Grand Jury slams county’s financial management
By Santa Ynez Valley Star Staff · Tue Mar 17 2020
By Giana Magnoli
Noozhawk Managing Editor
A Santa Barbara County Public Works Department accountant was able to steal about $2 million over a nine-year period before getting caught last year, and a Grand Jury investigation of the county’s financial management found “significant residual risks to the county’s finances.”
The panel’s report, released June 20, outlined concerns about the county’s financial information network (FIN) and lack of consistent financial management training, or standard job requirements, among county employees.
“Many of the noted weaknesses of FIN result in costly duplications of efforts by staff in other departments,” the report stated.
The software the county uses for its internal finances, the FIN, appears to lack basic security measures and helpful features such as accounts payable and accounts receivable, so department have created their own systems, according to the report.
After the fraud was discovered in 2017 (for which the former Public Works senior accountant, Lynn Hogan, has been sentenced to prison), the county was slow to respond, and did not even require employees to change their FIN passwords, the report found.
Hogan was accused of creating fake vendor numbers and issuing false refund checks to 10 people and two organizations, avoiding detection for nearly a decade.
“A key element that contributed to the fraud was the fact that there was no second approval (signature) required to create a temporary vendor number,” the report concluded. “A temporary vendor number is always 999999, which is assigned to a vendor, such as a consultant, supplying services to the county and is intended to be used for a single transaction; as such, there is no accumulation of payments by vendor.”
The Grand Jury found that, in wake of the fraud, that process wasn’t changed.
“Staff members were not required to change FIN passwords, temporary vendor numbers are still used even if there has been more than one transaction with the entity, and paper checks are still often used in place of Automated Clearing House transfers, increasing the risk of theft or loss,” the report said.
The county has started quarterly meetings between the Auditor-Controller and county departments’ chief financial officers, issued an “Internal Controls Policy,” and trained its accounting staff on internal controls and fraud.
The Grand Jury report includes many recommendations for the county and individual departments, including: