Adams County’s feud with treasurer could grind “operations to a halt” for half a million residents

The finance director for Adams County says a communication breakdown with the county treasurer’s office is jeopardizing her ability to complete a required annual audit, without which state officials could withhold millions of dollars in property tax proceeds and “possibly bring county operations to a halt.”

The dire warning from Nancy Duncan, the county’s budget and finance director, was made in a Jan. 19 memo that was shared with county commissioners earlier this month. The Denver Post obtained the memo through an open records request.

Duncan wrote that “due to having no access to financial records held in the Treasurer’s Office,” the county of half a million residents could face “severe consequences” if her department is unable to complete the 2021 annual audit.

“If the county does not file its audit within the extension period, there are repercussions that the State can take regarding property tax collections,” Duncan wrote, referring to a September deadline for Adams County to submit its audit with the state. “Property tax distributions to the county will be withheld.”

Not only could critical tax revenues evaporate, but federal and state grants to Adams County could also dry up until the situation is resolved, she wrote. The county had a $575 million budget last year.

Greg Fugate, a spokesman with the Colorado Office of the State Auditor, confirmed that his office has the authority to place a property tax hold on local governments in the state if they fail to submit the audit. For the 2020 filing year, his office issued holds on property tax revenues for about 130 local governments in Colorado out of roughly 4,500 in the state, he said.

Duncan’s memo is the latest development in a months-long legal battle between Adams County and its elected treasurer, Lisa Culpepper, who the county sued in October, accusing her office of shoddy bookkeeping, including a more than six-month late accounting of $90 million in federal COVID-19 relief money and more than half a million dollars sent by her office to taxing jurisdictions that weren’t owed the money.

The lawsuit asks a judge to appoint a receiver to manage Adams County’s finances in place of the treasurer’s office, accusing Culpepper of failing to carry out her statutory duties.

Culpepper, an attorney who once worked on tax auditing and compliance in criminal investigations for the state Department of Revenue, was elected treasurer in November 2018. She cannot be removed from her position by the county commissioners, according to state statute. Her term lasts until January 2023.

Culpepper, a Democrat, declined to go into details with The Post about the case, saying in a brief phone interview that “it’s a constitutional question that is being dealt with in the courts.” Her attorney, J. Kirk McGill, said his client believes “these claims are without merit.”

First, he said, the parties in the case are awaiting a ruling from the state’s high court as to whether Adams County violated the law by having one of its attorneys initially represent Culpepper against the county.

“The district court cannot adjudicate the treasurer’s motion for judgment in her favor until the Supreme Court rules on the purported misconduct by the (board of commissioners) and its attorneys,” McGill said. “Once the Supreme Court rules, the treasurer’s office expects the district court to rule that the (county’s) claims are meritless.”

On Feb. 3, Culpepper filed to run for re-election for her treasurer seat this November.

Adams County Commissioner Eva Henry said she’s frustrated that a judge has yet to rule on the county’s suit against Culpepper, nearly four months after it was filed in Adams County District Court.

“It’s frustrating that the courts aren’t moving fast enough to give us the help and relief we need,” Henry said. “Basically, our finance department is moving blindly. I think (Culpepper) is incompetent and she’s too proud to admit it.”

The commissioner said the longer the situation drags on, the more potential there is for the county’s fiscal health to deteriorate.

“I know for a fact that it could ruin our credit rating, which could cost the cities of Adams County an enormous amount of money,” Henry said.

Thornton, Adams County’s largest city, has been one of the customers having trouble dealing with the treasurer’s office, she said. A spokesman for the city declined to comment.

According to an audit of the Adams County Treasurer’s Office performed by consultancy Eide Bailly LLP, which was released publicly earlier this month, the firm found that the office had failed to submit required reports on time to the commissioners and delayed its reporting in 2021 “due to lack of timely bank account reconciliations.”

“Without timely reconciliations, business decisions may not be able to be made accurately or timely, potentially jeopardizing the credit and bond ratings of the county,” Eide Bailly reported in its audit.

The firm criticized the treasurer’s office for not adequately safeguarding its assets, pointing to “unsecured checks awaiting deposit not stored in a safe place before being deposited,” and cited high staff turnover in Culpepper’s office, with few employees having longer than one year of service, as problematic.

Eide Bailly also knocked the office for its failure to respond to taxpayers’ questions about tax payments, liens and other business matters.

“As of November 2021, more than 4,000 emails and 500 voicemails remained unanswered…,” the report said.

Morgan County Treasurer Bob Sagel, who also serves as president of the Colorado County Treasurer and Public Trustee Association, said the situation in Adams County “sounds bad.” He’s been the treasurer in Morgan County for nearly 40 years.

“Any time you have elected officials who aren’t communicating, it’s a problem,” he said. “Counties have big business — we provide a lot of services.”