Eau Claire County Courthouse

What started seven months ago as an inquiry into DHS financial practices has progressed into a criminal investigation that includes a forensic audit.

EAU CLAIRE — Some Eau Claire County supervisors want a closer look into the finances of the Department of Human Services.

Supervisors Steve Chilson and Mark Beckfield are proposing a resolution that would require a forensic audit of DHS. Beckfield and Chilson want a thorough review of the financial practices of a department that has come under scrutiny for several recent errors and criminal charges against a former employee.

On Tuesday, Zer Smith, a former DHS employee, made her initial appearance in court and was charged with nine counts of fraud relating to credit card purchases in DHS between November 2018 and August 2019.

Smith allegedly used her county credit card for personal purchases and falsified email records related to those purchases.

That included buying and using gift cards intended to be spent toward Supporting Actions Resilience and Knowledge, a county program to assist at-risk youth. According to the criminal complaint against Smith, she purchased 43 Visa prepaid gift cards each worth $500. DHS records only show receipt or approval of 17 gift cards, leaving at least $13,000 unannounced for.

Separately, during Monday’s Finance and Budget Committee, it was revealed that in the final stages of the DHS 2019 audit, a reconciliation error totaling about $230,00 was found. That amount will be recorded as a loss in the DHS 2020 budget.

Third, a $1.29 million DHS projection error was uncovered in late May, bringing department overages to more than $3 million in 2019. A few days after the error was uncovered, the Eau Claire County Sheriff’s Office began a fact-finding inquiry into DHS financial practices. The inquiry remains open.

Beckfield and Chilson requested the sheriff’s inquiry in May “due to the number of supervisors who are uncomfortable with the losses and transparency and the lack of mitigation from (DHS),” according to Beckfield.

Beckfield said they went to the sheriff requesting an inquiry “as a last resort” after attempting for the past year to have county officials more closely examine DHS.

“If they would’ve looked a year ago, they might have saved the taxpayers a hell of a lot of money,” Beckfield said.

Resolution to be taken up

A forensic audit analyzes an organization’s financial records specifically to search for illegal activity. It is different from an audit, which provides a financial overview for an organization. The Finance and Budget Committee will consider the resolution during its meeting Monday. If the committee approves it, Beckfield and Chilson aim for the County Board to vote on the resolution, which they called an urgent matter, during its meeting next Tuesday.

Supervisor Colleen Bates, chair of the DHS board, conceded the seven-figure error and criminal charges were a “double whammy” for the department but said employees continue working hard amid challenges.

“We’re holding our breath hoping that we all get through this really difficult time and hoping we can get back to really focusing on the jobs we do well,” Bates said.

DHS director responds

DHS Director Diane Cable said she was not aware of the resolution requesting a forensic audit.

“Human Services has incredible staff working hard to carry out our responsibilities of needs to the residents of our county,” Cable wrote in an email. “During this time of COVID-19, there are heightened needs for everyone to keep people safe and protected. The focus of the department continues to be on the care, well-being, and our responsibility to our community.”

Over the past year, Cable and DHS board members have repeatedly stated that the department is enacting cost-mitigation strategies that take time to show results. They have also mentioned department challenges stemming from community issues such as poverty, substance abuse and mental health challenges.

Despite legitimate challenges faced by DHS, Chilson has grown frustrated by what he called insufficient answers from DHS regarding its finances.

“Issues continue to come forth, and this (audit) just has to happen,” said Chilson, a member of the Finance and Budget Committee. “Eau Claire County Board needs to have the gumption and the fortitude to go ahead and get this thing going and find out what is truly going on in this department ... We continue to have problem after problem after problem, and it’s time that we do something about it.”

The recent mistakes and alleged crimes represent “either incompetence or something worse,” Beckfield said. “I hope we don’t have a culture of corruption.”

Beckfield said DHS procedural controls are not working, as evidenced by the recent criminal charges against Smith. The criminal complaint states Smith often left gift cards at a front desk for her supervisor. If there were extra gift cards, Smith stored them in her unlocked desk.

According to the criminal complaint, DHS did not keep clear records of Smith’s purchasing activity.

“Discrepancies in the information and data that had been provided by DHS through the course of the investigation only further complicated the ability to identify the number of gift cards purchased by (Smith) for the SPARK program and the number of gift cards that had been utilized by the SPARK program,” the complaint reads.

Supervisor Stella Pagonis, chair of the Finance and Budget Committee, believes most of the problems in DHS can be attributed to mismanagement and poor organizational structure rather then purposeful wrongdoing.

“For the most part, I think people are well-intentioned,” Pagonis said. “I don’t think there’s massive corruption going on.”

Pagonis believes the vast majority of employees do an excellent job but said the problems in DHS are likely related to organizational structure and leadership.

“The larger issue is what appears to me to be disorganization,” Pagonis said. “I think the disorganization is top down.”

Pagonis said she supports an audit that would reveal the department’s underlying issues and “identify any other inappropriate behaviors or actions.”

If a forensic audit occurs, Beckfield and Chilson hope it reveals a complete understanding of DHS and its fiscal practices.

“I’m willing to go where the facts take us,” Chilson said. “The old adage is, ‘Where there’s smoke, there’s fire.’ There’s a whole lot of smoke here.”

Separate resolution

Independent of the resolution from Beckfield and Chilson, Supervisor Jerry Wilkie, a member of the Finance and Budget Committee, proposed an action item to address the DHS “mismanagement and fiscal crisis,” which includes a forensic audit of the department.

Wilkie recommends four actions to improve DHS fiscal areas: grant County Finance Director Norb Kirk “authority and responsibility for the DHS financial unit effective immediately;“ evaluate internal procedures for handling gift cards and determine the value of giving gift cards to clients; conduct an in-depth audit into DHS 2019 spending; and implement a forensic audit of DHS, as determined by law enforcement and funding sources in consultation with the Finance and Budget Committee.

That item will be considered for discussion and action during Monday’s Finance and Budget Committee meeting and be discussed during the next Administration Committee meeting.

Supervisors receive broad overviews of DHS and other departments. They aren’t updated on the ins and outs of daily operations, and Wilkie said a thorough investigation can provide an in-depth look into DHS.

“We have such a high-level look at things (that) we’re above the clouds, and we can’t see what’s going on,” Wilkie said. “We need to dig deeper. That’s where the forensic audit will help, considerably, the board in its decision-making.”

The next Finance and Budget Committee meeting is scheduled for Monday at 4:30 p.m.