The mayor of Dierks told the state's Legislative Joint Auditing Committee that his city has changed the way it handles payments at the city's water and sewer system after officials discovered that more than half a million dollars was missing from system funds.
Legislative Auditor Jimmy Locke told the committee Friday morning that staff reviewed receipts and deposits of the Dierks Water and Sewer System in response to a request by the Ninth-West Judicial Circuit prosecuting attorney's office. He said the prosecuting attorney had received allegations that system funds were possibly misappropriated.
Locke said the review revealed that revenue totaling $501,193 was not deposited in the water system's bank accounts from 2015 through 2020. He also said the city hadn't done an annual financial audit or agreed-upon procedures and compilation report since 2014.
The review also revealed several internal control deficiencies.
"Receipting and depositing duties weren't properly segregated," he said. "Receipts were not reconciled with bank deposits. Receipts were not issued for all items of income. Receipts didn't always indicate method of payment and two receipts were missing from manual receipts books examined."
Secretary/Water Clerk Cheryl DeLaRosa was responsible for bank deposits and was custodian of the funds.
This report was forwarded to the prosecuting attorney's office and an Arkansas State Police investigation was conducted that would lead to the termination of DeLaRosa on Jan. 25. She was charged with six counts of felony theft of property and six counts of felony abuse of office on Aug. 4.
Sen. Trent Garner, R-El Dorado, wanted to know how more than half a million dollars could go missing in a period of five years without anybody noticing.
"It took me three to four months to notice something was wrong, so I don't know," said Dierks Mayor Ronnie Cogburn, who was elected in 2018.
Cogburn said DeLaRosa at the time didn't have any oversight when it came to deposits and bookkeeping for the water system.
"We now have a computer program that shows at the end of the day where the money goes," Cogburn said. "Every day the amount you take in is the amount that goes into the bank. We also have it in one account. Before, she was transferring from account to account."
Locke told the committee DeLaRosa wasn't really trying to cover her tracks.
"Nobody was tracking to see if it got there," he said.
Cogburn told the committee the thefts probably had been going on longer than the time period of the review. He said the issue came to light when he tried to get water meters for the city.
"We had people bring in bills and we didn't have money to pay them," he said. "I saw what was coming through the window and couldn't believe we didn't have money. I decided to get water meters and to get water meters we need that audit."
Locke said the city contracted with a certified public accounting firm to do the audits for fiscal years 2015 through 2018, but they were not completed because of the city not providing all the requested records.
DeLaRosa "never would get him all the stuff that was needed," Cogburn said. "Finally, the guy gave up."
Cogburn said the mayor's position in Dierks is part-time so this issue could have been going on for awhile.
Rep. Johnny Rye, R-Trumann, said most of these type of problems can be traced back to taking cash payments.
"Credit cards or checks leave a trail, but when you pay in cash there is no trail and that is where things go wrong," he said.
Legislative auditor Roger Norman told the committee that thefts like these can occur because the audit staff doesn't have the manpower or resources to audit water and sewer system reviews without a request from a prosecuting attorney.
"There are 500 municipalities out there and if we had more resources we could do more, but we only have so much that we can do with the people that we have," he said. "It would require a substantial increase in staff."