An audit of Nueces County’s auditor has revealed concerning findings of poor documentation and noncompliance with policies and procedures.
The Nueces County Commissioners Court heard a preliminary report on forensic audits of the county auditor’s office and a health insurance fund on July 23. One finding was that commissioners weren’t informed of millions of dollars in transfers and loans to the county’s health insurance fund.
The audits examine five years from fiscal years 2020 through 2024. The current Nueces County auditor, Grayson Meyer, was not in the position at the time.
In January, the Commissioners Court chose accounting firm Carr, Riggs & Ingram to conduct a forensic audit of the county’s health insurance fund and the county auditor’s office.
The final reports from the audit will be presented at the next Commissioners Court meeting, including detailed findings and recommendations.
CRI partner Ben Kincaid presented the preliminary findings July 23. Kincaid shared a high-level overview of the main findings, but the final reports will include more findings.
The county auditor’s office is responsible for preparing accounting records for all county funds, auditing the records and accounts of various county departments, verifying the legality of county disbursements, forecasting financial data for budget formulation purposes and serving as the county’s budget officer.
Commissioner Brent Chesney said that the commission had concerns about the previous auditor, which is why the county pursued a forensic audit. Forensic audits are used to identify fraud or irregularities.
The forensic audit cost the county $315,000.
Meyer was appointed county auditor in May. He previously served as a business manager for development services for the city of Corpus Christi and as budget manager for the Nueces County auditor’s office.
For the county auditor’s office, the outside forensic auditors analyzed internal financial statements, county budgets, financial records, year-end financial processes, payroll expenditures, invoices, contracts, procurements, purchase orders, and purchasing card and fuel card activities. They were looking for irregularities and noncompliance.
There were errors in budgets, Kincaid said, and commissioners were concerned about a lack of documentation. A software transition also created significant hurdles for the county.
The outside auditors found that operations were siloed within the county, the county had an elevated fraud risk, there was insufficient planning for the software transition, the county had a lack of standard procedures and reviews of existing policies for compliance, bank reconciliations weren’t performed on a timely basis and the county lacked oversight for procurement cards.
“Overall, we determined that the auditor’s office was operating as a silo within the county, and that affected its operations and its ability to serve as an auditor for the county as a whole,” Kincaid said.
This siloing is a problem in other county departments as well, Kincaid said.
“We have to have buy-in from everybody,” Nueces County Judge Connie Scott said. “We want to move forward with new policies that take care of this and correct the problems.”
Other findings include minimal oversight over fuel card purchases, insufficient details for purchase orders, insufficient documentation for gift card purchases, lack of procurement training and noncompliance with county policies and procedures. The county uses gift cards for social services and staff recognition.
The county also doesn’t have a fraud hotline for people to report fraud or noncompliance.
The reviewers also recommend the county implement fraud awareness training. Fraud is often caught by employees, Kincaid said.
The county hasn’t been using internal audit functions sufficiently, the audit showed.
For the health insurance fund, the auditors analyzed financial records, identified the sources and uses of funds transferred to offset losses, analyzed a change in the pay schedule for employee and county contributions, analyzed the procurement of agreements with health insurance fund contractors and determined whether the county’s internal controls were overridden.
“Over the past several years there have been deficits within the health insurance fund that created concerns,” Kincaid said. “There were also some concerns related to loans that were being provided from the general fund to the health insurance fund as well as various transfers amongst the funds.”
But during this time, the Commissioners Court wasn’t given the full picture of the health insurance fund’s financial performance.
If only employer and employee contributions to the fund are considered, the fund lost more than $10 million between fiscal year 2019-20 and fiscal year 2023-24. To make up for the losses, the county contributed additional monies to cover the deficits.
These transfers appear as revenues.
“It obscures to some degree the true reality of the fund performance,” Kincaid said.
Kincaid said that $3.75 million in loans and transfers to the account were never brought before the Commissioners Court.
“That’s beyond disturbing,” Chesney said, saying that someone will have to be held accountable.
Chesney said that the county should budget for forensic audits every few years.
Commissioner John Marez called the findings “staggering.”
Commissioner Mike Pusley said that he’s long had concerns with purchasing card and fuel card transactions and gift cards.
Pusley, a former Corpus Christi City Council member, said that the city’s fraud hotline has helped bring problems to light. The city also has an audit committee, Pusley said.
“Maybe those are some things we need to look at,” Pusley said.
Scott said that the county has policies in place that county employees were not following.
“Let’s make sure we don’t create more if there’s something (already in place) that we need to enforce,” Scott said.
This article originally appeared on Corpus Christi Caller Times: Nueces County examines fraud risk, irregularities from former county auditor’s office
Reporting by Olivia Garrett, Corpus Christi Caller Times / Corpus Christi Caller Times
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