ARLINGTON — Serious problems with accounting procedures opened the door for the city to be a victim of embezzlement, a report released Monday by the Washington State Auditor’s Office indicates.
An audit of the records kept by the city of Arlington in 2007 found that the city did not have an accounting system in place to ensure accurate financial reporting. The audit identified what state officials called “significant deficiencies in controls that adversely affect the city’s ability to produce reliable financial statements.”
In particular, the city had a lack of monitoring procedures to prevent such problems as embezzlement.
A special report on misappropriation of public money in Arlington is due from the state as soon as federal investigative agencies release evidence against a former city finance department employee who admitted that she wrote herself dozens of city checks worth more than $1.3 million.
Terry L. Davis of Arlington pleaded guilty in U.S. District Court in December to mail fraud and filing a false tax return. She is scheduled to be sentenced March 27.
Arlington officials say the city has already complied with directions from the Auditor’s Office to clean up its accounting processes.
“The city looks to the auditor to get guidance and direction,” Mayor Margaret Larson said. “We want to make sure we are good stewards of the public’s money. We always take any findings from the state very seriously and work quickly to implement any changes.”
The city has is working to be in full compliance with the state’s recommendations, city spokeswoman Kristin Banfield said.
City officials are eager to receive the upcoming fraud report from the auditor, Banfield said. In the meantime, checks on city accounts are no longer written by hand and the finance department cross checks all transactions.
Davis, a longtime employee, allegedly wrote herself more than 100 unauthorized checks. She allegedly deposited them into her own bank account, intercepted them after the checks came back from the bank and then submitted bogus checks and other accounting paperwork to cover her tracks.
The scheme relied in part on using the mail system and the filing of false tax returns in violation of federal law, prosecutors contended.
In the state’s report, Auditor Brian Sonntag praised the city’s commitment to resolving all the issues brought forth in the audit. At the same time, the report took city managers to task for not being responsible for the city’s financial reporting.
In its examination of city records, auditors looked at how city personnel dealt with billing, budget compliance, cash receipts, payroll, investments, long-term debt and overall presentation of financial statements.
In general, city finance department staff members were not sufficiently trained to follow state budgeting, accounting and reporting standards, the audit said.
In many cases, errors that occurred were the result of reporting revenues or expenditures in incorrect categories, Banfield said, resulting in accounting that did not accurately represent the city’s transactions and obligations.
Gale Fiege: 425-339-3427, gfiege@heraldnet.com.
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