Freeborn County Attorney Craig Nelson has begun evaluating the reports and investigations into a former Freeborn County Sheriff’s Office civil processing employee who resigned in February. He said this week he is considering what course of action to take after a State Auditor’s Office independent investigation into the matter returned last week.

The auditor’s investigation reviewed financial procedures in the Sheriff’s Office for petty cash, the cash register maintained in the records department and civil process services and garnishment funds from January 2008 through February 2010. It gave suggestions of internal controls that could be implemented.

Nelson said the investigation came about initially after a loss of cash was reported for copies of reports and documents in the Sheriff’s Office at the beginning of 2010.

He said when the loss was recovered, he thought he would ask another county attorney’s office to review the case, along with an internal Freeborn County Sheriff’s Office investigation that coincided with the resignation of employee Kelly Davenport.

However, the internal investigation soon indicated other concerns, he said, so the county administrator and Sheriff’s Office asked for an independent investigation by the State Auditor’s Office.

Nelson said he received a letter dated Oct. 19 from the Auditor’s Office with several internal control recommendations. The next day, he also received a copy of an internal investigation report, which was not available to the public.

He said he asked two lawyers in his office to help evaluate the situation, and given the amount of time the Auditor’s Office spent on the investigation, he needs to spend some time to make a decision. The case may be forwarded to a nearby county attorney’s office.

New procedures

Since the allegation arose, the Freeborn County Sheriff’s Office and the Freeborn County Auditor-Treasurer’s Office have started working out new internal control procedures, Nelson said, including weekly balance sheets and working closer with Freeborn County Auditor-Treasurer Dennis Distad.

Freeborn County Chief Deputy Gene Arnold said there is no longer a petty cash fund, and checks are being deposited as “deposit only.”

Sheriff’s Office staff are being rotated through the civil process department every few weeks so that several people have a chance to review this area.

Arnold said there had been checks and balances in place prior to this incident, but “obviously they weren’t working.”

“There were some things we were doing procedurally that definitely needed to be changed,” he said. “It’s an unfortunate thing, but it’s something that came to light that will help us better handle the department.”

More changes that are recommended by the State Auditor’s Office report will go into effect after the general election, by request of Distad.

Freeborn County Sheriff Mark Harig said many of the procedures in place prior to the audit had been established before he became sheriff in 2002.

Petty cash fund

According to the state auditor’s report, petty cash funds are allowed under state law but they must be established by the county board. A person must be appointed as custodian of the fund, and a claim itemizing the disbursements must be presented to the county board at the next county board meeting after the month the disbursements were made, the report states.

Petty cash funds should not be used for normal employee expenses, such as training and meeting expenses.

The auditor’s report notes the Auditor’s Office found no evidence that the petty cash fund in the Sheriff’s Office had been approved by the county board. It also was not replenished on a regular basis, and at some times the fund did not contain sufficient money to reimburse employees for submitted expenses.

It suggested where possible, Sheriff’s Office employees should use the same expense reimbursement procedures used by other county employees.

The fund closed Sept. 17.

Records division cash register

The auditor’s report states the Sheriff’s Office maintains a joint records division with the Albert Lea Police Department. In this division, a cash register is used for revenue received from the sale of copies of county and city documents, and the revenue is split between the city and county, depending on which entity’s documents were sold.

The report states the sheriff was approved as the custodian of a $100 change/imprest cash fund approved by the county board; however, records note a starting cash balance of $50 for the register was obtained from petty cash.

Funds were also not deposited from the register on a regular basis.

The Auditor’s Office recommends the county board establish a change fund and identify the amount, purpose and custodian of the fund. The financial duties should not be put on one single person.

Checks should be made payable to the Freeborn County auditor/treasurer or the city of Albert Lea, depending on which copies were sold, and checks should be endorsed “for deposit only” immediately upon receipt.

The report continues by stating all transactions should be entered into the cash register, and no cashing of personal or third-party checks should be done from the register. All checks should be written for the amount of the sale, no more for cash back.

The register should be balanced at least weekly, with funds being deposited at least monthly with the Freeborn County Auditor/Treasurer’s Office and the city. Receipts should be obtained for all deposits.

Civil process service and garnishment funds/fees

The state auditor’s report found that the procedures established for this fund were not being followed. Not all fees received by the Sheriff’s Office were given receipts and a spreadsheet about the fund was not maintained.

It states no deposits to the county auditor/treasurer from the collection account were made for 11 consecutive months in 2009.

Furthermore, no checks from the trust account were written to the collection account for seven months in 2009, though garnishment and levy checks were still being written from the collection account.

The report stated checks from these two accounts contained only one signature, and at times the signature on the checks was a signature stamp. The stamps were not securely maintained.

A civil process clerk was responsible for these responsibilities.

The auditor stated concentrating such financial duties on one person is not desirable.

“Duties for the receiving, disbursing, depositing and balancing of funds should be segregated, or other compensating controls should be adopted,” it added.

The auditor recommended closing the separate Sheriff’s Office checking accounts. While funds would be given receipts by the Sheriff’s Office, they would be deposited with the auditor/treasurer on a weekly basis. The auditor/treasurer would issue any necessary checks.

Receipts should identify from whom the funds were received, whether the funds were paid by cash or check, when the funds were received, why they were received and which employee received the funds.

All checks received by the Sheriff’s Office should immediately be endorsed “for deposit only.” Deposits should be made with the auditor/treasurer at least weekly, and receipts should be obtained for all deposits.

The Sheriff’s Office should work with the county finance director to establish an agency fund in the county’s general ledger for this fund, among other recommendations.

Additional recommendations

The State Auditor’s Office also recommended the Sheriff’s Office adopt written policies for all funds handled by the department.

The documentation should describe how the policies are intended to be performed, identify which employees should perform the procedures and ultimately increase employee understanding and support for the controls.

The documentation should be shared with all Sheriff’s Office employees, the letter continues, and the department should consider having employees sign a form stating they received a copy of the policies and that they agree to follow them.

The policies should be monitored regularly.

The State Auditor’s Office also recommended that signature stamps be kept in a locked box inside of a locked desk or cabinet. A log should be maintained to identify who has possession of the stamps.