Pine-Strawberry Water Improvement District—Theft and Conflict of Interest

In May 2012, the Arizona Attorney General’s Office informed the Office of the Auditor General of potential conflict-of-interest violations by former Pine-Strawberry Water Improvement District (District) Treasurer Michael Greer in regard to his involvement with the District’s award of an $89,700 contract to his former business. Consequently, we conducted an investigation during which we became aware of other potential misconduct by Mr. Greer with the District as well as with another entity for which he was treasurer, the Gila County Mounted Posse (Posse). Our investigation revealed that from April 2011 to February 2013, Mr. Greer may have violated state laws related to conflict of interest, theft, fraudulent schemes, and forgery. We have submitted our report to the Attorney General’s Office, which has taken criminal action against Mr. Greer resulting in his indictment on eight felony counts.

Mr. Greer abused his authority as district treasurer—Mr. Greer illicitly received from two district vendors a total of $65,895 after he participated in awarding district contracts to them totaling $110,700. Mr. Greer also improperly paid $2,299 of his personal and business expenses using his district credit card. In addition, Mr. Greer forged a district letter falsely asserting that the District had received $31,565 in cash deposits from himself.

Mr. Greer abused his authority as posse treasurer—Mr. Greer spent $38,706 of posse money for personal benefit. Specifically, he paid his personal and business expenses by withdrawing cash and writing checks from the posse bank account and by using a posse debit card. He also orally presented false treasurer’s reports, concealing the Posse’s true financial condition by fraudulently overstating bank account balances 12 times at posse governing board meetings.

Although no internal control system can completely prevent dishonest behavior such as Mr. Greer’s, there are ways to help ensure officials properly safeguard and control monies for which they have fiduciary responsibilities. Governing boards should require all board members and certain personnel to complete conflict-of-interest forms every year. In addition, governing boards should develop and implement purchasing policies and procedures that ensure monies are properly controlled and expended. These policies should provide for a clear separation of responsibilities regarding the disbursement of monies so that individuals preparing checks do not also sign them and supporting documentation, such as invoices or contracts, is reviewed for propriety by a separate authorized individual. Additionally, board members should regularly review bank statements to ensure bank accounts are authorized and that reconciliations between the bank statement and check register are independently performed and reviewed.