County audit uncovers Tax Office deficiencies

Poor accounting resulted in misplaced funds as far back as 2003; 2 arrests made so far

Bill Spinks
Midlothian Mirror
Ellis County records are stored in this November 2019 photo. A recent internal audit uncovered widespread deficiencies in the Ellis County Tax Assessor/Collector's Office stretching as far back as 2003.

Results of an internal audit of the Ellis County Tax Assessor/Collector’s Office show widespread deficiencies in the handling of money and records under the longtime previous officeholder.

The internal audit, released last week by Ellis County Auditor Janet Martin, began in January 2020 and uncovered numerous serious shortcomings in that department, some dating as far back as 2003. Martin also recommended remedies to correct these deficiencies, many of which have already been enacted under the new assessor/collector, Richard Rozier.

Martin said facts indicating criminal activity or theft have been referred to the Tarrant County District Attorney’s Office, since the Ellis County DA’s Office recused itself because of a conflict of interest. Martin said her office turned over more than 250,000 scanned pages of documentation as evidence. The Tarrant DA presented evidence to a grand jury resulting in two indictments and two arrests in June.

“It is not the county auditor’s job to find guilt or innocence,” Martin said. “It’s our job to put a spotlight on those things that either comply or do not comply, and then we refer them to the proper agency, whether it’s law enforcement or a managerial body.”

Ellis County records are strewn haphazardly in a private storage building in this July 2020 photo. A recent internal audit uncovered widespread deficiencies in the Ellis County Tax Assessor/Collector's Office stretching as far back as 2003.

The previous county assessor/collector, John Bridges, resigned in January after 22 years in office and Rozier was appointed in his place. Bridges served five full terms starting with his appointment in November 1998 to fill an unexpired term and was elected to his sixth term last November, running unopposed.

In summary, Martin listed the Tax Office’s failure to reconcile bank statements, to provide monthly reports to the Ellis County Commissioners’ Court, to provide an annual budget for special inventory tax (SIT) funds, to limit SIT fund spending to expenses allowed, and to request help from the Ellis County Treasurer’s Office to balance accounts.

Martin accepted blame for her office in failing to require and review monthly bank reconciliations, to perform quarterly audits on the Tax Office, and to perform annual audits of SIT penalties and fees.

Bank reconciliations in numerous accounts were missing, Martin said. As a result, the balances in these accounts were not accurately known. She said an external firm conducted an audit in recent years that concluded that these reconciliations were not crucial to its report.

Additionally, a search of the county’s records building found that records from December 2018 and January 2019 were completely missing. Martin said a search of a private local storage facility uncovered other records, some going as far back as 1892.

“We contacted the state, we looked at other records, and we had to re-create December 2018,” Martin said.

Once those records began to be reconstructed, discrepancies were quickly found, Martin said.

Martin’s audit found there were four “balancing points” within the office that were neglected: the balancing of each of the four clerks’ drawers; the taking of money from these drawers to make a deposit; remote depositing of checks and handling of credit card payments; and the reconciliation of bank statements and referral of statements to the Auditor’s Office for review.

“The four-point balancing process had not been followed,” Martin said. “It resulted in deposits not matching the actual funds collected. There were instances where cash was short, and there were instances where credit card transactions were reported higher than the amount processed.”

The audit moved to other accounts, where Martin detailed a long list of deficiencies. In the area of motor vehicles, bank statements were not reconciled, monthly bank statements were not being reviewed by management, staff was not adequately cross-trained, and cash drawers were consistently out of balance. Martin said a total of $66,000 in cash was not deposited.

In the property tax area, the audit was able to reconstruct missing records as well, and similar balancing and reconciliation problems were found. Martin said interest income totaling $162,054; parcel commissions of $458,374; and unclaimed tax refunds of $424,488 were never paid to the county but instead were being held in property tax accounts. Additionally, excess funds of $454,597 in the property tax account are still being researched to determine where they need to go.

Martin said Texas Alcoholic Beverage Commission license payments were being deposited into the property tax fund improperly. She said there were $23,000 in unpaid fees that were owed to the county.

Perhaps the stickiest wicket in the audit was the county’s special inventory tax fund, or SIT. This tax is paid by dealerships that sell properties with motors, such as cars, motor homes and heavy equipment. Inadequate software and lack of employee training were factors, but Martin said there were other reasons as well.

Martin said money intended for the SIT fund was instead placed in the property tax fund. In addition, approximately $68,000 in SIT tax funds were never distributed to taxing authorities from the period between 2003 and 2019, she said. Additionally, the SIT account has not been reconciled since 2003. This money is being researched and will be remitted.

The audit also found that SIT interest and penalties, which the Tax Office is allowed to keep, was being used to pay employees outside of the Ellis County payroll system between 2009 and 2019. Martin said corrected W-2 and 1099 forms have been issued.

Approximately $9,200 in funds were deposited into the motor vehicle and property tax accounts to account for a theft that occurred in December 2007, Martin said.

“Making that kind of transfer was not something that’s not allowed,” Martin said. “It’s not an allowable use of SIT interest and penalty.”

Martin said another audit of the Tax Office will be performed in February 2022.

Martin thanked the employees of the Tax Office and Rozier, the current county tax assessor/collector, for their cooperation in the audit.

Rozier said Gerdau Steel has offered to incinerate old records that need to be destroyed at no cost, representing a savings of thousands of dollars.

“We’re working hard to implement the recommendations that Janet spoke about, and we’re getting those things done,” Rozier said. “A lot of people are new and they’re being trained and brought up to speed.”