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Audit finds Franklin court mishandled funds; clerk says staff wasn’t trained

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The Franklin County Courthouse in Louisburg
The Franklin County Courthouse in Louisburg
The Wake Weekly file photo
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LOUISBURG — State officials Thursday said an audit found numerous errors in the bookkeeping practices of the Franklin County Clerk of Superior Court, claiming that court officials had tens of thousands of dollars in the wrong accounts.

The audit, from the Office of the State Auditor, found five weaknesses in the court’s accounting practices. The findings were related to a lack of training and monitoring that the state auditor discovered when looking at transactions between July 1, 2019, and Jan. 31, 2020

The audit found that Clerk of Court Patricia Burnette Chastain’s office didn’t make a “good faith effort” to find the owners of unclaimed money in 24 cases, totaling $59,616.

The office also didn’t transfer money that remained unclaimed for more than one year in 25 cases. That $30,490 should have gone to the Office of the State Treasurer’s unclaimed property fund if the rightful owners couldn’t be found.

The unclaimed property fund helps support the N.C. State Education Assistance Authority, which provides financial aid to college students.

Many of the other issues identified in the audit were related to guardianship and estate cases, as well as bank reconciliations. Dozens of individual errors were discovered in the audit.

Opportunity to improve

In a response, Chastain concurred with all the audit’s findings.

“We work for the people. This is the people’s business, and it must be right,” Chastain said Friday. “Any opportunity we have to improve, we will take. ... I appreciate them bringing it to our attention.”

She claimed improper staff training and staffing were to blame.

The office’s veteran bookkeeper, who had served 15 years in the department, left in September to work for Franklin County, Chastain said in her response, published with the audit. That employee was replaced by a bookkeeper who did not have the necessary training.

The replacement left the position three months later before the classes were offered.

A staff member who worked in the estates office also left to work for the county during the six months audited by the state, Chastain said.

“I can’t blame them for doing what they did because the county pays more. They can make $10,000-$20,000 more,” she said Friday. “The courts’ pay is decided by the legislature.”

In addition, the office is short-staffed, Chastain said. Four staff were absent during the audit period, including Chastain, because of medical conditions or the death of family members.

“Fifteen (staff members) in a county this size is ridiculous,” Chastain said. “Granville has about 50,000 people and more staff than we do. We’re pushing 70,000.”

The General Assembly determines the budget and staffing for the Clerk of Superior Court’s office.

Making changes

The court has more recently hired a trained bookkeeper and assigned part-time staff to that bookkeeper, the clerk’s office said. It is also cross-training employees and implementing additional estate training, including hiring a former trainer to work in the estate office.

The clerk’s office said it is also adding monitoring procedures with trained staff and putting internal checks in place to make sure deadlines are hit.

“The state auditors are not clerks,” Chastain said. “They know the statutes, not what we do in this office.”

“If there’s a 90-day deadline, they find us if we don’t send out a notice on day 91, even if we send the notice on day 92.”

Lack of review

Two findings were related to a lack of review over guardianship estates — cases of minors or incapacitated adults cared for by others. The audit found the clerk’s office failed to compel inventory findings, assess and collect bonds and disburse money accurately.

All of these failures could result in minors or incapacitated adults losing money if their guardians had misused the money, the report said.

Three estates didn’t file inventories while five estates didn’t pay enough bond. The state requires guardians to pay a bond to protect their wards’ money in cases of financial misuse.

The clerk’s office collected $16,170 less than it was supposed to, according to the audit. The state and the clerk’s office may be liable for financial losses if the bond isn’t enough.

In one case, the clerk’s office paid $800 to a guardian without required documentation and in another, it underpaid a ward $776 because a trust failed to refund investment fees.

The audit also found the clerk’s office didn’t require several estates to file inventories on time. Of 40 estates that required inventories, 16 weren’t compelled to file them within the proper timeline. Of those, seven were asked to file, but the clerk’s office took no other documented action.

The clerk’s office says staff made follow-up phone calls but failed to document them properly.

Six estates didn’t receive written requests at all, the audit said. The remaining three estates received written requests up to 98 days after the three-month inventory deadline. These deficiencies could potentially allow items to be removed from an estate without the heirs’ knowledge as well as delaying the finalization of the estate.

In addition, estate inventory fees were incorrectly assessed and collected, according to the audit. Seven estates overpaid for a total of $1,986 while two estates underpaid by $81 total.

Three estates didn’t have fees collected at all, resulting in $255 not being paid.

Staff also didn’t complete bank reconciliations in a timely manner. When adjustments need to be made, the N.C. Administrative Office of the Courts prepares them and the local clerk’s office records these.

Five reconciliations totaling $310 were recorded 27 to 97 days after the administrative office completed them. That means 71% of bank adjustments weren’t recorded for at least a month, increasing the risk of an error or misappropriation, the report said.

The audit only reports weaknesses and does not include things the office is doing well, Chastain said.

“In most cases, the main audit finding is related to access to programs creating possible fraud,” she said. “They didn’t find any fraud or any possible avenue for fraud.”

The state audits the clerk’s office once every four years.

The court system also has an internal auditor who recently finished their audit investigation. While that audit has not been finalized, Chastain said the internal auditor was pleased.

“They found two bonds insufficient. One was $30 short, and one was $50 short,” she said. “They had no findings on compelling.”


Editor's Note: This story was updated June 5 with comments from Clerk of Court Patricia Burnette Chastain.

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