CASPER, Wyo. — Local officials never suspected that Lisa Whetstone was stealing from the town of Mills: It was a random state audit in 2015 that revealed the then-treasurer had embezzled roughly $60,000 from the town.
Whetstone, who was ordered this year to repay the funds and serve five years of supervised probation, used the town’s credit card for personal expenses and stole money she was supposed to deposit into a government bank account.
Her crimes aren’t unique in Wyoming. State audits catch town officials embezzling about every three years, but due to a shortage of funds and staff these audits aren’t happening on a regular basis in small towns, according to Pam Robinson, the administrator for the public funds division of the Department of Audit.
Mills Mayor Seth Coleman said the town had not been audited in nearly three decades when Whetstone was caught, and other towns throughout the state are in similar situations.
The Department of Audit released a report last month that revealed that 13 of the 79 small towns in Wyoming have not been audited by the state — or by an independently hired CPA — in at least a decade.
Two of these towns, Edgerton and Midwest, are in Natrona County.
The state used to audit small-town governments at least every four years — until the department’s budget was cut in 1992, Robinson told the Casper Star-Tribune (http://bit.ly/2wFhRkR). Small-town governments were not audited by the department again until a budget increase in 2005 allowed the audits to resume on a limited basis.
The state defines small towns as those with a population of under 4,000.
Auditing requirements for small towns vary from state to state.
Requirements in Idaho are based on a town’s expenditures, not population, said April Renfro, the manager for the audit division at the Legislative Services Office. Renfro said municipalities with expenditures of over $250,000 are required to have an annual audit done by a CPA, which is then submitted to the office.
In Colorado, all towns regardless of expenditures or population are required to hire a CPA to perform an annual audit and then submit the report to the Office of the State Auditor, according to Stelios Pavlou, the office’s communications specialist.
Although Wyoming law does not require small towns to be audited, Robinson said some towns routinely hire CPAs. Others skip this step.
The town of Mills previously opted for the latter option, but Whetstone’s arrest and conviction sparked a series of changes: The town purchased a more advanced accounting software system, financial duties that used to fall solely on the town treasurer are now shared by the town clerk and a CPA is hired each year to conduct an audit.
But every small town can’t afford these safeguards.
Bert Smith, the clerk treasurer for Midwest, said the town is working with a limited budget and cannot afford a CPA’s services, which she said would cost at least $10,000.
Smith noted that financial duties used to be split between the clerk treasurer and a deputy clerk but that the deputy clerk position was eliminated in 2016 due to budgetary restrictions.
“I’m the only one that deals with the money,” she said.
Smith explained that the town keeps track of its finances with in-house audits, which are conducted each year by herself, another city employee or a council member. The clerk treasurer said she believes this measure is effective at protecting the town’s funds, and added that she’s never heard town residents express concerns.
That said, Smith said that regular state audits would be helpful.
Cindy Aars, the clerk treasurer for Edgerton, echoed those sentiments.
Edgerton hasn’t been audited by the state or a CPA in at least 20 years, and hiring an accountant is currently out of the question given the town’s tight budget, according to Aars.
“We lost a lot of our revenue the past year, just in sales tax revenue,” she explained.
Pointing out that she hasn’t had a raise in three years, Aars said hiring another employee to share financial duties would also be too expensive.
However, the clerk treasurer explained that she makes every effort to keep Edgerton City Council informed about all financial matters, and said she frequently has other city employees looking over her shoulder at work.
Like Midwest, Edgerton also conducts self-audits each year to keep track of funds, Aars said.
Wyoming Association of Municipalities Executive Director Rick Kaysen said the association believes it’s essential to protect a town’s funds but also recognizes that limited budgets are a valid challenge for towns and the state.
While Kaysen encouraged town council members to take an active role in their town’s finances, he said officials must decide what’s best for their individual municipality when it comes to auditing.
“There is not a silver bullet. . It’s an ongoing discussion,” he said.
Despite the struggling economy, Carisa Hensley, the town clerk and treasurer for Bar Nunn in Natrona County, said the town has opted to pay a CPA to conduct annual audits for at least two decades.
However, Hensley said she considers audits a “backup” when it comes to protecting the town’s money and believes having an active council that stays involved in financial matters is a more effective safeguard.
The Department of Audit’s 2017 Report on Evaluation Requirements for Small Cities and Towns supports Hensley’s belief that audits are not the most important method for detecting fraud.
“An auditor will consider the possibility of fraud and will design their testing to detect fraud in the context of having an impact on financial statements, (but) audits are not a significant method of fraud detection,” states the report.
The majority of fraud investigations are launched because of tips, according to the report, which suggests that a “formal intake system of tips” should be established by state and local agencies.
However, the report still concludes that external audits are useful for municipalities.
“An audit will give assurance the town is accounting for its transactions properly, that internal controls are in place, and the financial statements produced by the town are representative of the financial activities and position of the town for the audited period,” it states.
Robinson couldn’t comment on whether Wyoming has plans to change its auditing practices. But according to the report, the state and local section of the Public Funds Division would need to bring on eight additional auditors and one manager to audit all 79 small towns every five years.
Information from: Casper (Wyo.) Star-Tribune, http://www.trib.com