ATHOL - The city's insurance carrier has denied a claim to recoup more than $400,000 allegedly embezzled from Athol over the past five years.

In a letter dated Dec. 26, the Idaho Counties Risk Management Program (ICRMP) denied the city's claim for $417,879 mainly because the city failed to conduct financial audits for those years.

Rick Ferguson, executive director of ICRMP, declined to comment on the letter.

"On any kind of claim files we have opened, we cannot comment on those," he said Friday, referring all questions to the city of Athol.

According to the city council minutes in the month of October, Mayor Darla Kuhman told the council that it had received correspondence from ICRMP stating: "That because timely audits may not have been performed for the fiscal years the embezzlement occurred; we must respectfully reserve our rights to decline insurance coverage for this claim."

The same statement was reiterated in the Dec. 26 letter.

Kuhman said she is disappointed that the insurance company denied the claim, but she intends to pursue the claim further if possible.

"All of us are going to be taking a hit on this," the mayor said Friday, adding that it was the responsibility of the previous city council and the former city attorney to conduct those audits. "They just didn't do it."

In fact, the ICRMP letter stated Athol's last financial audit was conducted in 2010, even though Idaho law requires one every year.

Furthermore, the letter states, even if the city had conducted timely audits, its crime insurance policy does not cover any loss claims beyond two years prior to the date of the claim.

"On that basis, the losses at issue would be limited to those incurred between June 16, 2012 and June 16, 2014," the letter said. "Based on the information we have been provided, those losses total $250,288."

The insurance company said $79,590 was lost in 2014, $103,718 was lost in 2013, and $66,980 was lost in 2012.

"Because the fiscal years 2014, 2013 and 2012 were not audited, coverage would not exist for any losses or claims which occurred during those years," the letter stated.

ICRMP concluded its letter saying it is willing to review any new materials that may be related to the embezzlement case, and welcomed the city to utilize the dispute resolution procedures that are detailed in its policy.

Kuhman said she hopes that once the city attorney's position is filled, the city hopes they can find a way to overturn the denial.

She said that may be difficult, however, because very few legal records were kept at city hall.

In fact, the city council minutes of its September meeting show that former City Attorney Bill Appleton could only produce two incomplete contracts that he managed during his seven to eight years of service to the city.

According to the minutes, the mayor was looking for contractual information on a cell tower agreement between the city and T-Mobile.

"Mayor asked Attorney if this was all that he had for the city of Athol in his files," the minutes said. "Attorney answered that he has no other contracts and did not even know of the existence of T-mobile or what T-mobile is."

Appleton resigned his position on Oct. 9, 2014. His replacement has been offered the position, but has yet to accept the job.