Auditor urges more Oversight in Offices of Superior Court | Eastern North Carolina Now

    Publisher's note: The author of this post is Dan Way, who is an associate editor for the Carolina Journal, John Hood Publisher.

Wood says many court clerks and sheriffs resist outside oversight and don't take measures to prevent fraud

    A risk of fraud or embezzlement continues in the offices of Superior Court clerks of court, yet many clerks refuse to correct serious problems, State Auditor Beth Wood says.

    "I will tell you, it's a little tiresome spending taxpayer dollars writing the same report over, and over again," Wood said.

    "There are clerks across the state of North Carolina who say they are elected, and they are going to run their shops the way they want to," Wood said. "They should either be voted out of office, or the AOC [Administrative Office of Courts] should be working with them to make them comply with the law."

    Risks exist.

    One involves staff members performing overlapping duties, resulting in an absence of checks and balances that could prevent staff members from pocketing criminal fines and fees. Another is late or nonexistent inventories of estates, which could result in family members or others removing property being before the estate is settled.

    Wood's office recently completed audits in Orange and Carteret counties that exposed those deficiencies.

    Haphazard operations and staffing assignments in the Orange County Clerk of Superior Court's office created an elevated risk of fraud and misappropriation of payments. The office also failed to collect estate fees in accordance with state law. That resulted in delays and potential loss in the collection of estate costs and fees, the audit report said.

    Clerk of Superior Court James Stanford agreed with the findings in his response to the audit report. He blamed the errors on a staff shortage and said tighter controls and heavier monitoring would be placed on employees to avoid errors and fraud in collecting criminal fees and fines.

    Stanford said his office would better document the reasons fees aren't collected at the time estate costs are filed, and would show how he's trying to collect delinquent filing fees.

    According to the audit, the Clerk's Office collected nearly $6.3 million cash from fines, fees, and court costs, as well as bonds, judgments, and other matters during the audit period. But there was a lack of internal controls, especially in segregating the duties of personnel with access to various functions.


State Auditor Beth Wood. (photo by Dan Way)

    Allowing employees access to more than one part of the process increases the risk that errors, unauthorized transactions, and fraud could have occurred, and remained undetected because it circumvents a checks-and-balance approach. The audit did not identify any missing money.

    The audit determined estate inventory fees for three of 58 estates examined weren't collected until 23 to 35 days after the inventory was filed. Fees for six estates still had not been collected by the time of the audit.

    The Carteret County Clerk of Superior Court's Office was cited for untimely filing or failure to compel estate inventory filings or fee collection. Of 65 estates examined by Wood's office, in 18 cases the written requests for requiring inventory filings were issued 34 to 95 days after the three-month inventory deadline. In six instances the clerk failed to issue written requests.

    Clerk Pamela Hanson concurred with the audit findings. She blamed the problem on new staff, an increase in the volume of work, and a deliberate policy not to refuse a filing if costs are not in hand.

    Wood said Superior Court clerks of court are audited every three to four years on a rotating basis. While that serves as a deterrent, more oversight from AOC is needed, she said.

    "You don't wait until the situation at the Wake County Register of Deeds happens, and then everybody gets up in arms," Wood said. Some $600,000 turned up missing in that case, and the State Bureau of Investigation was called to investigate. Wood said her office could have performed an audit but wasn't contacted.

    County sheriffs and registers of deeds are elected, so their offices mostly operate independent from the county. They generally hire local CPAs to do financial statement audits. Wood believes their audits should include risk assessments of the controls in place, but many don't.

    Had proper controls existed in Wake County, that situation could have been caught, she said. The county auditor should have incorporated the register of deeds audit into the comprehensive county audit, where the misappropriation could have been detected.