Fayette is a town of only 250 residents in Sanpete County. But its former town clerk embezzled more than $300,000 over nine years — or 12 to 13 percent of town’s total budget in that span, a new state audit says.

The clerk, Tracy Kay Mellor, pleaded guilty to three felony counts of misusing public money, and in November was sentenced to 45 days in jail and ordered to repay $153,391 plus interest in restitution.

The new audit, released Monday, says the small town was cheated out of double that amount and should seek additional restitution.

“Town officials failed in one of the most basic duties of elected officials, the separation of the duties of clerk and treasurer as required by law. Had they done so, it likely could have prevented or mitigated this theft,” State Auditor John Dougall said.

But he did praise newly elected Mayor Brenda Leifson for reviewing town finances, catching irregularities, and calling for help from the county and state.

Leifson told FOX 13 she noticed when she first took office that the town was writing checks to vendors for what seemed like a lot of money — about $3,000 to $4,000 — per month, and when she asked Mellor about it, the checks in question disappeared from the manilla folders where Mellor kept financial information.

When Mellor went on vacation, Leifson said she spent a lot of time in the mayor’s office trying to learn the job and came across more checks that were “even more questionable.”

“I talked to [Mellor] about it,” Leifson told FOX 13. “She got upset and quit.”

Leifson said she turned the information over the Sanpete Sheriff’s Office. When she found out about the fraud, Leifson said she was shocked.

“I wondered why it had gone on for so long, but I know that the other two mayors ... had a lot of trust in [Mellor]. They trusted the town clerk and a lot of the townspeople. I don’t know if anyone’s to blame,” she said.

The new audit scolds past leaders for not detecting the theft, which was made largely by Mellor writing checks to herself, her husband, a business they own or leaving checks blank — but sometimes altering their images.

“The method used by the former clerk to alter the check images was quite unsophisticated and easily identifiable,” the audit said.

“The amount of the theft averaged approximately 12 percent to 13 percent of the town’s annual revenues, which likely impacted the town’s ability to operate and could have been noticed by town officials,” it said, adding they simply didn’t do their jobs of properly reviewing finances.

The audit went so far as to say town officials should “resign if they were in office prior to Jan. 1, 2018. If replacements cannot be found the town should disincorporate.”

In a written response, the town said only one of its current five council members was in office before then “whose term ends this year and he assisted with this correction of the town’s malfeasance and we believe he will be of value till the end of his term.”

The town said it has hired an outside accounting firm to help get its books in order and help review them in the future. It said it is adopting changes in procedure suggested by the auditor.

It also said it shut off water service to the former clerk until she pays an old $1,000 installation fee that the audit found she had improperly avoided.

Of note, the audit also questioned a contract for security cameras at the town’s spring that were awarded to a relative of the former town clerk. She had said that relative had the low bid, but she opened the bids alone with no one else present.