Charlotte-Mecklenburg Internal Auditor resigns after DSS error
The former Director of Charlotte-Mecklenburg County's Internal Audit department, who recently admitted an error in a report on spending in a Christmas charity, will leave county government.
County Manager Harry Jones suspended the director, Cornita Spears, and announced a search for a permanent replacement last month. At the time, he said the auditor failed to consider some information that had been available before Spears issued a June report on the Giving Tree, which provided gifts for needy children.
Asked about Spears' current status with the county, county spokesman Danny Diehl said today: “Harry Jones has accepted her resignation effective Dec. 31, 2009.” Diehl declined further comment.
Spears told the Observer this afternoon that county officials offered her a position as a contract coordinator in Area Mental Health, the government agency that offers services to residents with mental illness, developmental disability and substance abuse issues. The job involves monitoring private contractors who perform duties for the county.
Spears, who worked in county government for 25 years, said she turned down the offer because it would have meant a 42 percent pay reduction. She made about $110,000 a year.
Her retirement benefits will pay her the same as she would have made in the job, she said.
A Charlotte native and graduate of UNC Charlotte, Spears worked as auditor for what was then First Union bank before landing a job with the county. She has worked as internal audit director for 19 years.
Asked whether she is upset at how her government career ended, she said, “The county manager made a business decision and I'll leave it at that.”
The county has come under scrutiny for much of this year because of investigations into the Giving Tree and other spending programs across the Department of Social Services. The reports cited lax accounting practices within the programs and the county has since announced numerous steps to correct the problems, including temporarily putting DSS finances under control of the county's main finance department.
On Sunday, the Observer detailed a 74-page memo from a former county employee who headed the Giving Tree. Cindy Brady, who retired from the county in August, wrote she was never given a chance to talk at length about how the charity worked, despite requests to do so.
Brady said the county advanced her as much as $198,000 since 2005 with the approval of her supervisors. Brady said she spent the money on gifts for needy children, but says she did not collect all of her receipts, and some were handwritten or lost.
County leaders say they can account for how about $162,000 was spent by the Giving Tree last year. But in an interview for the Sunday article, Spears said she now disputes the claim.
Spears said she first received the Brady document in November, and it had enough evidence to cause her to revise her June report. There are “inconsistencies” between the information used to conduct the audit and statements contained in Brady's memo, Spears said.
One example, she said, involves an $11,000 check Brady wrote to the county. Spears said in an interview she was informed that the check was for repayment of personal purchases.
But Brady's memo states that $10,000 of the amount was unspent money from the program, Spears said.
She said she performed a thorough investigation, given the circumstances. It would have been helpful, Spears said, to interview Brady for “clarification” on some issues, but said she was unable to because of her employment status.
The county has previously said that the county typically tries to contact workers involved in internal audits or human resources investigations.
But he said exceptions may be granted in some cases, such as if an employee is on leave. “Requiring an employee on leave to participate in work-related functions, including investigation interviews, would constitute a county violation of the employee's leave status,” Diehl said in a statement provided for the Sunday story.
Commissioners criticized Spears publicly last month after they learned about the audit oversight.
“It was much more complicated,” than it appeared, Spears said, noting that commissioners met in private session before the meeting.
“They based their comments on the information they were provided and how they understood it,” she said.
Jennifer Roberts, Part of the Problem
I think I’m done cutting Roberts any slack on this DSS mess. For her to obstruct and slam the attempts of other commissioners to find out what is going on with county’s massive, $200m. DSS operation is too much. And for Roberts to suggest that a closed session airing of DSS’s dirty laundry is not her preferred way to go is an insult to the intelligence of all Mecklenburg County taxpayers.
The only reason Commissioner Bill James and the other GOPers are suggesting the closed session route is in response the “disclosure” stonewall County Manager Harry Jones has erected around the investigation — a construction effort aided and abetted by Jennifer Roberts. Fine. Let’s hear DSS chief Mary Wilson answer questions in open session. Super. Next.
It will also be interesting to see if Commissioner George Dunlap’s confirmation that a federal grand jury probe is underway of DSS shakes anything new loose. Why it took a full month for the probe’s existence to be reported remains a mystery, but at least everyone in town has caught up to the story.
However, it would be wrong to assume that the probe will result in any indictments, both as a matter of fairness and institutional inertia. Prosecutors are political animals and will require some slam-dunk, smoking gun type evidence of wrongdoing for them to move on a DSS devoid, until very recently, of adult supervision of its funds.
On the third hand, not all gross mismanagement rises to the level of criminality. This is why the county commission must itself reestablish public trust in one of its largest ongoing budget expenses. Jennifer Roberts needs to help that process or get out of the way.
Charlotte-Mecklenburg County Officials Still Not Talking About DSS Criminal Probe
One week after Mecklenburg County Commission Chair Jennifer Roberts acknowledged publicly an ongoing Criminal Investigation of the county’s $200 million Department of Social Services, county officials refused to identify the government agency conducting the investigation. County commissioners reportedly were advised of a federal probe while in closed session in early November.
Danny Diehl, the county’s director of public information, responded to e-mail questions on the probe by saying an unnamed deputy county attorney advised him the county cannot comment on the investigation at this time.
Diehl instead directed a reporter to a county Web site which includes a March 2009 audit of DSS operations and the county’s response, but no information on the ongoing criminal probe.
That outside audit, which reportedly cost the county $83,000, turned up some $162,000 in missing or undocumented expenditures in a Christmas charity account administered by DSS employees. Auditors advised radical overhauls for DSS finances, including an end to all credit card purchases by the department. The department had about a dozen Diners Club accounts and one Target charge card with a $99,000 balance, including several hundred dollars in late fees.
As a result of the audit’s findings, DSS’ check-writing authority was transferred to the county finance office and several programs were ended.
Three weeks ago the county revealed that one former DSS employee, whose identity remains unknown, returned $33,000 of the missing funds to the county, along with earrings and a DVD player.
County Manager Harry Jones said the revelation left him “damned embarassed” and he suspended the internal auditor who missed the repayments. Jones has also vowed repeatedly to make public all aspects of the DSS investigation.
“The buck stops with me. I’m the Manager of Mecklenburg County,” Jones told WFAE radio. “I go back to my initial point. We have conducted this review of this particular program transparently and out in the sunshine. As manager I will say we’ve done a good job of trying to explain to the public and elected officials where we are and what the problems were.”
Last week Roberts wrote that she hoped the secret criminal investigation “will produce findings soon, so the public will know the conclusions. I also want to be clear that if there is evidence of illegal activity within DSS — currently we have no firm indication of this — the county will take every action it can to prosecute those responsible to the full extent of the law.”
Below is the list of questions submitted to the county that the county refused to answer:
1.) Is there a federal grand jury investigation going on? Approximately when did it begin or when did County learn of it? Has the County received subpoenas or other process compelling production of County documents? Have County personnel been subpoenaed to testify before the grand jury?
2.) Is the County cooperating? If so, how?
3.) What federal agencies are involved (FBI, U.S. Postal Inspector, etc.?)? (An answer to this question would permit any member of the public with possibly relevant information to contact investigating agents and provide that information.)
4.) What lawyer or lawyers are representing the County as to the investigation (in-house or outside counsel)? To what extent is the attorney for County keeping County Commissioners advised of progress in the federal investigation? (briefings, memos, etc.)
5.) Is the County paying for separate, independent counsel for any individual County employees or any individual County Commissioners? If so, for whom? If so, who authorized such payments for counsel?
6.) Has any County official or employee sworn out a warrant with regard to missing or misallocated DSS funds? If not, why not?
Memo: Money flowed, no questions asked
A former Department of Social Services employee at the center of a charity probe says the county advanced her as much as $198,000 since 2005 with the approval of her supervisors.
The county checks, which she deposited in her personal bank account, were meant to provide gifts for needy children, according to an internal memo the Observer obtained. The 74-page document was written by Cindy Brady, the former DSS employee who ran the Giving Tree charity.
The document paints the defunct charity in more detail than the county has released publicly. It also raises new questions about the investigation, which the county has turned over to police.
The county has never publicly identified Brady or released the full internal audit of the Giving Tree, which the county maintains are both prohibited under personnel law.
The county also has said that all expenditures were accounted for - a fact that the former internal audit director now disputes. Cornita Spears, who was disciplined for a flawed review of the Giving Tree, says the county can't be sure of how $108,000 of $162,000 was spent in 2008.
Brady said the investigation has focused on her spending, which she defended as appropriate. But she acknowledged she fell behind in collecting receipts last year, and some were handwritten, damaged or lost.
Her memo and statements from current and former employees describe a popular Christmas charity that operated for years without accepted standards or accountability. The county has said DSS has not been audited comprehensively since 1996.
The memo, dated July 29, was sent to a county human resources manager, but it's unclear who read it and when.
County spokesman Danny Diehl would not say if County Manager Harry Jones has read it, citing personnel law. Three county commissioners listed as recipients said they have not seen it.
Former Internal Audit Director Spears said she first received the document in November, five months after she released her audit of the program.
Spears said Brady's memo had enough evidence to cause her to revise her June report, and she now says she wishes she had seen it earlier. Spears said personnel rules prevented her from interviewing Brady. Brady wrote in the memo that she wanted to talk but was "given no opportunity for input or clarification."
She said in her memo that some receipts were either lost in a rainstorm or shredded by her dog. Original receipts also remain missing, including some for more than $2,200 spent for the charity at an Old Navy store, the document says.
The county has asked the Charlotte-Mecklenburg Police to investigate the Giving Tree and help retrieve receipts from vendors.
Contacted by the Observer, current and former DSS administrators named in the memo supported Brady's description of how the program operated, though one former director said fiscal controls were appropriate under his watch.
Brady's attorney has said Brady is cooperating with a police investigation. Brady, a 20-year county social worker who retired in August, declined to comment for this story.
Suspicious spending
Organizers launched the Giving Tree nearly two decades ago to provide toys, clothing and other gifts to foster children.
The program relied on donations of money and gifts. Past supporters include Second String Santa, Young Lawyers, employees of Wachovia and Bank of America and Project Joy, a fundraiser set up by Observer columnist Tommy Tomlinson. Brady said financial contributions began to grow after Tomlinson became involved.
Officials collected more than 8,400 gifts last Christmas.
But Department of Social Services Director Mary Wilson got a tip earlier this year about suspicious spending and ordered financial audits of the Giving Tree and other programs. Wilson declined to comment through a spokesperson.
E-mails previously obtained by the Observer have shown officials suspected an employee received $80,000 in checks from Giving Tree donations.
Officials also investigated whether an employee's sister got money to buy gifts. Questions were also raised over purchases of diamond earrings, leather coats and a DVD player.
Auditors found numerous accounting failures across the department. County officials suspended some programs and put the agency's finances under direct county control. Officials retrained workers on accounting rules, including the use of restricted purchasing cards.
More oversight
County records show the Department of Social Services wrote checks to Brady totaling more than $176,000 during a three-year period that ended in June 2009. Brady's memo reflects that about $126,000 was for the Christmas program last year, but the county records didn't say how much of the remaining money was for the charity.
The agency also gave another woman about $8,000, records show. Brady's memo identifies her as the sister of an administrator who helped oversee the Giving Tree.
The administrator's sister used her employee discount at Belk Department Store in Brevard, in Western North Carolina, to purchase gifts for the charity, according to the memo and an accompanying letter from the store's manager.
The woman could not be reached for comment.
Jones said officials have strengthened supervisory oversight and clarified employee rules, responsibilities and requirements.
Ward Simmons is a citizen member of the county commission's Audit Review Committee, which investigated accounting failures in DSS. He said that regardless of whether the county explicitly spells out procedures for handling donations, employees have a responsibility to remain diligent in bookkeeping.
"There exist certain standards of prudent behavior that any employee who handles money should adhere to," Simmons said. "If someone else is not using good judgment it's not a license for a second person to do the same."
Lost, damaged receipts
Brady's report contains photocopies of checks she returned to the county, pictures of torn store receipts, a detailed accounting of more than 40 transactions, and her positive performance evaluations.
Her memo says 10 bags of clothing were purchased at an Old Navy store for $2,222. The clothes were put in a room with donated toys, but the original receipts are lost, she said.
Brady wrote that receipts were lost or damaged on hundreds of dollars worth of items from Belk, Coldwater Creek, Target and Kohl's.
Brady also wrote that for years workers did not inventory donated items individually. Storage rooms contained jewelry, music players, a home theater system and toys. She defended purchasing expensive items, saying some children overcame obstacles to graduate from high school, college or find a job.
Brady said she asked the county in February to do an inventory of the items stored at Walton Plaza, a government building on the edge of uptown.
But she said she received a phone call days later from another social worker who told her a county auditor looked at a room of clothing and said she wasn't going to inventory the items because there was "too much stuff," the memo states.
Diehl said items bought with Giving Tree donations are secure and DSS staff conducted an inventory after the audit.
Brady said after a February meeting where she was first questioned about Giving Tree spending, she was told to bring in receipts showing how money advanced to her was spent.
In the following weeks, she said she kept updating the information, and returned $33,000 in money that she hadn't spent.
Internal Audit
Spears, the former internal audit director, recently said her June report on the Giving Tree failed to account for money returned by Brady. Spears was suspended last month after acknowledging the error. At the time, Jones said the auditor failed to consider information that had been available before the June report.
Spears said she discovered the oversight after receiving the Brady memo on Nov. 11 from someone in the county manager's office who asked her to review it.
There are "inconsistencies" between the information used to conduct the audit and statements contained in Brady's memo, Spears said.
One example, she said, involves an $11,000 check Brady wrote to the county. Spears said in an interview she was informed that the check was for repayment of personal purchases.
But Brady's memo states that $10,000 of the amount was unspent money from the program, Spears said.
She said she performed a thorough investigation, given the circumstances. It would have been helpful, Spears said, to interview Brady for "clarification" on some issues.
Brady said she was placed on nondisciplinary suspension in February. On March 9, she was placed on medical leave and remained on leave until she retired.
Diehl, the county spokesman, said the county typically tries to contact workers involved in internal audits or human resources investigations.
But he said exceptions may be granted in some cases, such as if an employee is on leave. "Requiring an employee on leave to participate in work-related functions, including investigation interviews, would constitute a county violation of the employee's leave status," Diehl wrote in the county statement.
In recent weeks, Jones and some county commissioners have said the Giving Tree investigation has been handled appropriately.
County commission chairman Jennifer Roberts said she is confident in Jones' assessment that the county knows how last year's donations were spent. She said the county has receipts, possession of items purchased, and returned checks.
But Roberts acknowledged that some receipts may have been altered and have missing dates and store names.
Commissioner Bill James said statements in Spears' audit report about the poor condition of receipts or other documentation makes it inaccurate to say the county has accounted for all of the expenditures. "The central question I have asked since this started was how much of the $162,000 made it to the children or needy," James said. "That question hasn't been answered."
Asked about questions that the county can account for all of last year's donations, Spears said: "From an auditing standpoint, it's not accounted for. You have to have reliable documentation."
Scapegoat?
The Observer sought comment from the roughly two dozen current and former DSS employees named in the memo. Most declined to comment or could not be reached.
Five corroborated Brady's account. None said they witnessed any wrongdoing in the program.
Polly Needham, a former DSS administrator who helped oversee the Giving Tree, said she anticipates that police will interview her. In her eight years with the program, Needham said DSS finance administrators always approved how Brady and others handled donations.
"Cindy is an honest person," Needham said. "We tried to follow the rules."
Robert McCarter, a former DSS attorney and volunteer for the Christmas charity, said he believes DSS is trying to cover up how little oversight the agency provided the program.
"There was no accounting," McCarter said. "This is the county finding a scapegoat and it is Cindy."
Darryl German, an administrative assistant for DSS who volunteered with the Giving Tree program for five years, said Brady still has broad support in the agency and many people are angry over her departure.
"I have never seen anything at all" that would be considered inappropriate, German said. "It's all been blown out of proportion."
For years, he said the program operated without any complaints about how donations and money were handled. German said it was "common" for employees to receive advance money to purchase items for clients and then submit receipts.
The county no longer runs the program, which has been taken over by the Salvation Army, but he said residents still call to inquire about donating items.
Donald Bynum, who led the Giving Tree program in the early 1990s, said he is sure Brady handled donations appropriately, but disagreed with her description of lax accounting.
In 1992, members of Second String Santa, a nonprofit that holds an annual fundraiser benefiting the program, questioned how donations were handled and feared they did not reach foster children, Bynum said. The group threatened to stop giving donations to the program, he said.
Bynum said he responded by implementing a new inventory system and making sure gifts were placed in a secure area. Organizers then compiled a report each year to show Second String Santa how donations were used, he said.
"I was proud of how we handled the program," Bynum said.
Brady wrote that she was also proud of her work. She cited a passage from a performance evaluation that said "she is an excellent ambassador for the agency."
"My job was to do what I could to get the most we could for our children with the money we had to spend," Brady wrote. "It was someone else's job to monitor the financial end of the process."
Grand jury investigating Charlotte-Mecklenburg County DSS
A Federal Grand Jury is investigating the Mecklenburg County Department of Social Services, which has faced scrutiny over accounting practices and spending since early this year, two county commissioners said Monday.
Commissioner George Dunlap said the grand jury has been looking into whether crimes were committed by employees.
Commissioner Bill James said board members were told last month that a federal grand jury is investigating. He refused further comment on the topic, saying commissioners were instructed by a county attorney not to discuss specifics.
The county ordered an audit of the Giving Tree after a DSS employee raised questions about spending at the Christmas charity for needy children. The county discovered checks written out to a county employee who volunteered with the program, as well as money issued to the sister of another employee.
County spokesman Danny Diehl said officials cannot confirm whether a federal grand jury is involved, but said the county "is cooperating with law enforcement to complete the investigation."
The county has asked Charlotte-Mecklenburg police to investigate. A police spokesperson on Monday said their work is ongoing.
Other commissioners reached Monday would not comment on work by authorities. "I want the investigation to have the best possible outcome, said board Chair Jennifer Roberts. "So I am unable to discuss it in the interest of not impeding the work of law enforcement."
In the meantime, James and fellow Republican commissioners Karen Bentley and Neil Cooksey want the county board to meet next week to learn more about ongoing probes.
"There are facts we don't have," James said. "I am just concerned there is stuff even senior management doesn't know."
Diehl said the county will respond to any questions the board has about the DSS audits. "The board has received reports and been briefed on all aspects of the DSS audits that are available to the county manager and staff."
The developments follow Observer stories on Sunday detailing a 74-page memo from a former county employee who headed the Giving Tree. Cindy Brady, who retired from the county in August, wrote she was never given a chance to talk at length about how the charity worked, despite requests to do so.
Brady said the county advanced her as much as $198,000 since 2005 with the approval of her supervisors. Brady said she spent the money on gifts for needy children, but says she did not collect all of her receipts, and some were handwritten or lost.
County leaders say they can account for how about $162,000 was spent by the Giving Tree last year.
But audit reports acknowledge numerous problems with receipts and other documents to track expenses and cited inadequate oversight and controls of the program by management.
The county has announced a number of changes in response to the charity audit and reviews of other DSS spending, including putting department finances under control of the county finance office and re-training DSS employees in financial practices and procedures.
The agency employs about 1,200, with a current annual budget of $176 million.
Brady's memo, dated July 29 and sent to a human resources manager, criticized county investigators for not interviewing her during the audit investigation. The county's former Internal Audit Director Cornita Spears said she first read the memo last month, and it led her to revise her earlier report to include about $33,000 Brady said she returned to the county earlier this year.
County Manager Harry Jones suspended Spears last month over the error.
Why James wants meeting
James cited the Observer story in explaining his reasons for calling the new discussions on DSS. He said he wants to give disgruntled employees a venue to air grievances. For months, James said, commissioners have been deluged with anonymous complaint letters from people who only identify themselves as current and former agency workers.
Some apparently won't divulge their names because they fear retaliation from superiors, James said.
The proposal requests that the board discuss the DSS issues on Dec. 17, with portions of the meeting to be held behind closed doors. It asks that DSS Director Mary Wilson appear to the meeting, and that other department employees be made available.
It also requests that former Giving Tree employees be invited to talk, including former county general manager Janice Allen Jackson, who briefly led DSS on an interim basis until Wilson was hired last year.
Neither Jackson nor Brady could be reached for comment Monday.
The proposal also wants Jones to provide in open session a detailed list of gifts bought with Giving Tree money and information on all items from the charity now in county inventory.
It also asks for copies of all internal memos produced by internal audit and county management involving the Giving Tree.
The county publicly released a three-page report in June and a follow-up report last month. The Observer has requested a longer report by Spears multiple times since July, but the county has said personnel laws bar them from releasing the document.
In order to hold the Dec. 17 meeting, at least five commissioners would have to agree. At least two of the six Democrats would have to sign on.
Roberts, Dunlap and Vilma Leake said they want to hear more about what the commissioners are trying to accomplish in holding the meeting before they can decide whether to support it. However, Roberts questioned whether meeting in closed session was the best approach, and said she is "distressed" that the board Republicans did not talk to her before putting the item on next week's agenda.
Dumont Clarke said he's inclined "to be as transparent and public as possible about this issue and do as little as possible behind closed doors."
Commissioners Harold Cogdell and Dan Murrey did not respond to requests for comments.
Cooksey said his constituents are demanding the board take a "more active role in getting to the bottom of this."
Cooksey disagreed with commissioners who have said they county is spending too much time on the issue and should not look into anonymous complaints.
"When you have issues swirling around, you can't ignore it," Cooksey said. "We have an obligation to see if these allegations have any truth to them or not."
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Sources: McClatchy Newspapers, Charlotte Observer, The Meck Deck Blog, John Locke Foundation, Carolina Journal Online, Google Maps
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