Embezzlement from Small Town Coffers Still a Problem

Nov 22, 2016

A three-year-old state law to crack down on theft of public funds from Iowa’s smallest cities has not cut down on fraud.   

Six-hundred small towns are now getting surprise visits from the state auditor’s office.     

The law mandates an audit at least every eight years.   

Lt. Gov. Kim Reynolds and Gov. Terry Branstad at the governor's annual budget hearings
Credit Joyce Russell/IPR

State Auditor Mary Mosiman says so far city employees are stealing public funds at about the same rate.

“I have to say we haven’t seen any reduction,” Mosiman said.   “When people want to commit fraud they figure out a way to try to do it until it's brought to the attention.”

Mosiman briefed Governor Branstad and his budget advisors on implementation of the new law.   It was passed because of an increase in small town embezzlement and a general lack of oversight. 

Mosiman says the law doesn’t appear to be acting as a deterrent.

“We'll put out a fraud on a small city and we'll get calls from another city to walk through procedures  with them so there  is some benefit,” Mosiman said.    “But there are some frauds taking place a decade or longer so once they get involved it’s hard for them to turn back.”

Mosiman says the state inspections are more hands-on than audits the towns may undergo independently.  

“It’s one thing to say yes, we never sign blank checks, they can tell any auditor that,” Mosiman said.     “But what happens when the mayor goes into the room, is he handed things that he's not even  looking at, he's just signing  his name?”

She says small town officials are learning it’s their job to make sure bank accounts are reconciled and issue receipts for cash collections.    

A few towns have received a second surprise visit from the auditor 18 to 24 months later.

“As we're arriving for the second go around to make sure they are implementing our recommendations and procedures, it’s almost more of a surprise that we were serious,” Mosiman said.