The City held a news conference Wednesday afternoon to discuss the report and issue an apology.
Police Chief Jose Lopez, City Manager Tom Bonfield and City Councilman Howard Clement attended.
Bonfield issued and apology and said the case is isolated and the police department does not have a widespread problem.
"I want to publicly apologize to the citizens of Durham," he said. "I am personally embarrassed, and embarrassed for Durham's police department. "
The report says Secondary Employment Coordinator Alesha Robinson-Taylor billed the police department for $62,583 in overtime between September 1, 2008 and the end of August of this year. The amount is more than her normal annual salary.
Bonfield did not say what Taylor's current job status is - saying it is protected under privacy laws. But sources tell Eyewitness News the officer is no longer on the force.
The overtime was approved by Deputy Chief B.J. Council - who Eyewitness News has learned is leaving the department over the scandal.
Council will retire from her position effective December 31, 2009.
Bonfield said her duties will be assigned to other administrators.
The report says "Management failed to monitor the actual work being performed. This lack of oversight enabled abuse of overtime and compensation claimed."
It goes on to say: "Deputy Chief B. J. Council approved overtime hours claimed by the employee. Per the Deputy Chief, she did not monitor the [employee's] time and no one else was involved in the process."
The report says Robinson-Taylor's immediate supervisor noted the extra overtime and went to Council with her concerns. Council told the supervisor that because Robinson-Taylor was not allowed to work any off-duty jobs, she was allowing her to earn the extra time.
The audit was requested by Durham's city manager and done by the city's internal audit department.
In a written response to the audit, Police Chief Jose Lopez said he agreed with the findings and plans to implement its recommendations - including new reviews of how much overtime employees receive.
"I acknowledge the seriousness of this event and the blemish it has had on the city and this police department. As mentioned, we are taking steps to comply with the recommendations outlined in the audit report," wrote Lopez.
Lopez says he'll ask for random audits of top overtime pay earners in his department in the future to make sure proper procedures are followed.