Auditors: Hatton clerk missapropriated funds

HATTON — The former clerk/treasurer of the Town of Hatton has been found to have misappropriated money and used other money in a questionable manner, according to a report published on July 25 by the Washington State Auditor’s office.

“On July 30, 2018, the mayor of the Town of Hatton notified our office regarding a potential loss of public funds as required by state law,” stated the report. “We initiated an investigation and determined a payment misappropriation totaling $6,289 and questionable expenditures totaling $15,783 occurred at the town between Jan. 29, 2016, and July 6, 2018. We also identified penalties and fines related to overdue payroll tax totaling $455 that have been assessed to the town. The town filed a report with Adams County Sheriff’s Office on July 14, 2018. We will refer this report to the Adams County Prosecuting Attorney’s Office.”

According to the report, the former clerk/treasurer worked 909.2 questionable hours, in the form of working from home and going to unapproved trainings and conferences, that came to a total of $14,032.

She issued a $1,000 check to herself on June 15, 2017 as a loan for the down payment on a van. When she requested the loan from the city council on July 10, 2017, they did not approve the request. The auditor’s office determined that was a misappropriation of public funds.

On July 9, 2018, the former clerk issued a check for $4,301 to herself.

“The notes left by the clerk/treasurer noted this was to reimburse her for the federal income tax withholdings held from her paychecks over years 2015 to 2018,” stated the report. “Calculation notes show tax withholdings amounted to $5,151 but she reduced $850 related to the repayment of the personal loan taken in June 2017. We identified $4,301 to be misappropriated disbursements.”

The auditor’s office identified $145 of travel expenses and general disbursements from January 2016 to July 2018 that “lacked support.” There were also $6,324 of unauthorized purchases, misappropriated funds and questionable transactions on the city’s debit card.

It was also found that $393 in late utility bill fees were not applied to the former clerk/treasurer’s personal utility accounts. The mayor’s personal account was also found to be missing $363 in late fees.

The former clerk/treasurer did not payroll taxes.

“The clerk/treasurer was responsible for making sure the town paid its quarterly payroll income tax withholding to IRS regularly,” stated the report. “According to the town’s new clerk/treasurer, the town has not paid payroll taxes since 2015. As of April 8, 2019, the IRS has assessed penalties and interest related to overdue payroll taxes from the first quarter of 2015, totaling $455.”

As part of the process, the state auditor’s office talked to the former clerk/treasurer.

“On April 9, 2019, we interviewed the former clerk/treasurer, who said that in June 2017 she discussed the $1,000 loan with the mayor and various council members,” said the report. “She said the mayor approved it, and she paid it back. She further said that she never understood how to report payroll withholding to the Internal Revenue Service (IRS) and did prepare a check to herself for reimbursement of her 2015 to 2018 federal tax withholdings.”

The Washington State Auditor’s Office found that the City of Hatton did not have the appropriate internal controls necessary to adequately “safeguard public resources.”

“Disbursement controls, including controls over payroll, were not adequate to ensure payments were allowed, supported by receipts or timesheets, and for a town purpose,” said the report. “The council did not perform a secondary review of the clerk/treasurer’s debit card transactions and did not make sure the clerk/treasurer submitted quarterly income tax reports to the IRS. Cash receipting controls were not adequate to ensure funds receipted were deposited to the Town’s bank account. The town lacked adequate oversight over utility billing to make sure the clerk/treasurer consistently applied late fees to accounts in accordance with town policy.”

The auditor’s office issued some recommendations to the City of Hatton.

“We recommend the town strengthen internal controls over disbursements, cash receipting and utility billing, including oversight and monitoring in order to safeguard public resources and comply with town policies,” said the report.” We also recommend the town strengthen monitoring over the clerk/treasurer position to ensure timely submission of quarterly income tax report to IRS. We further recommend the Town seek recovery of the misappropriated $6,289 and related investigation costs of $14,878 from the former Clerk/Treasurer and/or its insurance bonding company, as appropriate. Any compromise or settlement of this claim by the town must be approved in writing by the Attorney General and State Auditor as directed by state law (RCW 43.09.260).”

The City of Hatton is working to correct the problems as presented in the report. Their current city clerk is getting trained with financial software.

Rachal Pinkerton may be reached via email at rpinkerton@suntribunenews.com.