Forensic audit details missing records, unreported compensation and governance gaps at Crockett EDC
January 10, 2023 | Crockett, Houston County, Texas
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Travis Casper, lead auditor with Weaver & Tillwell LLP, told the Crockett City Council on Monday that a forensic review of the Crockett Economic and Industrial Development Corporation found recordkeeping, compensation and procurement problems dating from 2010 through 2022.
"We analyzed bank statements for all transactions, and reconcile those to the general ledger, including reviewing all of the check images for all of the transactions during the review period," Casper said. He told the council the audit examined about 3,300 transactions totaling approximately $12,200,000.
The audit identified six months of bank statements that were missing or incomplete; those gaps correspond to 99 payments in the general ledger for which the auditors could not locate supporting check images, a ledger value auditors estimated at roughly $450,000. "For those 99 payments, we did not have check images," Casper said, adding that the auditors know where the ledger entries indicate money went but lack bank images to verify the payments.
Auditors also flagged compensation payments paid directly by CEIDC rather than through the city payroll. Casper said the review found $144,255 in such payments during the audit period, of which $118,622 was not reported on W-2 or 1099 tax forms. He cited monthly auto allowances, temporary living allowances, bonuses and severance as examples of items paid outside the standard payroll process.
The report singled out two $4,200 bonus payments to the executive director, prepared in QuickBooks after regular business hours in August and October 2020, which together total $8,400. Casper said auditors found no explicit written board authorization in the minutes for those bonus payments even though minutes recorded a salary increase at the time.
The audit also documented severance payments in 2016 to two employees that the city declined to reimburse; CEIDC paid the severances directly, and city council subsequently removed all CEIDC board members in January 2017, the report said.
Conflict-of-interest concerns appear in multiple sections of the report. Auditors reported that Ponsetta Robins — hired in 2017 as an executive assistant — is a first cousin of the executive director’s spouse; early salary payments to Robins (about $5,235) were paid directly by CEIDC and were not reported on tax forms. The audit also notes that contractor Larry Robbins, who performed grounds maintenance, is related by marriage to CEIDC staff and that lawn-maintenance spending roughly doubled beginning in fiscal 2020.
Credit-card spending by former executive director Tom Lambert and by the current director also drew scrutiny. Casper said Lambert’s card showed about 700 transactions (~$92,000) with supporting documentation missing for 161 items (~$17,800). The director’s card showed roughly 600 transactions (~$53,000) with 92 transactions (~$5,896) missing receipts.
The audit reviewed CEIDC’s small-business relief program and found payments of $40,500 issued in two phases; the state grant administrator (TDEM) later determined those payments were not eligible for CRF reimbursement because contracts and required performance agreements were not in place, auditors said.
On procurement and governance, auditors concluded CEIDC often used an informal procurement process, lacked required competitive-bidding documentation, and amended bylaws in 2021–2022 without all required approvals. The presentation also raised questions about a January 2014 $1.5 million Prosperity Bank loan that used a collateral assignment of sales-tax revenues without clear city authorization, and noted missing agendas, unsigned certifications and incomplete audio records for multiple board meetings, raising Open Meetings Act compliance concerns.
Council members pressed whether the audit had found money stolen or missing. "I don't think there's any direct expenditure…we didn't include any findings related to fraud," Casper said, adding that auditors could not conclusively determine fraud from the evidence gathered and that missing bank records limit verification of certain payments.
Casper closed with a set of recommendations including staff and board training on Texas Government Code procurement and Open Meetings Act requirements, formal procurement and payroll policies, segregation of QuickBooks user accounts, adoption of a document-retention policy and centralized, secure electronic storage of records.
After the presentation and a period of questions, the council moved into executive session to discuss legal next steps.
"We analyzed bank statements for all transactions, and reconcile those to the general ledger, including reviewing all of the check images for all of the transactions during the review period," Casper said. He told the council the audit examined about 3,300 transactions totaling approximately $12,200,000.
The audit identified six months of bank statements that were missing or incomplete; those gaps correspond to 99 payments in the general ledger for which the auditors could not locate supporting check images, a ledger value auditors estimated at roughly $450,000. "For those 99 payments, we did not have check images," Casper said, adding that the auditors know where the ledger entries indicate money went but lack bank images to verify the payments.
Auditors also flagged compensation payments paid directly by CEIDC rather than through the city payroll. Casper said the review found $144,255 in such payments during the audit period, of which $118,622 was not reported on W-2 or 1099 tax forms. He cited monthly auto allowances, temporary living allowances, bonuses and severance as examples of items paid outside the standard payroll process.
The report singled out two $4,200 bonus payments to the executive director, prepared in QuickBooks after regular business hours in August and October 2020, which together total $8,400. Casper said auditors found no explicit written board authorization in the minutes for those bonus payments even though minutes recorded a salary increase at the time.
The audit also documented severance payments in 2016 to two employees that the city declined to reimburse; CEIDC paid the severances directly, and city council subsequently removed all CEIDC board members in January 2017, the report said.
Conflict-of-interest concerns appear in multiple sections of the report. Auditors reported that Ponsetta Robins — hired in 2017 as an executive assistant — is a first cousin of the executive director’s spouse; early salary payments to Robins (about $5,235) were paid directly by CEIDC and were not reported on tax forms. The audit also notes that contractor Larry Robbins, who performed grounds maintenance, is related by marriage to CEIDC staff and that lawn-maintenance spending roughly doubled beginning in fiscal 2020.
Credit-card spending by former executive director Tom Lambert and by the current director also drew scrutiny. Casper said Lambert’s card showed about 700 transactions (~$92,000) with supporting documentation missing for 161 items (~$17,800). The director’s card showed roughly 600 transactions (~$53,000) with 92 transactions (~$5,896) missing receipts.
The audit reviewed CEIDC’s small-business relief program and found payments of $40,500 issued in two phases; the state grant administrator (TDEM) later determined those payments were not eligible for CRF reimbursement because contracts and required performance agreements were not in place, auditors said.
On procurement and governance, auditors concluded CEIDC often used an informal procurement process, lacked required competitive-bidding documentation, and amended bylaws in 2021–2022 without all required approvals. The presentation also raised questions about a January 2014 $1.5 million Prosperity Bank loan that used a collateral assignment of sales-tax revenues without clear city authorization, and noted missing agendas, unsigned certifications and incomplete audio records for multiple board meetings, raising Open Meetings Act compliance concerns.
Council members pressed whether the audit had found money stolen or missing. "I don't think there's any direct expenditure…we didn't include any findings related to fraud," Casper said, adding that auditors could not conclusively determine fraud from the evidence gathered and that missing bank records limit verification of certain payments.
Casper closed with a set of recommendations including staff and board training on Texas Government Code procurement and Open Meetings Act requirements, formal procurement and payroll policies, segregation of QuickBooks user accounts, adoption of a document-retention policy and centralized, secure electronic storage of records.
After the presentation and a period of questions, the council moved into executive session to discuss legal next steps.
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