Ohio Auditor of State's website

Lessons Learned

How Some Ohio Governments Strengthened
Practices and Policies in the Aftermath of Fraud

By Steve Faulkner – Public Affairs Staff Writer

Many crooks are simply manipulating bank accounts to commit their fraud. From a fiscal clerk who wrote herself additional paychecks, to a port authority director who used a bogus bank logo to forge monthly account statements, the face of fraud can change dramatically from one case to the next.

Some local government offices in Ohio have learned difficult lessons from crimes like these and have adopted new policies and procedures to help prevent from being victimized again.

The village of Lockland in Hamilton County is a prime example. On August 19, 2008, Ohio Auditor of State Mary Taylor released the final report of a special investigation detailing how two village employees committed completely separate crimes to embezzle more than $315,000 from local taxpayers.

One of those employees, former village Payroll Clerk Debra Reynolds, wrote herself additional payroll checks totaling $128,016 over a two-year period. She pleaded guilty to theft in office, was sentenced to five years probation and ordered to pay restitution. The second employee, former Mayor’s Court Clerk Dana Mynatt, stole $188,481 in fines paid to the court but never deposited.

“You have to trust the people you work with, but you have to double check the work of the people you work with as well,” said Krista Blum, finance manager for the village of Lockland.

Since the theft, village Administrator David Krings, who first alerted the Auditor of State’s office of his suspicions, ordered a top-to-bottom review of the policies and procedures in place to safeguard public tax dollars.

“We’ve tightened up our policies in general,” Krings said. “There are at least two sets of eyes on all transactions. We weren’t doing an adequate job of that in the past.”

Krings now personally reviews all village checks. He receives unopened bank statements and randomly picks certain transactions to scrutinize for more information.

Nearly 175 miles from Lockland, the former executive director of the Coshocton Port Authority was forging bank statements to cover up his theft. On April 10, 2007, Auditor of State Mary Taylor released details of a scheme former director, Edmund Flynn, used to make illegal credit card charges for personal medical payments, college tuition payments, jewelry, flowers and personal travel expenses totaling more than $64,000.

Flynn was charged with theft in office, sentenced to serve one year in prison and ordered to pay more than $83,000 in restitution, which included the cost of the Auditor of State’s investigation.

When T.J. Justice was hired as the new executive director of the Coshocton Port Authority, he had to clean up Flynn’s mess and restore the community’s trust in the port authority.

“We did a sweeping review of our policy manual and instituted new policies covering everything from cell phones to purchase orders,” Justice said. “We are now operating in a much more transparent mode with proper safeguards in place.”

A few of those safeguards include:

• Eliminating the port authority’s credit card • Making bank reconciliations available to board members at monthly meetings • Requiring port authority board members to sign each check issued

On February 27, 2009, the Government Finance Officers Association’s (GFOA) executive board produced and published a recommended model policy to prevent bank account fraud in government. According to the GFOA, “Advances in technology have reduced the effectiveness of traditional fraud prevention techniques and have even enabled new forms of fraud.” But there are ways to improve oversight. Krings and Justice are doing exactly what the GFOA recommends. With the overhaul of their individual policy manuals in place, they have provided taxpayers with additional protection against fraud, but their examples serve as cautionary reminders that fraud can strike most anywhere.