State Auditor Nicole Galloway released her follow-up report on the city of Cross Timbers, a town of fewer than 120 in Hickory County. A citizen-initiated audit released in March gave a rating of “poor”; the audit found tens of thousands of dollars misappropriated by a former city clerk and a city in poor financial condition.
The follow-up report measured the progress of city officials in implementing the recommendations on 31 audit findings. Auditors found that while some progress has been made, more than half of the recommendations were only partially implemented or not implemented at all.
In the audit released in March, auditors found at least $44,452 was misappropriated by former city clerk January “Nicki” Clark during her employment with the city from 2017 to 2020. This included payments to the city never deposited; improper adjustments to utility payments, including adjustments to Clark’s own utility account; and overcompensation to herself.
Bank records obtained by the State Auditor’s Office and provided to law enforcement established that there were cash deposits into her personal bank account of amounts similar to or greater than the number of missing city receipts. Clark was charged with felony stealing by the Hickory County Prosecuting Attorney. That criminal case remains ongoing, with the State Auditor’s Public Corruption and Fraud Unit providing support.
The audit also found city finances in poor financial condition, and that the Board did not adequately monitor the city’s financial condition. As a result, expenses exceeded income in 2018 and 2019, causing cash balances to decrease. The cash flow problems resulted in the city not paying bills timely.
The follow-up report found that of the 31 audit recommendations reviewed, city officials have implemented six and are in progress on another six. Of the remaining recommendations, thirteen have been partially implemented and another six have not been implemented.
Auditors noted that the city is paying all current bills due and has implemented procedures to monitor spending and cash balances each month. The city is making monthly agreed-upon payments on past due balances owed for electricity, payroll taxes, pumping equipment and services, and the state audit. However, as of August 2022, the city still owed over $62,000 to these vendors and entities.
Auditors also found the city has implemented some of the recommended electronic data security measures. Officials also have made progress on employee payroll and other accounting matters, including paying past due payroll taxes to the IRS and sewer loan payments.
The report noted that the city’s Board of Aldermen has not obtained annual audits of the combined water and sewer system as required by state law and loan/grant, nor has the Board ensured the publication of the city’s semiannual financial statements, as required by law; and the Board has not determined the proper classification for the city clerk and maintenance supervisor to ensure compliance with state and federal laws and regulations.
The report also found that the Board has not periodically reconciled customer utility deposits per the utility system to accounting records and cash balances, and promptly investigated any differences. Several other recommendations regarding the utility system have only been partially implemented.
While working with the city in conducting the follow-up work, auditors identified deleted utility transactions and various concerns related to the handling of customer utility payments. Additional work related to these transactions and concerns is planned and will be addressed in a subsequent letter to the Mayor and the Board of Aldermen.
A complete copy of the follow-up report on Cross Timbers is available here.
