The Office of the County Auditor conducted an audit of the Tax Deed Section of the Records, Taxes and Treasury Division. Our objectives were to determine whether tax deed sale transactions are handled appropriately, to determine whether the tax deed sale process complied with laws, rules and regulations, and to determine whether there are any additional opportunities for improvement.
We conclude that a large number of tax deed sales transactions were grossly mishandled. The Tax Deed Section did not comply with laws, rules and regulations resulting in the payment of approximately $2.4 million in potentially fraudulent tax deed claims. These potentially fraudulent claims were paid as a result of grossly inadequate supervision, poor segregation of duties, and the lack of adequate and timely review of claims by the County Attorney’s Office.
During our review, we noted a total of 51 potentially fraudulent claims totaling approximately $2.4 million were paid by the Tax Deeds Section. The former RTT Specialist used his unique position to accept potentially fraudulent claims from Power of Attorneys (POAs) claiming to represent former property owners. The former RTT Specialist would then process the claims for payment by initiating disbursement documents that were later authorized by the former Supervisor and the County Attorney. After securing authorization, the disbursement documents were processed by the Accounting Division and the checks mailed to the POAs. We found 17 payments, totaling $536,667, to POAs with family ties to the former RTT Specialist named in the arrest warrant.
The former Supervisor of the Tax Deed section provided grossly inadequate supervision of the former RTT Specialist and authorized millions in tax deed payments without performing adequate review of disbursement documents. In addition, the former Supervisor inappropriately accepted a $5,000 cash loan from the former RTT Specialist. We noted instances when the Supervisor ignored customer complaints, inquiries, and public records requests alleging potential fraudulent activities and took no action to perform additional follow-up, and notify Division Management and the County Attorney when two companies contacted her and raised concerns of possible fraud, as early as July 2015. Her failure to notify management resulted in subsequent payments of an additional 23 potentially fraudulent claims, totaling approximately $1.2 million. The former Supervisor was reassigned by RTT Management to another supervisory position in the Records Section, and terminated employment on or about February 13, 2018.
The County Attorney’s Office provided grossly inadequate services to the Tax Deed Section. Specifically, the County Attorney did not perform timely review of claims, document payment recommendations, and review documents prior to authorizing the payment of claims. The lack of timely review of claims resulted in significant backlogs in processing claims and filing interpleader complaints. As of June 2017, there were approximately $10.1 million in tax deed proceeds that remained unpaid for one to seven years after the auction date. Included in this amount was approximately $6.8 million in claims that were recommended for interpleader action and in various stages of processing to transfer funds to the Clerk of Courts.
Segregation of duties over tax deed sales were grossly inadequate. The former employee handled claims from beginning to end, including receipt and processing of claims, initiating payment of claims, handling customer complaints, responding to inquiries, and processing public records requests. These duties, when combined with other internal control weaknesses cited throughout this report, allowed potentially fraudulent disbursements to occur without timely detection. At the time of our audit fieldwork, the current RTT Specialist continued to perform virtually all aspects of these transactions.
The County acts in a fiduciary capacity as custodian of the excess proceeds from tax deed sales and, therefore, has an obligation to establish adequate and effective management controls to safeguard these funds.
Other Opportunities for Improvement relate to lack of accounting system reconciliations, lack of quality assurance procedures, inadequate response to customer inquiries, and other related matters. Our report contains a total of 22 recommendations for improvement.
|