fraudEstimated theft from the City of Kingman by a trusted employee has escalated dramatically. A statement issued Wednesday indicated the city has determined that at least $1.1-million is missing, more than three times the amount noted at the start of an investigation and review of city records on November 16.
The Arizona Attorney General’s Office and National Homeland Security probe began with an allegation that Budget Analyst Diane Richards abused her position to embezzle an estimated $300,000 from the Employee Benefit Trust (EBT) account. “In addition, it appears that a City credit card was used to pay for personal expenses as well as cash advances,” the City statement said.
 Richards was fired on November 18 and she has reportedly been cooperating with investigators though she has not been formally charged or arrested.
   “The Kingman City Council and staff are outraged at this type of behavior and, like the citizens of our community, feel betrayed,” the statement said. “It is the goal of the City to regain the trust of its citizens and move forward in a positive manner.”
City Attorney Carl Cooper said a company insuring the city will use a forensic auditing team to attempt to determine the full extent of the loss. Cooper said the City has $500,000 in employee theft coverage and that it will attempt to recover as much of the loss as is possible.
Meantime, City Finance Director Tina Moline said the City has essentially ended its working relationship with the Phoenix firm (Heinfeld, Meech and Co.) that has been conducting annual audits for Kingman for the last 14 years. “They were not doing their job thoroughly enough,” Moline said.
   Moline said it was pure coincidence that representatives of the firm showed up in Kingman for routine field work the very same day that investigators began their finance probe at City Hall. Moline said the firm had about 70% of its work done through a $60,000 contract.
Moline said the City will fully compensate the company for work performed but also must go out to bid to secure another company to audit the entire year. She said the City has already lodged a request with the Arizona Auditor General’s office for a time waiver since the firm that won’t be retained until late January will not be able to meet the March 31, 2016 filing deadline.
Moline, Mayor Dick Anderson and City Manager John Dougherty have said that the City has already changed its procedures and improved check and balance protocols to protect the public treasury. City officials have declined to identify which outside entity discovered the theft activity that has been traced back to 2007.
Moline said the city is postponing any recruitment campaign to fill its second top position in the Department at this point. Cooper said information provided by the outside investigators has the City expecting a Richards’ indictment sometime in January.