Spending probe spreads at DSS
Audits turn up misspent money in programs for foster children, and county officials can’t account for $162,000 in donations.
By April Bethea and Fred Clasen-Kelly
Posted: Saturday, Jun. 27, 2009
A probe of misspending at a Mecklenburg County Department of Social Services Christmas charity has widened across the agency, and officials now say they are unable to say how much money may have disappeared over the years.
The county’s second-largest agency, often a first stop for the community’s poor or neglected, has recently been reorganized. Director Mary Wilson, hired last summer, ordered audits following reports of suspicious spending.
The audits looked at several spending programs and financial practices throughout the department.
Among the findings:
Mecklenburg County officials cannot account for $162,000 in donations meant to buy gifts for needy children. That includes a $10,000 check made out to an employee.
Of the 840 receipts inspected for that program, 799 had problems, including receipts that were altered, whited out or omitted in photocopying.
In a separate year-round program, auditors said, money meant to help foster families buy clothes and other necessities for children was spent on office supplies.
The audits cover July 2007 through this past March, but officials say they don’t know whether problems started earlier because the last departmentwide audit of DSS was in 1996. Some findings have been turned over to the Charlotte-Mecklenburg Police Department.
Officials briefed county commissioners earlier this month about the audits.
But new details are emerging since officials gave a fuller account last week to the commission’s audit review committee.
Committee members told county administrators they did not understand how the department failed to adhere to basic financial practices, such as requiring two signatures on checks – a standard spelled out in N.C. law.
Some asked how managers could have allowed such behavior to go unnoticed. The audit committee also appeared surprised that receipts for the department had not been checked for so many years.
Such a review was planned for next year, said Chris Waddell of the county’s Internal Audit department, who said he thinks the problems cited in recent audits would have been uncovered.
When panel members asked county auditors and administrators to find out who is responsible for the problems, or how long they persisted, officials cast doubt on whether they could comply.
“There’s a lot of missing documentation,” county Finance Director Dena Diorio told the committee.
On Friday, County Manager Harry Jones said officials would respond to problems laid out in the audits.
Overall, Jones said, DSS has been “well-managed,” especially in light of numerous changes in top management in recent years.
But with “an operation of that size it is difficult to be immune from problems,” he said. “We’re going to address it and fix it. Hopefully, it won’t be recurring.”
Officials said charity and emergency spending programs went unchecked by supervisors. Asked why, Wilson said people grew very trusting about “feel-good” programs. Diorio said the longtime programs simply escaped scrutiny.
County officials said some DSS programs were audited annually, but not smaller programs like the Giving Tree.
DSS spends more than $176million annually and employs about 1,200 workers.
Problems surfaced publicly this year when Wilson said she learned about irregular spending patterns in the agency’s programs for poor families and foster children.
Wilson said an employee raised questions about money in the Giving Tree program. Wilson said she herself pointed to a need to audit the broader programs.
Since then, leaders have ordered multiple financial audits and suspended two workers suspected of taking $110,000 from the Giving Tree program, which solicits money to buy the holiday gifts.
Officials say they have asked Charlotte-Mecklenburg police to help investigate. One of the suspended workers has been cleared of wrongdoing and reinstated, while the other is now on medical leave. The county has not publicly identified the employees.
County officials say they are trying to determine whether there was criminal activity or just sloppy accounting.
In either case, commissioner Bill James said the findings show the county needs to re-examine how it keeps tabs on taxpayer money. James described the fiscal controls at DSS as “nonexistent.”
“There is a fundamental management control deficiency,” James said. “We have to find out why this lasted as long as it did.”
Ward Simmons, another member of the county audit committee, said there should be two goals. “Fix this for the future, and then this has to do with public confidence in the county: (identify) who’s responsible for what happened in the past.”
But county administrators say they are not sure who should be held accountable.
A series of DSS directors
DSS has had four directors in recent years.
Longtime director Richard “Jake” Jacobsen took a medical leave in 2004 and was briefly replaced in the interim by then-deputy director Brenda Jackson. Jacobsen returned in 2005, only to be reassigned as an executive-in-residence at UNC Charlotte, where he started work in January 2008.
The county appointed another interim DSS director, Janice Allen Jackson, who was also one of the county’s general managers.
Director Mary Wilson replaced her last July. Allen Jackson resigned in May for personal reasons.
As a general manager Allen Jackson was responsible for helping oversee DSS for four years. She also was interim director for six months.
Allen Jackson said she was not aware of any accounting failures during her tenure with the county. “No issues were brought to me,” she told the Observer before declining further comment.
Jacobsen worked for 13 years as head of the DSS. Through a county spokesman, Jacobsen declined to comment.
Jacobsen had named a senior-level administrator to oversee DSS finances during his tenure, but county leaders said the post later was vacated. Earlier this year, Wilson recreated the post, naming Angela Hurlburt as the department’s director of financial management.
Jones praised Wilson for initiating the financial audit and said she had “clearly inherited this situation.”
“These are programs deliberately designed to operate outside the traditional DSS systems,” Jones said. He said Friday the emergency nature of the charity programs may have led to mistakes. Social workers often must act quickly to address such needs as clothing, housing and medicine.
A lax culture of accounting
County officials described a lax culture at DSS about accounting procedures.
In some cases, Wilson said, social workers made expenditures without their supervisor’s approval. Other times, she said, supervisors did not document approvals for expenses.
Officials say they are unsure whether employees were trained to properly carry out the department’s financial policies.
“People who work anywhere need to know what the expectations are,” said John McGillicuddy, county general manager. “And when you know that they’ve been given those expectations and clear terms … you can hold them accountable. Part of our challenge is going to be who should have known that these were their responsibility.”
McGillicuddy said county management and DSS directors bear some responsibility in making sure the county is effectively managing the public’s money. But he said he thinks that if any of the previous DSS directors knew a problem was occurring, that it would have been addressed.
Officials said they have already addressed issues in the audits, including the need to process all checks through the county finance department and new training for DSS workers on accounting procedures. But the audit panel and county staff said they’d like more investigation.
Commissioner Dan Murrey said the challenge will be infusing the agency with a new culture.
“There are policies and procedures and the way we’ve always done things,” he said. “In a sound organization those two things are closer together.”
April Bethea: 704 358-6013
What the auditors found
The DSS program collected Christmas gifts for children in the county’s foster care system. Gifts were received from donors or purchased through financial contributions. Among the well-known supporters of the Giving Tree program is Project Joy, the holiday fund drive initiated by Observer columnist Tommy Tomlinson. The Giving Tree program has been shut down.
No receipts for a $10,000 check made out to an employee.
For the remaining $152,289 disbursed, $138,978 in receipt copies were provided. Of those 840 receipts, 799 had problems, including:
– Parts of receipts whited out, or omitted in photocopying.
– Altered dates.
– Gift card misuse.
– Multiple submissions of altered receipts.
The independent program collects donations to serve as what officials call“the last line of defense” for families and children and typically helps people pay utility bills and prescriptions. Until this year, it gave donations to DSS to disburse. The group stopped working with the county in March.
DSS issued checks without two signatures.
Payments made to county employees, instead of stores.
Unapproved items purchased.
Due to the number of “unsupported transactions,” auditors could not render an opinion on financial statements.
Used by social workers who purchased emergency supplies for needy families. DSS discontinued the programin May and replaced it with restricted credit cards with stringent guidelines.
99.3% of all transactions tested had problems, including:
Emergency money used for office supplies.
Source documents created after purchase.
Auditors checked various DSS receipts and payments to test internal controls.
DSS ran programs from an account that held benefits for Social Security beneficiaries.
DSS had two unauthorized credit card accounts.
Source: Mecklenburg County Department of Internal Audit; Cherry, Bekaert & Holland Certified Public Accountants & Consultants