Unlike Wake County and Its Register of Deeds Office, Some Counties Stop Losses with Internal Audits | Wake County | Indy Week
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Unlike Wake County and Its Register of Deeds Office, Some Counties Stop Losses with Internal Audits 

Since 2008, as Wake County's Register of Deeds office was losing track of more than $600,000, Durham County performed two hands-on audits of its equivalent office, catching a few problems and moving on.

The difference? Durham County—like Buncombe, Mecklenburg, and other North Carolina counties—has an internal audit department. Auditors working for the semi-autonomous panel check everything from the way cash is handled to the people who carry out certain roles in the issuing of certificates and accepting payment, as in a 2008 audit of the Durham Register of Deeds office.

"Losses, if they were to occur, can be quickly identified at the point at which they occurred," Durham County audit director Richard C. Edwards wrote in an August 2008 report. "Supervision and segregation of duties is such that the risk of ongoing fraud or misconduct is limited."

Each North Carolina county uses external auditors to prepare a record of its financial affairs and other key facts, producing a comprehensive annual financial report, or CAFR. Such accountings can catch fraud, but they aren't designed for that purpose. Wake County's director of finance has said that the annual report filled a legal requirement for an audit of any department that handles cash and other payments.

"That's actually the register's statutory responsibility," says Greg Allison, a professor at the School of Government at the University of North Carolina at Chapel Hill. "How they handle internal controls, that's their purview."

According to Wake internal documents, then-register of deeds Laura Riddick habitually received bundles of uncounted cash, which she totaled while alone, then handed off to other staff members for recording.

In March, Wake County District Attorney General Lorrin Freeman and county manager Jim Hartmann announced that Riddick, an elected official who had held the office since 1996, had resigned her post because of poor health. The office remains under investigation by the State Bureau of Investigation, with the probe likely to conclude in about two months, Freeman says.

Riddick could not be reached for comment. Freeman says the former official is continuing to cooperate with the investigation.

"There are legitimate questions to be asked about why this was missed for so long," Freeman says.

UNC's Allison declined to comment specifically on the Wake case, but he says some county financial officers have shown reluctance to probe too deeply into the accounts of county sheriffs or registers of deeds. Both are elected officials and thus may enjoy a different status from that of hired department heads. The office of a county's elected district attorney general is a branch of state government and as such is subject to stringent review by the Office of the State Auditor.

"It gets really odd when you are dealing with a register of deeds office or a sheriff's office," Allison says. "Those individuals think, 'That is my office; you leave my office alone.'"

George K. Quick, chief financial officer of Durham County, agrees with Allison's statement about elected county officials.

"Sometimes those departments are hard to bring under the financial wing of the county," Quick says.

Wake County spokeswoman Dara Demi says the county does not have an internal audit committee. She noted that the Wake County Board of Commissioners has a budget and audit/finance committee, which oversees the CAFR. The internal auditor, John T. Stephenson, reports to the county manager's office.

"We are in the process of completing a business process review of the Wake County Sheriff's Office, which was initiated at the [sheriff's office's] request," Demi says. "We reviewed e-recording procedures within the Register of Deeds Office in 2013 to ensure proper deposit of funds at the request of the Register of Deeds."

Durham County audited both its Sheriff's and Register of Deeds office twice during the past decade. In 2007, an auditor's report found: "The lack of controls based upon sound principles in the Office of the Sheriff resulted in current estimated losses and misallocations of approximately $311.4K over a period of approximately 40 months from January 2004 through April 2007."

As the INDY first reported last week, Wake County did not perform detailed internal audits on the Register of Deeds office until word got out about the missing funds there. Freeman says the losses might have lasted a decade. Darryl Black, a former employee of the office, says he tried to bring into play more automation and computerized record keeping but got resistance from Riddick.

"Where there are not sufficient detailed audits done, it opens up the opportunity for these things to occur," Freeman says. "It can be as simple as the computer system is set up in such a way that it makes these kinds of things hard to be detected."

This article appeared in print with the headline "Risk Aversion"

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