CHELSEA, Oklahoma - An investigative audit by the Oklahoma State Auditor & Inspector's office found numerous problems with Chelsea's city government.

The Auditor's office said it conducted the audit at the request of District Attorney Matt Ballard. It looked into the dealings of the Chelsea Economic Development Authority, the Chelsea Improvement Trust and the town's government itself.

According to the audit, the town violated the terms of the sale of its electric distribution system in 1989, it hasn't maintained documents related to that sale, it purchased insurance from a company owned by the town treasurer and projects totaling $38,600 were not bid according to state law.

The audit found that voters approved the sale of the Chelsea's electrical system in 1989, on several conditions. The proceeds from the sale were to be held intact and the Chelsea Improvement Trust could only spend the money if voters approved the expenditure in a subsequent election. The audit says the proceeds would have had to be maintained at $2,200,000 to satisfy the terms, but the proceeds had been invested in non-qualified annuities and as of September 2016 the account had a value of only $1,557,463.99.

The Auditor's office says the town has improperly been making yearly withdrawals of $84,000 from the account. It also found that the town did not maintain documents, statements and policies pertaining to the account, even though the lack of compliance was brought to management's attention for four years.

The audit found that the town violated state law by paying $11,321.87 from July 1, 2014 to October 31, 2015 to buy insurance from Fraley Insurance, which is owned by town treasurer George Fraley. According to the audit, state law prohibits a town official from contracting with the town.

The town clerk told investigators the town obtained insurance quotes about every two years to get the best price and benefit for the town. However, the audit says investigators could find no written records of the quotes.

The audit says it found no conflict of interest between the town and the Bank of Commerce. Fraley, the town treasurer, owns 5% of the bank, but the law says a proprietary interest has to be at least 25%.