Cortez Embezzlement Investigation Hindered By Search For Lost Records

CORTEZ, Colo. (CBS4) The City of Cortez is investigating whether a city employee stole $25,000 from city accounts, but cannot determine the actual amount of funds taken or the length of time the fraudulent activity occurred. Cortez's City Council approved a contract Tuesday night to hire an IT specialist to recover data lost when the city switched software systems in 2016.

The contract for the IT specialist stipulates hourly based payment ranging from $4,000 to $20,000, a cost approaching the amount suspected of being stolen.

Council expressed reservations about the increasing cost of the investigation, according to an article from the Cortez Journal.

"We can't keep supplementing a new magic bullet," said Councilor Jill Carlson. "We've just got to get it fixed. And I don't feel comfortable authorizing $25,000, knowing that we might only recover $25,000."

Even if the city's funds are recovered or reimbursed, "it doesn't seem to me like a good use of our funds," Carlson added.

The council's vote approving the contract was 6-1, with Councilor Ty Keel the lone dissenter. Keel noted costs of the investigation may exceed the benefits.

"I don't think there's anyone up here that does not want to have some conclusion to that question," Keel said. "The thing is, it's beginning to be a really expensive question."

Councilors did not approve an extra $5,000 requested by the city's finance department to support work on the case.

The city has declined to identify the suspected embezzler.

Last April, city officials discovered faulty financial documentation as a result of the software conversion. The embezzlement investigation was announced months later.

The discrepancy in documentation has delegitimized the city's audits. A backlog of audits from the last three years now awaits review. Meantime, revenue from property taxes and some state grants is held up.

The city's bond rating was removed earlier this year, Finance Director Ben Burkett told The Journal. The city will apply for a new rating once the new audits have been completed.

Also, the city's proposed 2020 budget includes an expectation for remittance of these funds amounting to more than half a million dollars.

Agents from the Colorado Bureau of Investigation and forensic auditors from a private firm are helping with the investigation. The forensic auditors are being paid with money from the city's insurance plan, Burkett said.

At issue is whether the alleged embezzlement may have occurred prior to the software changeover.

"Financial reports from the previous financial system, AS400, for previous years were printed off in hard copy format," Burkett wrote in a staff report. "Regrettably, city staff have found some reports were destroyed; directly in violation with financial retention policies."