An independent forensic audit that followed the city of Dumas’ internal investigation into departmental budget discrepancies revealed Code Enforcement Officer Holly LaFever possibly committed fraud and/or theft. She was fired Friday, and City Manager Arbie Taylor said other Dumas Fire Department employees might be complicit. The audit also showed decisions made by the Dumas fire chief created breaches in the accounting checks and balances that made the misappropriation possible.
The problem surfaced after city personnel saw revenue declines when they began to prepare for the 2016/2017 budget. Their line-by-line review revealed inconsistent yearly trends in the line item for health permit fees. There are about 80 businesses who are required to have health permits, and each business pays the city $75 for an annual inspection. The line item for those fees should show about $6,000, but city personnel saw the audited revenue dropped to $4,875 in the 2013/2014 budget year. The drop was more drastic in the 2014/2015 budget year when it fell to $1,875 in audited revenue. The city, wanting answers, immediately launched an investigation.
Numerous inconsistencies in the health inspection process and how the fees were collected popped up during the investigation, and further probing indicated the revenue decline began when the process was changed.
“Previously, City Hall would send out an application for inspection, collect the $75 fee and then report to the health inspector that the business had paid their fee and was ready to be inspected,” City Manager Arbie Taylor said. “Once the inspection was passed, the permit would be issued.”
But then sometime in 2013, Dumas Fire Chief Paul Jenkins changed that process, and the health inspector started collecting the fees. Taylor said after that change, the fees were either paid directly to the health inspector or to the fire department.
“That caused a critical breakdown in the checks and balances that are critical to our accounting procedures,” Taylor said.
To maintain objectivity and eliminate bias, the city hired Lubbock-based Dawson Forensic Group to investigate the accounting process that led to the revenue decline. Their findings showed LaFever, and possibly other fire department employess, might have committed fraud and/or theft. With Dawson’s report in hand, the city called the Texas Rangers, and LaFever was fired.
“Further legal action may be undertaken, but that will be at the discretion of law enforcement,” Taylor said. “As far as other personnel, no action has been taken.”
But there was more.
During the investigation into the health permit fees, Taylor kept the city commissioners updated, and a question was raised about another budget line item for County Fire/Rescue Calls. That line item is for expenses the city can recover for the fire department responding to auto accidents, HAZMAT spills and other incidents that involve people from outside the city and are not Moore County residents. The fire department generates an incident report and an invoice for each incident, which is sent out for collection.
Again, Jenkins made a change. At his request, the city entered into an agreement with Amarillo-based Municipal Expenditures Reclamation, LLC to act in the city’s behalf in collecting the invoices after receiving them from the fire department. MER would keep 25 percent of the recovered costs as payment. The company also agreed to give the city month-end closing reports, copies of all checks remitted to the city, accounts receivable aging reports and records of all deposits made to the city.
But MER never did any of it. They didn’t give the city any reports, and Taylor found the fire department didn’t have them, either. Also, the investigation showed that since fiscal 2013/2014, no funds from MER have been recorded even though fire department records indicate numerous invoices were faxed to the company. The city asked the Dawson Forensic Group to look into it in addition to the health permits, and their report shows MER was negligent and didn’t live up to the terms of the contract they signed with the city. Over the last several years, only a fraction of the recoverable funds have been recovered, and the records show more than $30,000 that should have been recovered hasn’t been recovered.
Representatives from the Dawson Forensic Group met with the city commission during executive session Monday, and Taylor later said several accounting and oversight breakdowns led to the problems with the budget’s two line items.
“At the time in which the processes and procedures for implementing the health inspections was changed by the fire chief, there was an immediate effect on the revenues that were expected by that department,” Taylor said. “Why those procedures were changed is now a moot point. The fact remains that we are in this situation as a direct result.”
Taylor said law enforcement will determine if criminal activity occurred, “but the harsh reality is that we have expended time and money in the pursuit of these discrepancies, and questions remain unanswered.”
“The end result, at a minimum, is going to be a complete reorganization of the health department and the code enforcement department as well as a return to the previous procedures and processes for the collection of health inspection permit fees.”
The city paid Dawson Forensic Group $9,800 for their audit, a large reduction from their usual $20,000 fee.
“We were charged significantly less because the finance director compiled a great deal of the information the auditor’s needed,” City Attorney Jerrod Pingelton said. “We were able to save them a lot of time, which saved the city a lot of money.”
Taylor said further disciplinary action may need to be taken, “but to what extent and to whom will rest in the final outcome of the investigation.”
Animal Control Officer Dustin Carlyle replaced LaFever, effective Tuesday. He will continue to work as the animal control officer in addition to health inspection and code enforcement duties.