The first of seven government-mandated audits of the Eastern Plains Council of Government dating back to 2005 painted a picture of financial mismanagement and ineptitude that is likely to be repeated in consecutive audits, according to Sandy Chancey, executive director of EPCOG.

EPCOG board members reviewed and approved the 2005 audit, which the accounting firm Woodard, Cowen and Co., concluded did not provide enough information to express an opinion on the financial statements.

Mary Gray, EPCOG executive assistant to the director, said yearly financial audits are required by the federal government in order for EPCOG to receive and disperse government monies.

"How they continued to get state funding all those years without yearly audits no one knows," Gray said.

Chancey, who took over as executive director of EPCOG in June 2011, said, "No financial audits had been done since 2005 and no auditable books had been kept."

Lee Tillman, executive director of EPCOG from 1975 to mid-2008, could not be reached for comment.

Among the problems listed by Woodard, Cowen and Co. in the 2005 audited financial statement were:

• The cash accounts on the books were brought to balance by journal entries that could not be substantiated by any source documentation or reasonable explanation. Accordingly, we could not substantiate the cash balances as they appear on the council's books.

• The accounts payable for the council was not maintained and even appeared to have been deleted from the accounting system of the council. We could not ascertain the amount of accounts payable at year-end or the amount of unrecorded expenditures.

The report listed widespread problems of borrowing between funds, misclassification of funds, posting of expenditures to improper funds, failure to balance bank statements, and failure to utilize accounting software.

The report also stated that time keeping records for employees were not maintained on a regular basis and seemed to be recorded to match the grant contracts.

Allegations of mismanaged funds and possible embezzlement at EPCOG began to surface in 2008, when Tillman was still executive director, according to a previous Clovis News Journal story. EPCOG employee Lori Howard was convicted in 2010 of embezzling $145,000 and sentenced to 10 years in prison.

The overdue audits, spanning the last seven years, should be complete by July, when House Bill 411 kicks in, Chancey said.

House Bill 411 prohibits state agencies from contracting with any entity that does not have current financial audits, Chancey said.

EPCOG has hired Odessa Hamilton, an accountant with auditing and grant experience, to help build an accountable record keeping system for the organization, according to Chancey.

"We will have books that can and will be audited for 2012," Chancey said.

The seven years of delinquent audits will cost the organization $100,000 and will be paid for by the sale of two houses in Santa Rosa owned by EPCOG, Chancey said.

"A lot of work needs to be done to get EPCOG back on track," Chancey said. "All I can do is address the issues I see and move forward."