The Colorado Bureau of Investigation is looking into a city of Cortez embezzlement case, and the probe might further hold up three years of delayed financial audits.
About three weeks ago, City Manager John Dougherty announced that staff members believe a former city employee had embezzled funds from the city.
Additional details were shared at the Tuesday night City Council meeting, and Finance Director Ben Burkett said the CBI was investigating the case.
“There was a former employee who has embezzled from the city,” Burkett said. “The CBI, or the Colorado Bureau of Investigation, is involved. I can’t go into much detail because it is an ongoing investigation.”
He added that the city has asked its insurance provider, CIRSA, to provide a forensic auditor as soon as possible.
“We’re trying to be very proactive and keep things moving,” Burkett said.
On July 26, Dougherty announced he learned that morning that a former city employee might have stolen money from the city. How much money was allegedly embezzled was not known, he said.
Investigators are examining the extent and time frame of the alleged fraud, he said.
“We don’t know how far back it goes; that will be decided by either CBI or the insurance company forensic auditors,” Dougherty told The Journal Thursday. “I would like them to go back until for a whole year they don’t find any suspicious activity.”
At Tuesday night’s meeting, Burkett said the investigation could further delay the city’s ability to catch up on three years’ worth of audits.
In April, city officials discovered a faulty software conversion in 2016 led to inadequate financial documentation, preventing Cortez from receiving proper audits for the past three years. The backlog of audits meant the city could not apply for state grants and caused the county to withhold property taxes.
The city was working to remedy the situation, and the 2016 financial audit was nearly completed, but the embezzlement investigation halted its progress.
Burkett said the embezzlement case likely would dramatically delay the audit process. “We were very close to having our 2016 audit completed, but with the fraud that has occurred, we decided to open up that year and look at it in more detail,” Burkett added.
He added that there some general record corrections are needed for the audits to take place.
“But the CBI has instructed us for now, ‘Do not do any cleanup of any activities for initial evidence purposes,’” he said. “So that puts a delay on the audits even further.”
Dougherty said the investigation shouldn’t affect city services, but it will delay the budgetary process.
“We have money in the bank and a positive cash flow,” he said. “Where I lack confidence is that the different fund balances are accurate.”
It’s unclear how long the investigation will take and how long it will be until the city can “start cranking out audits,” Dougherty said.
“The investigator was pulled off this case late last week as he had to investigate a homicide in another county,” he said. “I’m told that since this is a nonviolent and not an ongoing crime, they will have other, more-pressing crimes that he will have to investigate, and ours will be bounced around.”
He declined to share details on the embezzling suspect, citing the ongoing investigation.