Wake County plans to submit an initial insurance claim next week for the loss of hundreds of thousands of dollars from its Register of Deeds office during at least three years.

The handling of that claimand other parts of an ongoing investigationwill rest in part on one question: Are people who work at the popularly elected Register of Deeds office considered county employees? More questions underlie that one: Who had ultimate responsibility for the office? The Register of Deeds at the time, Laura Riddick, or the county manager and the Board of Commissioners?

The answers may determine which parts of county government the insurance companyand the legal systemcould find responsible.

Known as a “proof of loss” statement, the claim will tell an insurance company, in this case Travelers, what happened, what kind of loss was sustained, and how much money is missing. A Wake County investigation found that the register’s office used sloppy accounting practices and other loose procedures that resulted in losses that could total millions over a period as long as a decade.

Wake County District Attorney Lorrin Freeman has said she expects the investigation to conclude in September. The insurance claim is the first step in the county’s civil effort to regain its lost funds.

“We’ll have to see whether they accept it or ask for more information,” county attorney Scott Warren says of Travelers. “They’ve been very cooperative.”

The question of whether people who work for elected officials such as Sheriff Donnie Harrison or Riddick are county employees would seem to be straightforward, since they’re on the county’s payroll. But things aren’t actually that clear-cut, Warren says.

“We budget them; we pay for them,” he says. “It’s kind of a muddled area. It’s not well settled.”

Last year, the state Supreme Court upheld an appeals court decision in a case called McLaughlin v. Bailey, ruling that “employees of a county sheriff, including deputies … are directly employed by the sheriff and not by the county or a county department.”

The status of Register of Deeds employees is not as clear, but the county could claim that any register employees found at fault were not under the its direct control, which could bolster its insurance claim.

Asked about his employees’ status, Sheriff Donnie Harrison cites case and state law, but he adds that he has sometimes asked the county to audit his office.

“Some people’s take on it is the sheriff has to ask them to come in and do it,” Harrison says. “I don’t care either way. It’s county money and I like to have a good relationship with them.”

In the end, this insurance claim may rest on one more seemingly simple question: Who was at fault?

County officials have been working on a memorandum of understanding with the Register of Deeds office about the relationship between the two entities. An early draft of an August 5 memo included this clause: “Whereas, the County’s financial policies and procedures apply only to employees of Wake County government, its agencies, and departments and not to the offices of elected County officials and their staffs.”

The day after the INDY asked about the intent of the passage, it was dropped from the memo, which is a work in progress.

In another development shaping the ongoing query, county manager Jim Hartmann announced last week that he is stepping down as of October 27. Hartmann says his departure has nothing to do with the Register of Deeds investigation.

Hartmann’s departure date means that he will be at his post next month when the SBI reports on its inquiry into millions of transactions at the Register of Deeds office since 2008. However, it seems likely that legal wrangling over the loss of public funds will continue long after Hartmann has gone.