Audit finds irregularities at second town
KREMLIN — A state audit of the small Garfield County town of Kremlin has revealed numerous financial irregularities, including some involving a former clerk/ treasurer who pleaded guilty in November to embezzling money from the nearby town of Hunter.
At the center of the alleged financial irregularities is
Donna Ellen Rainey, 55, of Kremlin, who simultaneously held the clerk/ treasurer's position in both Kremlin and Hunter for a number of years. Oklahoma law generally prohibits a person from holding two municipal offices, according to a 2018 attorney general's opinion. It could not readily be determined Thursday whether Rainey was able to hold both offices through some type of
exception.
Hunter and Kremlin are about 10 miles apart in northeastern Garfield County. Hunter has about 165 people and Kremlin 255, according to the 2010 census.
Rainey pleaded guilty in November to embezzling money from the town of Hunter. She received a fouryear deferred sentence and was ordered to pay $30,000 in restitution.
The Kremlin audit released Thursday also revealed evidence of possible embezzlement, but did not place a total dollar amount on suspected missing funds.
“Records were destroyed or removed from Town Hall and adequate records did not exist to properly account for all transactions of the town,” auditors said. “Utility billing records were not maintained as required. Billing stubs were destroyed, and customer account histories were altered or were missing information.”
Auditors were able to piece together some records that reflected possible missing funds.
For example, they found one receipt book that indicated Rainey had written receipts for at least $3,188 in utility payments. Those receipts could not be matched to bank deposits “indicating the funds were potentially misappropriated or otherwise diverted,” auditors said.
Auditors also found receipts indicating $ 1,250 had been collected for renting out the community center, but could find no corresponding bank deposits.
When auditors examined customer billing account records, they found $10,995 worth of adjustments had been made to customer utility accounts without board authorization or supporting documentation. Altering billing records is one way to try to avoid detection if embezzlement has occurred, an auditor said.
An auditor reported finding a partially shredded utility bill stub in the trash at Town Hall.
Auditors also took issue with Rainey's pay, saying that she was paid at a higher rate than had been approved by ordinance, resulting in a total of $13,500 in overpayments from July 2014 to March 2019.
Auditors noted that at least some of the extra payments resulted from the town board twice voting to bump up Rainey's pay — $100 a month each time — including once when the board attempted to change her position to city manager. Auditors questioned the legality of those pay boosts, however, noting that the official town ordinance was never changed to authorize the higher pay and that the “Town Board of Trustees form of government does not allow for the position of city manager and an elected official's pay cannot be changed during a term of office.”
In addition, Rainey was issued “three improper payroll payments totaling $1,175,” from the town's general fund, auditors said.
Rainey wasn't the only town official cited by auditors.
“Two former board members and the Kremlin fire chief were allowed to carry past due balances on their utility accounts without penalties or service disconnections,” auditors said.
The audit identified the fire chief as Jeff Baker and the former board members as Andy Minnick and Mike Parrish. The past balance on Parrish's account reached as high as $1,948.20 and the past due balance on Minnick's account reached as high as $ 809.01 before they were eventually paid off, auditors said.
Baker's outstanding balance reached as high as $2,282.36 in June 2018, auditors reported, adding that town officials notified them in October that Baker had paid off the past due amount after receiving a second disconnection notice.
Auditors criticized the preferential treatment given to these officials, citing a provision in the state constitution that states: “The receiving, directly or indirectly, by any officer ... of any county, city or town ... , of any interest, profit, or perquisites, arising from the use or loan of public funds in his hands, or moneys to be raised through his agency for State, city, town, district, or county purposes shall be deemed a felony. Said offense shall be punished as may be prescribed by law, a part of which punishment shall be disqualification to hold office.”
Efforts to reach current and former town officials named in the audit were unsuccessful. Auditors also reported: • More than $77,000 in town funds were expended without board approval and more than $6,000 was spent without supporting documentation.
• The town did not prepare budgets or utilize a purchase order system as required by law.
• The Kremlin Volunteer Fire Department maintained a bank account outside the town's authority and purchased $3,500 in gift cards that did not appear to be for a public purpose.
• The board allowed Rainey to conduct official town business and maintain town records at her private residence, limiting the public's access to those records.
• The board violated the Oklahoma Open Meeting Act.
• Without proper board approval, the town issued $638 in payments to the “postmaster” and Rainey issued a $300 payment to Kremlin High School for sponsoring a golf tournament.
State Auditor Cindy Byrd said the audit was prompted by a citizens petition.
“The citizens in this case took action and petitioned an audit, and we were pleased to assist them,” Byrd said. “Our audit revealed that their concerns were warranted.”
“These audits serve to identify issues and offer solutions to prevent this type of activity from occurring again,” Byrd said. “We hope that additional municipalities across the state also benefit from reviewing our findings, so they can also be informed and on guard to prevent the same issues from occurring in their towns.”