City Council Accepts Past Audit Findings

FARMINGTON — Farmington City Council at its Oct. 8 meeting voted to accept the city’s 2016 audit conducted by Przybysz & Associates Certified Public Accountants, and one section in the report repeats deficiencies in internal control that were spelled out during an investigative audit completed by Legislative Audit in 2017.

The investigative audit found that former finance director and court clerk Jimmy Story had misappropriated more than $1.5 million over an eight-year period by receiving revenues for Farmington District Court and the city’s general fund but not depositing the money into the appropriate bank accounts.

Story pleaded guilty in November 2017, to one count of theft concerning programs receiving federal money and one count of filing a false income tax return.

In July, U.S. District Judge Timothy Brooks sentenced Story to 46 months in federal prison and ordered Story to pay almost $1.3 million in restitution to the city of Farmington and $371,956 in restitution to the Internal Revenue Service. Story’s sentence includes three years of supervised release following his prison term.

The Legislative Audit investigation revealed that Farmington did not have internal controls in place over the receipting, recording and depositing of revenues. Specifically cited was a lack of segregation of duties and fiscal oversight.

As court clerk and finance director, Story was the sole employee responsible for preparing and making bank deposits, reconciling bank statements and entering information in the District Court’s case-management system.

City Clerk Kelly Penn handed out copies of Przybysz’s 2016 Farmington audit report to Council members, saying the firm was fulfilling its contractual obligation to finish the 2016 audit.

Basically, Penn said, Przybysz took information from the Legislative Audit investigation and inserted it into the 2016 audit.

Przybysz’s audit report cites three findings: (1) misstatements due to fraud entered into the accounting records; (2) incorrect recording of activity and inter-fund transactions not in balance; (3) internal controls over financial statement preparation.

The accounting firm recommended the city implement a system of internal controls that segregates the duties so that one person authorizes transactions, one has custody of assets and one keeps and records activities.

It also recommended the city implement an adequate monitoring and review of journal entries and inter-fund transactions on a monthly basis.

The third recommendation was to implement systems of internal controls and personnel regarding the preparation and review of financial statements.

For each of the findings, the city of Farmington agreed to the recommendations made by Przybysz.

Penn told Council members that Farmington has put measures in place to divide up duties and provide fiscal oversight.

She said six people have been assigned different duties when it comes to the city’s finances, revenue coming into City Hall and revenue coming into District Court. The city now has a court clerk and a deputy court clerk who are responsible for the court’s case-management system.

Duties have been segregated so that no one person has complete control over deposits, cash, reporting and reconciliations.

Przybysz audited the city of Farmington for the years outlined in the investigative audit, Jan. 1, 2009, to Dec. 6, 2016.

For 2017 and future audits, Farmington is using Legislative Audit, not a private accounting firm.

Penn said the city’s 2017 audit conducted by Legislative Audit has been completed but it cannot be released to the public until it is approved by the Legislative Audit Committee. Penn said Farmington received an excellent audit and the City Council would be “very pleased” with the report.