State auditor alleges a small-town clerk embezzled thousands while village board was ‘asleep at the switch’

LINCOLN — The state auditor asserts that the governing board of a small northeast Nebraska town must have been “asleep at the switch” when the village clerk allegedly embezzled thousands of dollars.

Nebraska State Auditor Mike Foley on Tuesday released a letter that his office sent to officials of the Village of Carroll (population 192) outlining how Clerk-Treasurer Jamie Muhs allegedly was able to “manipulate” the town’s accounting system.

The matter has been turned over, Foley said, to the Wayne County Attorney’s Office, Nebraska Attorney General’s Office and Nebraska State Patrol for possible criminal prosecution.

As Carroll’s clerk and treasurer for a decade, Muhs — who resigned last May —  had oversight of the village’s financial and utility billing processes, auditors said. That included the power to issue payments for village expenses and to apply credits on utility customer accounts for payments received.

According to the probe, which reviewed about three years of records, the village’s potential loss during that time totaled roughly $40,000.

Alleged in the audit report was that Muhs fixed the books to show that she paid $2,668 of her own utility bills. The team could find no evidence the bills were paid.

Auditors also took “strong exception,” Foley said in a media release, to the clerk’s ability to secure 32 separate reimbursement payments for office supplies that totaled $8,957 — “without a shred of documentation that she ever purchased or received the supplies.”

He said a village clerk typically would purchase such items for the community with a town credit card or line of credit with the office supply merchant.

“To claim to have personally made 32 monthly purchases in a row on the village’s behalf with no evidence and no one asking any questions is bizarre,” said Foley.

He added, “The Village Board apparently was asleep at the switch when they rubber-stamped approval.…” 

In addition, auditors documented a shortage of about $30,000 between what was deposited in the village bank account and what utility billing records showed as having been received from customers. 

Foley said that discrepancy raises the question of whether “customers were improperly being given credit for having paid their bills” when they did not.

He said that some cash-paying utility customers had complained to village representatives that their accounts were not being credited with payments made. Said Foley: “The actual losses of the cash cannot be readily determined due to the village’s slipshod accounting practices.” 

Auditors reportedly tried to contact Muhs to clarify or refute their findings, and she declined to talk, Foley said.

Attempts by the Nebraska Examiner to reach Muhs, the current clerk and the village chairman were unsuccessful.

The Village of Carroll did respond to the auditing team’s recommendations on tightening controls.

Officials said in the audit report that significant changes have been implemented. Among those is a rule that no payments to vendors or individuals are made without documentation. The new village clerk has encouraged setting up accounts with various vendors.

Village board members are now to be given an explanation for reimbursements, and board members will alternate inspection of bills presented for payment.

Dual signatures will continue to be required for reimbursement payments. Since the village chairman and the current clerk are married, it was recommended that the village vice-chair sign checks together with the clerk.

Village residents making cash utility payments are encouraged to make the payments to the bank and ask for a receipt.