But first, Commissioner Al Whitesides, who with Commissioner Robert Pressley, serves on the county’s internal audit committee, read remarks from that body that included, “The most effective internal controls over county assets become much less so in an environment that affords senior management extremely broad powers over financial resources and personnel. In addition, the effectiveness of the internal audit function in prior years was limited, given the internal auditor reported to senior management for all practical purposes. From this broader perspective, the Audit Committee believes that internal controls were weak during the fiscal year ending June 30, 2017 and likely in preceding fiscal years in which these conditions were the rule.”
Whitesides then commended the board for recent corrective actions. Many broke the monopoly the former county manager had maintained over scrutiny of her own actions and whistleblower complaints. Others provided for more transparency or promoted an “if you see something, say something” organizational culture.
When Flora took the stand, he began saying, “A single tax dollar used wrongly is a material event and a betrayal of public trust.” He then explained the county’s audit was only of internal controls. It was not a forensic audit. Instead, it only checked to make sure the county was following procedures prescribed by state and federal agencies for handling money.
By way of contrast, the federal investigation is looking at two types of problems: (1) inappropriate uses of funds and (2) questionable transactions. Flora said the dollar value of the former is too small to change the county’s financial position, and all the latter were entered in ledgers with standard budgetary processes. Reports about missing money, he said, were unsubstantiated. “Every dollar is accounted-for.”
Flora explained the county’s internal controls included prevention and detection; and preventions had eroded. “Before, we had protocols in place to prevent and detect wrongdoing. However, we let someone in power and position take advantage of those systems. We also operated in an environment where discovering these exploits was made difficult and making changes to any of the weaknesses incredibly hard.” What followed could only be addressed in general terms due to restrictions imposed by the ongoing investigation. Flora indicated even the commissioners likely did not know some of the details.
What did work was the detection. Flora then provided a “very summarized” history.
“Starting in the fall of 2016, there were some peculiar decisions and directions provided by the former county manager that came across as odd; nothing concrete, mind you, just things that made me scratch my head and wonder what’s going on.
“In the spring of 2017, there were some questionable actions by the county manager that raised some red flags for finance staff. Not much detail can be provided at this time.
“These actions led to an increased level of scrutiny regarding specific financial events. It is likely you, the board, and the public, are unaware of these actions, because ultimately they were prevented from occurring because of our internal controls.
“Over a four-day period in June, 2017, Finance noticed a series of irregularities tied to the former county manager. Again, our internal controls caught these events. However, in these circumstances, the controls were detective in nature, meaning the events had already occurred, but were discovered through routine analysis and review. Some irregularities were quickly deemed inappropriate, and an internal review was begun.
“Because of the nature of the events and circumstances, our internal auditor and human resources director were immediately notified and consulted.
“The weekend following these discoveries, irregularities were documented and delivered the following Monday to our senior attorney for his advice and counsel.
“Based on this, it was determined that a potential breach had occurred. While the senior attorney immediately notified the proper legal authorities; Finance, HR, and IT began the process of restricting county manager access to our systems, as well as the administration building. The county manager was informed of the restrictions placed upon her.”
Then, “We, collectively, meaning Finance, IT, internal Audit, Human Resources, Legal, and Budget, began the process of locking down information to preserve evidence.”
The county manager resigned, and authorities notified included the Local Government Commission; the state treasurer; the state auditor; and the county’s external auditors, Gould Killian CPA Group. With Gould Killian, county staff began assessing damages, and staff began developing new strategies to prevent the mishaps from recurring.
Flora concluded, “These events speak loudly to our past failures at transparency and accountability. Things were approved. Authority was granted. It was clear messages got muddled, intent obfuscated. As department heads, we let ourselves be put in silos. We trusted when we should have questioned. And when we did question, we let ourselves be convinced.
“We have all been let down. We have been misled. We thought we were better than this. We know we are better than this. Public trust has been compromised. We cannot let these actions define us, nor interfere with the tremendous work otherwise done by county staff.”
Ed Towson, representing Gould Killian, followed. He elaborated on how his firm only assessed internal controls, and he repeated it was the county’s strong internal controls that uncovered the questionable activities. He added, “It’s not known because the investigation is not complete – but it’s our understanding that in the questionable transactions involving [purchasing] cards, there were, in fact, two or more people involved. Now, it has kind of an ugly name in accounting. We call that collusion.
“And you think of it usually as two people that participate in an activity where they both benefit. And that’s not the case. Sometimes, collusion is inadvertent. There’s so much trust in an individual that a person does what they’re instructed to do, and we suspect that some of that occurred. And then, sometimes, collusion can occur simply because the person has some fear or other worry about their job or something that could happen. And so, when we get to that point, then there’s a little bit of a problem, which is the system of internal control on the preventive side is undermined. This is often called override of internal control.”
Towson explained no amount of policy was going to totally eradicate opportunities for collusion. Instead, the best way to prevent it would be what’s called, “the tone at the top;” or, “making sure that every person in the system – every employee, every person in finance – realizes that they have a duty and responsibility to report anything they think is inappropriate, or question it, and to make sure there’s education in that area.”
In follow-up discussion amongst the commissioners, it became apparent that purchasing cards had been abused for at least three years. Commissioner Ellen Frost commented, “Those charges were outrageous, absolutely mind-boggling crazy, and it happened over a period of three years.” While Flora said p-cards posed the highest risk of any county program for abuse, they are also preferable to formal requisition procedures for EMS and general services personnel who need something while in the field. They are issued to about 280 of the county’s 1,400 employees.
In Other Matters –
The meeting had begun with a discussion of four formalized instructions for the county manager. Commissioner Mike Fryar wasn’t impressed, noting County Manager Mandy Stone had instigated three of the four with neither explicit orders from the commissioners nor any official documents. Stone, however, said she welcomed any clarification, even if it was redundant. Frost recalled, “The first commissioner training I went to, I was instructed not to micromanage the [former] county manager. Well, that has burned all of us.”
The first item instructed Stone to “continue to recover funds” misappropriated from the public treasury by the former county manager. Commissioner Joe Belcher used the opportunity to suggest the county, absent fraudulent activities, could be in a position to lower the tax rate.
Later in the meeting, the commissioners approved the donation of two “excess” ambulances; one to the Fairview Volunteer Fire Department, and the other to the Buncombe County Rescue Squad. The county had replaced its diesel fleet in order to reduce maintenance costs, and all but two of the vehicles had been sold on GovDeals.com. The vehicles in question had about 166,000 miles on their odometers, and their estimated market value was $12,000. The commissioners were fine with the donation, referencing what appeared to be widespread ambulance breakdown in the county. Frost was happy to keep the rescue vehicles in the county in light of skyrocketing calls for service for opioid abuse. Fryar used the discussion as an opportunity to inquire about the status of MEDIC’s ongoing requests for a franchise to answer 911 calls.
In a final matter, Stone addressed another policy change. She explained the county had no sooner adopted an inclement weather policy when it snowed, and putting the document in practice brought to light a deficiency. General services employees had not been considered among those whose job descriptions require them to work in inclement weather, but they must clear roads for police and emergency rescue personnel who are. As Stone explained, there was lack of clarity in the policy; they should be eligible for comp time.
“And I say, ‘Yay!’ It’s exactly what we want to see happening in the new environment,” said Stone. “I’m here to celebrate somebody questioning my authority.”