The Birch Bay Water and Sewer District has begun tightening up its financial procedures as details emerge on how former treasurer Glenn Golay was allegedly able to embezzle an estimated $469,000 from a district travel expense account over the last seven years.
In addition, the board approved the hiring of Bellingham-based accounting firm Metcalf Hodges to perform an independent review of the district’s financial procedures. District manager Roger Brown said he collected bids from three firms at the suggestion of accountants from the Washington Water and Sewer Risk Management Pool, which insures about 60 water and sewer districts statewide against employee misconduct.
The commissioners voted unanimously to abolish the district’s travel account at their regular meeting on Thursday, March 10. The account had about $1,900 in it at the time of the vote, Brown said. The money will be transferred to the district’s operating fund, he noted.
A recent state audit of the district showed Golay used the account, which was maintained for travel reimbursements and did not hold more than $2,000, to transfer between $37,000 and $80,000 to his personal bank and credit card accounts, according to an affidavit of probable cause filed in Whatcom County superior court.
“Once the financial records were obtained [by investigators], the BBWSD, with assistance from state auditors, identified over 100 suspicious checks and transactions conducted by Golay to embezzle over $450,000,” deputy county prosecutor James Hulbert wrote.
Golay wrote checks to himself, his wife, his church, and a number of different credit card companies and banks. None of the checks, which varied in amount from $1,000 to $8,000, had board of commissioner’s approval.
Golay has been charged with 16 counts of theft in the first degree, a crime that carries a maximum sentence of 10 years in prison and a $20,000 fine. County sheriff’s deputies arrested Golay on February 23 after he admitted to Brown in January that a routine state audit of the district then underway was likely to reveal Golay’s theft. Brown fired Golay on January 11. Golay, a certified public accountant, had been the district’s treasurer for 23 years.
Investigators contacted Golay on February 16. During subsequent interviews, Golay admitted he has a problem with spending and an inability to manage his credit card debt.
Brown said the travel account was a remnant from 1984, when the county controlled the district’s finances. At that time, the travel account was the only bank account the district had direct access to. The district would issue checks from the account for staff travel expenses and then get reimbursed from the county upon expense approval, Brown explained.
When the district gained control of its own finances in 1987, and hired Golay as treasurer, the travel account effectively became unneeded because the district could reimburse travel expenses from its operating fund, Brown said. The travel fund was still used on occasion, but not enough to warrant any serious scrutiny, Brown said.
As far as the state auditors can tell, Golay used this weakness to transfer funds into the account and back out via checks written to himself. Golay allegedly covered up the missing money through over valued legal fees, water rights acquisition costs, and other in-house expenses, Brown explained.
Since Golay was balancing district account statements himself, state auditors suspect he was able to destroy any statements that showed he had transferred money out of the travel account, Brown said. State auditors would have had to ask intensely specific questions during every one of the district’s regular audits in order to find Golay’s alleged embezzlement, Brown noted.
Each audit took only a snapshot of the district’s financial information and could not have possibly caught everything, he added.
Metcalf Hodges, the lowest bidder among the three firms, will perform a financial review that will specifically target the district’s weaknesses against fraud and theft, Brown explained. After the district’s weaknesses are identified and suggestions are implemented, Brown will hire a certified fraud examiner who will test the district's new procedures and identify any remaining weaknesses.
“We are trying to plug this and all the other holes we can find,” Brown said.
Commissioner Don Montfort expressed concern that any new financial procedures might protect against unlikely risks and prove cumbersome to district staff. He said there is a balance between eliminating risk and maintaining efficiency.
Golay’s next appearance in court is March 18 at 9:30 a.m., when a trial date will be set. Golay could not be reached for comment because his listed phone number is not in service.