Loose Financial Controls in State Ag Department Facilitated Fraud, Audit Finds

A lack of financial oversight allowed one soil conservation district employee to embezzle almost $50,000 and another district to post a shortfall of $50,000, according to an audit of the Tennessee Department of Agriculture.

Lax money monitoring also allowed questionable grants to be awarded to the Tennessee State Fair Association and delayed inspections of food manufacturers, a recently released ag agency audit by the Tennessee Comptroller of the Treasury reported. The audit also suggested updating the Weights and Measures laboratory to help Tennessee businesses.

The department audit highlighted the comptroller’s April 2013 investigative audit of the Chester County Soil Conservation District, which found a former secretary “misappropriated” at least $47,460 between 2007-2011.

The findings resulted in the arrest and conviction of Stacey Clark, of Henderson, Tenn. She pleaded guilty to three charges related to the theft. Clark was charged with writing more than 100 checks to herself or to “cash.” She also created false bank statements and forged a district official’s name to conceal her embezzlement.

A grand jury indicted her in February on charges of theft of property over $10,000, forgery and tampering with evidence. Clark received five years probation for her guilty plea and was ordered to pay back $50,960 in restitution.

An audit of the Morgan County SCD found the board of directors did not provide proper financial oversight, which allowed for the district to post a cash shortage of at least $53,412.78.

The comptroller suggested all SCD boards need to meet regularly and review financial statements and promptly investigate discrepancies to avoid issues like this in the future.

The Department of Agriculture has hope reminding all soil conservation districts of current policies will help prevent fraud and financial mismanagement. To accomplish that, the department is writing a soil conservation district supervisor’s handbook, said Tom Womack, director of Public Affairs for the Tennessee Department of Agriculture.

“We believe there is adequate existing authority to greatly reduce the chances of misuse of funds with stepped up oversight by the State Soil Conservation Committee and local districts,” he said.

Soil conservation districts are funded by the state through the Department of Agriculture to prevent soil erosion.

“State funding of landowner conservation projects is critical for maintaining the progress that we’re making in reducing non-point source pollution from agricultural lands,” Womack said.

Grants issued prematurely

The audit found problems with two fiscal year 2011 reimbursement grants and a conflict-of-interest issue related to those grants. The grants were paid prematurely and without sufficient documentation justify the issuance of the grants to the Tennessee State Fair Association. There was also evidence of the questionable use of two other grants, one from FY 2012 and another in FY 2013. The cost of the problem grants total $260,000.

The department “will be working with the state committee to provide specific guidance on documenting grant payments and better educating local board members of their duties and responsibilities” to correct these issues, Womack said.

Food manufacturers not inspected within self-imposed time frames

Problems were also detected in the timeliness of inspections at retail food stores and food manufacturers.

Womack said the department is dedicated to the safety of Tennesseans and food safety and the audit refers to self-imposed goals, not government-mandated time frames.

“We are constantly striving to improve our own record in providing timely inspections and services,” Womack said. “We are confident that we are properly managing resources in order to place the highest priority on the areas of greatest risk and concern to public safety in all our regulatory programs.”

In its sample of inspections, the comptroller found 18 percent of food manufacturer inspections, while only 3 percent of retail food inspections, were not conducted within the required time frame.

Weights and Measures lab out of date

The comptroller also suggested the department should update the laboratory equipment in the Weights and Measures section of the Division of Regulatory Services.

The lab has been funded with $4.98 million by the General Assembly. The appropriation includes construction, administrative costs and new equipment. A new lab is slated to be built next year, with a target opening date of 2015, at Ellington Agricultural Center in Nashville.

This division is tasked with testing the accuracy of weighing and measuring devices in the state, such as fuel pumps, scales, and liquid propane meters.

“This will enable us to meet requirements set by state law that we maintain weights and measures standards traceable to national standards,” Womack said.

Currently equipment is 40 years old and “is outdated, substandard, and in need of significant improvement,” the comptroller said. Because of the substandard equipment Tennessee businesses that use scales calibrated by Weights and Measures are unable to do business in Alabama or Mississippi.