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ADDIE COSTELLO

Flatwater Free Press

Mary Terry, the longtime village clerk in Cedar Creek, shook her head no whenever Steve Sharp told her she deserved a raise.

"Her answer was always the same. It was always, 'You can't afford to give me a raise,'" said Sharp, elected chairperson of the village board in 2010.

What Sharp didn't know: Terry, the clerk and treasurer, was giving herself unauthorized raises. She padded her paycheck with more than $75,000 in stolen village funds over six years while overseeing the tiny eastern Nebraska town's finances, records and utilities.

"She was on the board longer than any of us were, so we came to trust her. We saw no reason not to," Sharp said.

That's serious money for the government of a 465-person village.

But Terry's theft is important for another reason: It's one in a series of embezzlements that have repeatedly stung small Nebraska towns, a drumbeat of fraud that's become routine.

In Nebraska, 14 city and village clerks have been charged for theft or violating public resources over the last decade.

Those clerks, plus another who took money but wasn't charged, stole an estimated $1.7 million from 17 small towns across the state, according to audit reports and restitution orders.

That total doesn't include four recent cases of theft or mismanagement by county officials and three cases of financial mismanagement by village and city board members.

And many more Nebraska small towns may be sitting ducks for future theft - or may not know that they are already being targeted.

A whopping 158 towns in Nebraska have gone more than 20 years without a full financial audit, including four towns where former clerks were charged with theft, according to data collected by Flatwater free press from state audit records.

And in almost every town where a clerk has been caught for fraud, audit reports have noted a lack of internal financial controls – essentially, not enough eyes on the cookie jar.

Ginger Neuhart took $265,000 from Alvo, Memphis and Ithaca – combined population: 384. Neuhart embezzled the money while working for all three villages in eastern Nebraska.

Kimberly Neiman took at least $700,000 from Pilger, according to audit reports – the most taken by any clerk in the last decade. She did so before and after tornadoes devastated the tiny town.

"Every year, it seems like there's a clerk that gets caught for stealing. And that doesn't mean that every one of them gets prosecuted, either." said Randy Peters of the League Association of Risk Management, the insurance pool that helped cover Cedar Creek's losses.

It's easy to see why small towns face financial risk from a rogue city clerk, experts say.

Board members like Sharp frequently work full-time jobs. The towns often lack the resources to keep or oversee detailed financials, said Nebraska deputy auditor of public accounts Craig Kubicek.

While clerks acting as treasurers are legally required to complete continuing education classes each year, there's no requirement for people elected to a city or village board.

The lack of oversight often means village clerks aren’t caught until they have stolen money for years.

In Cedar Creek, Terry got caught only after she got sick. A certified public accountant temporarily replaced her and noticed issues with the village finances.

For years, Terry had been paying herself more than what she listed on reports by signing, depositing and reporting her payroll, Sharp said. The village checks required two signatures to clear the bank.

Terry signed once as village clerk. Then she signed again as treasurer.

If a small town wants to avoid fraud, it should always require two distinct signatures on checks, Kubicek said.

These safeguards often deteriorate after trust between board members and a clerk builds over time, Peters said.

Six of the 14 clerks recently charged with theft served their small town for 10 or more years. Two were named Outstanding Clerk of the Year by the Nebraska Municipal Clerks Association before their convictions.

Today, Sharp said the Cedar Creek board ensures dual signatures on all checks and has a different member review the village’s financial records every quarter.

“Now we trust, but verify,” Sharp said.

In many small towns, there’s little verification.

The clerk often understands how the financial systems work, while board members often don’t, Peters said.

​​”The thing that facilitates the crime in the first place is their knowledge,” Peters said. “It's not like taking $10 out of a cash register. Some of these crimes are hundreds of thousands of dollars.”

In the last decade, four village clerks stole more than $100,000. In every case, they took it from a town with a population less than 1,000.

“I think the state's doing a good thing by requiring some additional education for treasurers. But without requiring trustees or city council members to have some training, I'm not sure you're accomplishing much,” Peters said.

Small Nebraska towns may also miss fraud because many avoid audits to save money. Even with yearly audits, fraud can go undetected. Cedar Creek had an audit every year, including the years Terry was stealing from the village.

Audits aren’t designed to catch thieves, Peters said.

The state actually requires all Nebraska cities, counties, towns and villages to perform annual audits. But most small towns can apply for a waiver each year. Audits can cost up to $10,000, which is why small town boards may frequently opt to skip, Kubicek said.

Before 2018, the state allowed audit waivers with minimal documentation. After nearly two dozen instances of official fraud in the past decade, the state now requires towns to present meeting minutes, bank statements and other financial details before a waiver is granted, Kubicek said.

“If they think somebody's looking or going to look, then they'll be less likely to do something,” Kubicek said.

But the State of Nebraska continues to grant waivers that allow many small towns to skip financial audits. Just last year, the auditor’s office granted audit waivers to 245 different small towns, Kubicek said.

In Amy Allen’s decade-long career as Stapleton’s village clerk and treasurer, the village only underwent one audit, in 2012. The town received a second audit in 2018 – this time, because money was missing. Allen was charged with taking $15,000 but could have taken up to $38,000, the auditor said.

The woman who replaced her, current Stapleton clerk and treasurer Stacey Anderson, started at $12 an hour and now makes $20/ hour while grappling with the fallout from Allen’s embezzlement.

“It was very hard coming in,” Anderson said. “I don't know that I would have taken this position had I known all the history here.”

Wendy McKain, current president of the Nebraska Municipal Clerks Association, said clerks frequently feel underpaid and underappreciated. McKain is the clerk and treasurer in Trenton, a 516-person town in southwest Nebraska.

There are 539 clerks in the state of Nebraska, McKain noted, and the vast majority perform their jobs admirably.

Still, when fraud does happen, it causes real damage.

Cedar Creek is still missing some of its $75,000, though insurance and court-ordered payments have returned most of it, Sharp said. He said the theft could have delayed updates to roads and the town’s baseball field.

The $37,000 taken from Stapleton has been repaid. Anderson said some of it has gone toward decorations and playground equipment.

“I'm hoping that they see that we're putting it back into the village,” Anderson said, “But that negative will never be forgotten, not in a small community.”

The Flatwater free press is Nebraska’s first independent, nonprofit newsroom focused on investigations and feature stories that matter.