Two recent issues of the Newton County Times have mentioned state and federal investigations into the county's expenditures of special funds. The first story appeared Sept. 24, 2009, and is headlined, "Compton Water Association probed by legislative audit." It tells of a report by the Legislative Joint Auditing Committee for the Division of Legislative Audit that reviewed operations and financial records of the Compton Water Association. Compton is a tiny community in northwest Newton County; it is neither a Census Designated Place nor the topic of a post on wikipedia.org. Among irregularities found by the audit are more than $5,000 in payments to the association bookkeeper for compensation not authorized by the board and a failure to comply with IRS regulations or with an agreed upon annual audit. The report has been forwarded to the prosecuting attorney.
The second story appeared in the October 15, 2009, issue of the paper under the headline, "FBI investigating county spending." It reports that the FBI is "investigating more than $200,000 in questionable expenditures of federal disaster funds and county road funds by Newton County officials." The main problem seems to be that some of the funds went to companies owned by a quorum court member and his family. The report states that while some county offices are in compliance with the law, "noncompliance with state law and accepted accounting practices was noted in the Offices of County Judge, County and Circuit Clerk, Sheriff and District Court clerk." Among the specific problems identified are $214,097 of "unauthorized and undocumented disbursements" and "noncompliance with state ethics laws, purchasing and bidding laws."
I see this as support for my hunch that inadequate checks and balances exist on small/rural county governments--except, that is, when the feds (or the state) happen to step in. Why else would local officials take the risk of unauthorized expenditures. Surely they expect not to get caught.
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I work as a lawyer in the Ozarks, and some of my clients are local governmental units.
There are several reasons for non-compliance with regulations for grants and other kinds of aid. Sometimes nobody at the local level understands the regulations. For water and sewer boards in some states, there are often no accounting or audit standards and no supervisory body other than a volunteer board.
Or there's not enough money in the program to hire an accountant to set up proper books, and the volunteers who run the board simply follow procedures that were in place previously, with nobody having reviewed the conditions of the new grant.
If there was no opportunity for self-dealing or nepotism, there might be insufficient local incentives to even for acceptance federal or state aid.
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