ELIZABETHTON — A former employee of the Watauga River Regional Water Authority and the North Elizabethton Water Co-op surrendered to the Carter County Sheriff’s Department on Thursday on a grand jury indictment charging her with two counts of theft, two counts of forgery, two counts of official misconduct and one counts of fraudulent use of a credit card.
Lori Beth Feaster was accused of stealing approximately $44,174 in ratepayer funds in just two years, 2010-11.
The charges stem from an investigative audit conducted by the Special Investigations Unit of the Tennessee Comptroller of the Treasury. A report of the investigation was released by the comptroller Thursday.
The comptroller’s review said Feaster “had stolen cash utility collections, made personal purchases with district credit cards and took unauthorized check payments that amounted to tens of thousands of dollars.” The report said Feaster “used some of the funds to cover personal expenses such as a battery and windshield wipers for her car and an energy efficient front-loading clothes washer.”
The report said Feaster misappropriated utility funds in three ways. These included $24,579 in unauthorized checks made payable to Feaster, $15,506 in water authority collections retained by Feaster for her own benefit and $4,089 of personal charges made on water authority charge accounts paid with the authority’s checks.
The audit reported the unauthorized checks began in May 2011 and continued through January 2012. The report said Feaster recorded the unauthorized checks in the utility’s accounting records as payments to a backhoe vendor, effectively concealing that she was the payee. The report said she also issued checks to herself for $836 for travel reimbursement for training sessions she did not attend.
The auditor’s statement that Feaster failed to deposit $15,506 in a water authority bank account was buttressed by an exhibit of an altered bank deposit slip in which she allegedly wrote a “$” sign over the numeral “1” in a listing of 1,803 in currency. The dollar sign made it appear there was only 803 in currency. The deposit line on the deposit slip was $1,000 less than the bottom line of the listed deposits.
The auditor also provided an exhibit of an alleged unauthorized use of a water authority credit card. The card was used to purchase a front-loading clothes washer. The receipt identifies Feaster as the customer, but the auditor said it was paid with an electronic payment from an agency bank account.
The comptroller’s report was also critical of the water authority procedures at the time Feaster was an employee. The report said the water authority did not segregate financial duties, allowing one employee to make collections, prepare deposits and sign checks. The audit recommended that no one employee have complete control of financial transactions.
“The failure to adequately separate financial duties, as was the case here, is the most common weakness in accountability that allows for thefts of public funds to occur,” said L. Rene Brison, assistant director of the comptroller’s Division of Investigations.
“It is imperative that all public officials and employees put adequate safeguards in place to prevent any single employee from having sole responsibility for each step in the collections and disbursements process,” she said.
The audit also found that collections were not being deposited within three working days and a daily collection report was not being prepared.
The audit was conducted during the period in which Michael Hughes was water authority executive director. He resigned in February 2012 and Bryon Trantham now directs the agency.