“It goes without saying this situation has brought to our attention things that we need, policies that we need to have in place regarding check requests and our financial policies here in Macon County,” said County Manager Derek Roland.
The investigation focuses on a series of 37 checks totaling $50,000 that were allegedly misappropriated over a seven-month period starting in June 2013, according to court documents.
During that time, Election Director Kim Bishop filed myriad payment requests with the county for various outside contractors — in particular four women who were supposedly doing work for the board of elections. However, the women never received the checks, according to court records: Bishop was taking the checks herself and depositing them. Further, signatures of election board members submitted to the county appear to be forged, according to court records.
The SBI is continuing to investigate the situation, and no charges have been filed, but Bishop has been placed on paid investigative leave.
While the SBI performs its investigation, Macon County officials are doing their own, evaluating the events internally to figure out if they missed some red flags and, if so, whether they could change their policies to keep it from happening in the future.
Court documents indicate that the $50,000 in allegedly misappropriated checks occurred over a seven-month period, with the paper trail involving forged signatures, fabricated spending justifications and incomplete paperwork.
County officials are now retracing their steps, trying to determine how the alleged embezzlement went undetected for so long and identifying any weak links in their system.
Breach No. 1: No tax forms
For starters, none of the four women who were supposedly doing contract work for the elections office had submitted a W9 tax form, a standard document that should ideally be filled out before a contractor is paid.
“We try to get it when the first check is mailed or shortly thereafter,” said Lori Hall, the county’s finance director.
However, she said the county has no hard and fast policy. Checks were written to the women even though none of them had verified their information on the form.
In other counties, new vendors are required to physically appear at either the human resources office or before the Board of Elections in order to be approved to work. For instance, in Jackson County contracted workers must go to the human resources department with personal identification, including a social security number, so that tax forms can be put on file.
In Haywood County, contracted workers — namely poll workers and voting machine testers — must supply their tax forms and identification. Poll workers are given photo IDs.
“That’s just standard personnel policy,” said Haywood County Board of Elections Director Robert Inman. “I would assume it would be that way across the entire state.”
Breach No. 2: Incomplete invoices
Before the county cuts a check to an outside contractor, the department head submits a check request form, which details who should be paid, how much and why. Theoretically, the check request should include a description of the work or services the contractor provided.
In this case, the many of the check requests contained irregularities. Seven of the 37 check requests made no attempt to explain what kind of work the contractor was being paid for. Most had just a one-word description such as “training,” “boxing” or “sorting.”
In other counties, such as Haywood, department heads must back up all such requests with some sort of paperwork, such as a receipt if the request is intended to reimburse an employee, or a program from the seminar or training that is the purpose of the spending.
“When we have an invoice or a check request, we require some form of backup to say what it’s for,” said Julie Davis, Haywood County Finance Department Director.
That’s a policy that Macon County will likely adopt following the situation at the Board of Elections, Roland said.
“What this will do is set the ground floor in terms of what acceptable documentation we have to have before we can cut a check,” he said.
Breach No. 3: No monthly finance report
Had the election board members more closely monitored the budget, the unauthorized payments supposedly going to contractors may have been detected sooner.
At its Jan. 30 meeting, the board decided that it will revisit its own financial accountability policies.
“We’re certainly going to make every effort to keep an eye on the financial reporting on a monthly basis instead of on a quarterly basis,” said Luke Bateman, board chairman.
The board is still working out exactly what form its new system of accountability will take, but a monthly financial report from the director to the board will likely be a component, as will closer communication between the board and the county’s financial director Lori Hall.
“I think when you have more accountability with more folks involved, it’s a good thing,” Bateman said.
Breach No. 4: Unapproved, yet fulfilled, check requests
The finance department will also take another look at its internal process for approving check requests, Hall said. When a check request comes in, it must receive a stamp from accounts payable. However, 12 of the 37 check requests did not have that stamp. According to Hall, that’s because the stamp bears the name of one employee, Lesa Southard, and nobody else is authorized to use it when she is not there.
“She’s been out for surgery two different times in the past six months,” Hall said, which is why checks were being cut without Southard’s approval stamp. In the future, Hall said, the department will likely purchase a blank stamp that another employee can use and initial if Southard is not available.
Hall, who has been the finance director for only two years, herself also plans to be more hands-on.
“Before the checks are printed each week, I try to review them,” she said. “In the real world, we all get busy. Of course, this has opened my eyes. We started two weeks ago that these checks are not getting out the door before I’ve looked at them.”
Breach No. 5: High spending threshold
Other financial firewalls may also prove helpful to Macon County in the future. For instance, currently department heads must only obtain a purchase order for expenditures over $10,000, a procedure that requires review from the county manager and finance director.
But in Haywood County, that threshold sits at $1,000, lowering the probability of multiple smaller payments slipping through the cracks, as happened in Macon County.
“[That] means others are going to check it and make sure it’s a purchase you’re authorized to make and that you have the funds to make it,” Inman said.
Breach No. 6: Insecure payment mode
Instead of sending the checks directly to the contractors, the county finance office gave the checks to Bishop to pass out. But, Hall said, it’s not unusual for a department head to request that the check be sent to his or her department for pickup, as Bishop did for most of the checks in question.
“It’s very common,” Hall said. “We have a lot of checks every week we hold for the departments.”
In some counties, that wouldn’t fly. For instance, Jackson County pays its workers — exclusive of poll workers, who receive a check — through direct deposit in order to increase security.
Breach No. 7: Unusual timing
As other election directors pointed out, it would be unusual for an election office to require as much contracted help during a quiet election year as Bishop’s check requests indicated. Nearly all contracted help, mostly poll workers and voting machine testers, happens in the months surrounding an election, but 12 of the check requests were made between June 1 and Aug. 31.
“The average is about $10 an hour, no more than 40 hours a week except very close to election time,” Lisa Lovedahl-Lehman, director of the Jackson County Board of Elections, said of her office’s contracted workers. “Normally we just use them for a couple months leading up to elections and a couple months afterward.”
And in a quiet election year like 2013, when Franklin and Highlands town elections were the only ones taking place, $50,000 would most definitely count as excessive spending on contracted services, regional election directors say. Haywood County, for instance, which is much larger than Macon, spent $48,694 for such expenditures in the busier 2012 election, but in 2013, it only spent $11,335.
Swain County has $20,000 in contracted services budgeted for 2013-14 but has spent just $1,240 so far. Lovedahl-Lehman says $20,000 to $30,000 is a normal range for her county.
Roland plans to take all of these considerations into account as he considers which policies will best protect the county in the future, tentatively planning to bring recommendations to the county commissioners at their March 11 meeting.
“All of these entities have come together and handled this in a very professional manner, and handled it promptly,” Roland said of the finance, law enforcement, legal and elections people involved in responding. “These financial policies will be handled with the same level of care and professionalism.”