COEUR d'ALENE - Mayor Sandi Bloem supports the city's decision not to reprimand anyone in the finance department in light of an embezzlement case that netted a former employee $365,000.

Not everybody at City Hall agrees.

The embezzlement issue will be a topic at Tuesday's City Council meeting, as the city prepares to hire the same accounting firm for its annual audit that performed the task in years past, even as city funds were being stolen.

Bloem said this week in an interview with The Press that Tuesday's discussion shouldn't veer toward punitive issues inside the finance department. Personnel issues should be discussed with administrative heads, which is protocol, not at public meetings, she said.

But she said she supports administration's decision not to punish anyone inside the department that uncovered the crime after six years.

"The punishment is going to take place with the person who did the wrongdoing. The other employees in the department, there was no wrongdoing," Bloem said. "I look on the bright side: The bright side is our employees were smart enough, and quick enough, and on it. It took a lot of hard work to figure this out - it was pretty sophisticated. They did that and of course corrected it immediately and are sharing the information so that the same type of thing can't happen to others" in the state.

Sheryl L. Carroll, the 52-year-old former finance department employee, pleaded guilty in federal court in November to six counts of wire fraud. She faces up to 20 years in prison on each count. Sentencing is Feb. 5 at the federal courthouse.

City Finance Director Troy Tymesen headed the department while Carroll committed 120 fraudulent transfers from 2007 to 2012.

Personnel rules don't allow public employers to discuss personnel issues without the employee's consent, but Tymesen, hired in 2000, told The Press earlier this week that he was not reprimanded in light of the embezzlement, nor was anyone in the finance department.

During last Tuesday's State of the City address, Bloem complimented finance staff for catching the theft. Later in the week, she said it is more important to learn from the circumstance than create an "intimidating" atmosphere by punishing a department with a proven track record of fiscal responsibility.

"All we can do is always learn and tighten up," she said. "If nothing was learned, if they didn't change any of the ways they operated ... then I would be concerned about the department. But exactly the opposite happened."

Since city staff discovered the financial irregularities during the summer, officials have implemented several safeguards, including ceasing most automated transactions, adding more employee oversight on wire transfers and banking security on check payments. It also added finance employees to the list of employees who must pass FBI background checks, since Carroll was convicted of embezzling in Bend, Ore., in the early 1980s.

City Councilman Dan Gookin said that isn't enough.

The first-year councilman said he'd like to see an independent body look over the finance department's practices to determine what could or should have been implemented. Department employees who caught the fraud and implemented the new changes are the same ones under whose watch the thefts occurred. It would be more reassuring, he said, to have independent parties look it over. From those independent findings the punishment question could then be considered.

"It's not good enough to say they've had a good track record," said Gookin, adding that he's heard from several "frustrated constituents" since Tuesday after news reports stated the punitive component. "What message does that send to the public?"

"I'm going to bring it up," he added. "I'm not happy with the current situation."

On Tuesday, the City Council will decide whether it wants to hire the accounting firm Magnuson, McHugh and Company to audit the city's books. It's the same company that audited city finances in previous years, including when Carroll was taking money.

Gookin said he may suggest the city look at another firm.

Audits study samples of an agency's finances. Only 3 percent of 1,388 fraud cases studied by the Association of Certified Fraud Examiners for its 2012 fraud report were spotted by external audits. Embezzling is far more likely to be detected after a tip, the report says. The report also shows that governments are among the most likely agencies to be victimized.

Last year, former Kootenai County Chief Deputy Clerk Sandy Martinson was convicted of stealing $139,000 over 10 years from the county. In Bonner County, whose biggest city is Sandpoint with 7,300 residents, 18 embezzlement-related cases have been prosecuted there since 2005, according to the Bonner County Daily Bee newspaper.

But the true quantity or volume of embezzling won't ever be gauged, said KD Hatheway-Dial, University of Idaho accounting instructor who teaches fraud examination. Too many cases go unreported, she said. Sometimes employers are too embarrassed to report the problem; they simply fire the offender. But, she said, stealing from an employer, even over several years, isn't rare.

"It's just not that uncommon of a problem," she said.

By its truest definition, such as employees cheating on time cards or exaggerating travel logs, she said she believes every company has been defrauded at some point. A common factor in an embezzlement recipe is giving too much control to one person. In Coeur d'Alene, Carroll was in charge of employee payroll.

Cross training departments is a good way to combat that, according to Hatheway-Dial.

"We don't see that as much as we should," she said.

The median duration of the frauds the ACFE studied for its 2012 report lasted 18 months before being detected, a shorter span than Carroll's six years. The ACFE report's median fraud amount was $140,000 - nearly Martinson's amount.

On Thursday Bloem described the city finance department as "absolutely unbelievable" with Tymesen at the head, and she fully supported administration's handling of the punitive issue.

The city routinely is recognized in the state for its economic health and has the second highest foregone taxes amount, she said. Foregone taxes are property taxes the municipality could have collected, but didn't. She highlighted those points in her speech on Tuesday as well, and pointed to the re-financed 2007 loan Tymesen negotiated this year that will save wastewater ratepayers $1.2 million - an amount four times the embezzlement total that received a fraction of the media coverage.

"I'm one that likes to look at positive things," she said. "We have a culture in the city to be progressive, try new things, and not a culture of intimidation - that you should be afraid because something might happen. We don't have that kind of culture at the city and I wouldn't promote that kind of culture."