grift is an excess of $39,955.64 in gross pay Jennings distributed to herself, according to the audit.
City officials discovered the impropriety in part when Mayor Rick Barton discovered city records that had been put in a dumpster in January of 2015. The Riverton City Council fired Jennings a month later.
Jennings joined the city in March of 2005. According to the Iowa Auditor Mary Mosiman’s report, concerns were raised regarding the city’s financial transactions in mid- to late 2014.
After Jennings was fired, the auditor’s office started an investigation, which focused on Jan. 1, 2008 through Feb. 28, 2015. Adequate records were not kept before 2008, the audit said.
The State Auditor’s Office turned its report over to the Riverton City Council, Fremont County Sheriff’s Office and Fremont County Attorney’s Office.
Fremont County Sheriff Kevin Aistrope said his office received the audit report on Wednesday and has opened an investigation into Jennings’ alleged actions.
“We’re in the early stages,” Aistrope said. “We’ll get something done in a timely fashion.”
Fremont County Attorney Brenna Bird was out of the office Thursday. Barton declined to comment when reached.
Attempts to reach Jennings were unsuccessful. The report noted that Jennings declined to meet with auditors during the investigation.
According to the audit:
• A total of $144,076.99 in improper disbursements includes $78,404.26 of payments to or on behalf of Jennings, $16,298.90 of withdrawals from the city’s bank accounts and $46,695.59 of payments to Walmart, Sam’s Club and other vendors.
• The investigation showed that the purchases from Walmart included groceries, clothing, bar stools, a gazebo, video games, children’s toys and health and beauty products.
“These purchases are personal in nature and not for city operations,” the audit said.
• Information from Sam’s Club showed the payments from the city’s bank accounts were for purchases made with a business membership belonging to the Admiral Inn in Farragut. City officials told auditors that Jennings’ sister, Janet Burkhiser, owns and operates the Admiral Inn.
Burkhiser was the primary cardholder for the Admiral Inn account and Jennings held an “add-on” membership card on the account.
• There was $37,685.23 in unsupported disbursements, which includes $32,334.83 of purchases at various vendors for which the city could not locate supporting documentation.
“Because of the lack of supporting documentation, we were unable to determine if these payments were for city operations or personal in nature,” the audit said.
• The audit also identified $149,235.48 of undeposited collections, including $114,803.47 of utility payments identified by comparing utility collections recorded in the city’s utility payment register and the amounts deposited to the city’s bank accounts between Jan. 1, 2008 and Jan. 31, 2015.
• The undeposited collections identified also include $32,890.86 of city funds deposited to two unauthorized bank accounts.
Jennings set up the unauthorized accounts in early 2014. She met with bank officials and provided city council meeting minutes from March 10, 2014, that showed the council had authorized her to open a checking account. Copies of the minutes obtained by auditors from a city official and from a city computer did not include the authorization to open a checking account.
“It appears the copy of the minutes Ms. Jennings provided to the bank were modified from the official copy,” the audit said.
City officials didn’t know about the accounts until after they placed Jennings on leave and went to the bank to remove the former city clerk as an authorized user of the city’s bank accounts.
• Included among the mishandling of the money is $39,955.64 in excess gross pay Jennings distributed to herself for her work as city clerk. Jennings’ duties included handling payroll for the city.
• Including that additional salary, the city lost $46,015.94, when excess Iowa Public Employees Retirement System and Federal Insurance Contributions Act disbursements are included.
After hearing Jennings was disposing of city records, Barton found a trove of documents in a dumpster – including bank statements, carbon copies of checks and deposit slips – in January of 2015. City officials reviewed the documents and identified personal payments from the city’s bank accounts. Jennings was placed on leave in early February before her firing. The city then requested the audit.
Iowa State Auditor Mary Mosiman said her office conducts investigations similar to this 20 to 25 time per year.
In this case, Mosiman said one of the things that stood out to her was that it was a “big dollar amount over a relatively short matter of time.”
She added that investigations are not done rapidly and that auditors try to be as thorough as possible. In this case, there were no bank records available prior to January 2008, and the payroll journal was started in January 2009.
Another thing that stood out to Mosiman was the improper disbursements to vendors. In three years of city council minutes, there were no approvals to individual vendors like Walmart or Sam’s Club.
Reflecting on the audit, Mosiman said fraud is able to take to place because of too little oversight and too much trust.
However, she said she understands how it can happen, especially in smaller cities where city officials wear multiple hats. Smaller cites like Riverton are also not required to have annual audits conducted.
There are three points on the “fraud triangle,” Mosiman continued – motive, rationalization and opportunity. With no one asking questions or noticing the alleged impropriety, she said, it was easy for Jennings to continue.
Mosiman’s office met with Riverton city officials to go over implementing oversight in the future so it doesn’t happen again.
The auditor’s office recommendations include a segregation of duties, better tracking of invoices and receipts, increased focus on bookkeeping and payroll tracking, increased oversight by the city council and periodic reports on what bank accounts are opened in the city’s name.