The Oklahoma State Auditor and Inspector’s Office released a comprehensive audit of the Circuit Engineering District No. 7 in April.
This is the 14th of a series of stories published by the Weatherford Daily News regarding the findings of the audit.
This story highlights the issue a special investigation into an alleged embezzlement of CED7 funds.
CED No. 7 includes Beckham, Blaine, Custer, Dewey, Ellis, Greer, Harmon, Jackson, Kiowa, Roger Mills, Tillman and Washita counties.
The board consists of a county commissioner from each of the 11 counties.
At issue — CED7 alleged embezzlement
Immediately after beginning the audit, an employee came forward admitting to an embezzlement of CED7 funds. An internal investigation of the alleged embezzlement was performed by R.S. Meacham, CPAs & Advisors (Meacham).
After completion of the internal investigation, and notification of appropriate law enforcement agencies, FSW&B Certified Public Accountants, PLLC (FSW&B), was asked to perform a follow-up investigation. Their objective was to accumulate and quantify evidence supporting the conclusion of the internal investigation performed by Meacham and to gather evidence to determine the extent and methods of the suspected embezzlement.
Upon completion of the agreedupon procedures engagement, FSW&B concluded:
“In our opinion, based on the evidence accumulated to date with both the internal Meacham report and our additional procedures, $99,300.36 is the amount in which restitution should be based.”
Per FSW&B, the methods utilized in the embezzlement included:
1 — improper use of a company-issued debit card for personal purposes; 2 — unauthorized
2 — unauthorized payments made to the perpetrator;
3 — overpayments of payroll to the perpetrator through unauthorized additions to payroll checks or overpayment of longevity and unused annual leave;
4 — repayment of loans due the 401(a) plan from the perpetrator and other employees which were not deducted from their payroll but instead paid by under-contributing company contributions to the plan; and
5 — payment of unauthorized comp time.
Part of the embezzlement investigation, as discovered and calculated by the independent CPA firm, included loans taken by CED7 employees from their 401(a) plans. This concern included nine employees in addition to the embezzlement perpetrator. These loans were not repaid with employee post-tax earnings as required by the plan but were being repaid with the CED7 payroll match contributions.
The audit found the matching contributions to CED7’s 401(a) plan were improperly utilized for the repayment of employee loans.
Employee loan payments were not deducted from employees’ post-tax earnings as required but were repaid with the 12 percent retirement matching amounts funded by CED7. The total outstanding employee loans owed was $171,522.61. The estimated investment earnings due from the lack of new contributions to the plan was $52,220.25.
The CED7 board voted to “make whole” the estimated investment earnings amount of $52,220.25 not earned from the lack of new contributions. The $171,522.61 owed by CED7 employees was treated as early retirement plan distributions and taxed accordingly.
As reported by FSW&B, the number of individuals involved in not paying back their loans — employees who should have been aware, understood, or reported the fact that the repayment of their loan had not been withheld from their paycheck — was questionable.
July 24, 2018, the CED7 board voted to “disallow loans through the Lincoln Financial 401(a) plan.