December 16, 2012

Trust Staff? 365,000 Good Reasons Why Not!

Filed under: Probable Cause — Bill @ 12:19 pm

TrustMeThe minutes of the September 4, 2012, Coeur d’Alene City Council meeting reflect that Councilman Mike Kennedy excoriated Councilman Dan Gookin for asking how the City’s staff arrived at some information included in the City’s proposed annual appropriation.

The minutes state, “Councilman Kennedy believes it is the role of a Councilmember to act as a board member of a Corporation and trust staff and provide them with the appropriate tools to do their jobs and allow them flexibility to manage their departments.”

Regrettably but unsurprisingly, Kennedy did not say a Councilman’s roles also include properly and diligently ensuring that City’s department heads are doing their jobs and protecting the public treasury.

If the City staff is so trustworthy, then how was former City Finance Department employee Sheryl Carroll allegedly able to carry out a systematic pattern of theft of approximately $365,000 from City funds throughout her decade of her employment?

Wasn’t it the responsibility of City staff (HR Director Pam MacDonald) to first ensure that the City performed due diligence in hiring her?

Wasn’t it the responsibility of City staff (Finance Director Troy Tymesen) to ensure that there were appropriate safeguards in place to prevent and detect outright theft of the public’s money by this trusted employee and others under his supervision?

Wasn’t it the responsibility of City staff (City Administrator Wendy Gabriel) to ensure that department heads (MacDonald and Tymesen) were diligently performing their duties for which they are exceptionally highly paid?

The questions concerning the HR Director and the Finance Director were definitively answered our October 13, 2012, post titled Who Bears Concurrent Responsibility?.

Sheryl Carroll was in a position of trust and responsibility but allegedly able to steal approximately $365,000 in City funds because at least three members of the City staff did not perform their duties acceptably.

City HR Director Pam MacDonald failed to properly and diligently obtain and verify available information that would have revealed Carroll’s conviction for theft committed under a different name prior to her employment with the City.  Diligently and thoroughly obtaining and verifying background information on applicants for the Finance Department was MacDonald’s responsibility.

City Finance Director Troy Tymesen failed to properly institute accepted financial procedures to deter and detect fraud and theft.   That was his responsibility.

City Administrator Wendy Gabriel failed to properly supervise both MacDonald and Tymesen in a manner that would ensure they were actually performing their duties and responsibilities.   Supervising department heads to ensure they were performing their duties was her responsibility.  Gabriel didn’t supervise them properly, so MacDonald’s and Tymesen’s failures of duty went undetected.

But what about Magnuson, McHugh & Co. PA?  Didn’t the company hired to perform the City’s annual audit have some responsibility for detecting the underlying conditions that enabled Carroll to allegedly steal about $365,000 over ten years?  The answer to that question is that Magnuson, McHugh had a responsibility to diligently perform the functions in its written agreement with the City.  Here is a link to the FY 2012-2013 Agreement that will be discussed and no doubt approved at the Council meeting on Tuesday, December 18, 2012.  It is worded similarly though not identically to the agreements from years past.

Note that the Agreement was presented to the General Services Committee by Finance Director Troy Tymesen.  The Agreement clearly defines which party is responsible for performing what duties.  Pay particular attention to page 3 of the Agreement and read the last paragraph on that page.  It is under the major heading Management’s Responsibilities.  “Management” refers explicitly to the City.  I’ve added the clarifications in brackets.  That paragraph reads:

You [the Mayor and Council] agree that management [the City government] is responsible for: (a) the design and implementation of programs and controls to prevent and detect fraud, (b) informing us [Magnuson, McHugh] about any fraud or suspected fraud affecting the entity involving management, employees who have significant roles in internal control, or others where the fraud could have a material effect on the financial statements or major federal award programs, and (c) informing us [Magnuson, McHugh] about any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, short sellers, or others.

So in agreements in years past, the Mayor and Council have agreed that the responsibility for “the design and implementation of programs and controls to prevent and detect fraud” has rested with City “management”  and not with Magnuson, McHugh.  The City “management” official charged with design and implementation of the fraud prevention and detection programs in the City’s Finance Department was the person who made the presentation to the General Services Committee, Finance Director Troy Tymesen.  But it was also City Administrator Wendy Gabriel’s responsibility to ensure that her subordinates, Tymesen and his Finance Department, were complying with the terms of the agreements.  That Sheryl Carroll was allegedly able to carry out her scheme of theft of $365,000 for so long is a clear indication that neither Tymesen nor Gabriel were doing their jobs.

Tymesen and Gabriel should be fired.  MacDonald should be allowed to retire immediately but without any incentive.  But the Mayor and Councilmen going back for years also bear some significant responsibility for their blind, unquestioning trust of these three officials.   Did any Mayor or Councilman ever require Gabriel or Tymesen to provide a detailed explanation of the programs and controls in place to prevent and detect fraud and theft in the City’s Finance Department?  Apparently not.  Should they have?  Not according to Kennedy’s bloviation at the September 4 Council meeting.  According to Kennedy, the Council’s job is to blindly trust the staff, give them whatever toys they want, and then don’t supervise them.  Thus, it comes as no surprise to hear Kennedy,  Goodlander, McEvers and Bloem mocking and deriding Councilmen Gookin and Adams for asking questions.   McEvers, Goodlander, Bloem, and Kennedy have no concept of duty to supervise.

Unlike their associates on the Council, Councilmen Adams and Gookin clearly recognize their duty and responsibility is to ask appropriate questions about City operations and management.    Asking those questions and getting sensible, understandable answers helps the honest and competent staff members perform their duties more diligently and effectively.  It helps the honest and competent staff members more wisely and efficiently spend public money to provide the community with the best services possible.

If Mayor Bloem and former and some present  Councilmen had properly performed the oversight duties of their offices as mayor and councilmen, then maybe City Administrator Wendy Gabriel, HR Director Pam MacDonald, and Finance Director Troy Tymesen would have diligently performed their duties as department heads.  And maybe former Finance Department employee Sheryl Carroll would never have been given a position of trust and responsibility where she could allegedly steal $365,000 from the citizens of Coeur d’Alene.

Next time you hear Bloem, Kennedy, Goodlander, or McEvers berating Councilmen Adams and Gookin for asking questions and for not going along with Bloem’s sequential head-nodding game plan, think about who was not asking questions when they should have been since Sheryl Carroll was hired.







  1. Well, it seems that every council meeting is a “Pick on Gookin” meeting. Last meeting (Dec. 4) was a good example with both Kennedy and Goodlander jumping on Gookin and Goodlander saying how disappointed she was in him. Tuesday night’s meeting should be an interesting one. According to today’s paper, they will vote on whether to go with their long-standing auditors again. Dan is quoted in the paper that he will bring it up and that he is not happy with the situation. We all know how it will go, I’m sure. Good luck, Dan.

    Comment by reddy — December 16, 2012 @ 1:25 pm

  2. Kennedy’s comments just go to show how little Kennedy knows about business.

    Councilman Kennedy believes it is the role of a Councilmember to act as a board member of a Corporation and trust staff and provide them with the appropriate tools to do their jobs and allow them flexibility to manage their departments.”

    The board of Directors has a further responsibility to the shareholders of the corporation to see that management preforms its responsibilities and surely the citizen taxpayers of the city are the stockholders.

    I would suggest the Kennedy and the cabal fire the president CEO (mayor) and resign from the Board.

    Comment by Ancientemplar — December 16, 2012 @ 2:16 pm

  3. reddy,

    Magnuson, McHugh has done the City’s and other agencies’ audits for some years. While it might inconvenience the City staff and cause some discomfort, it seems to me it would be a good idea to occasionally have the City’s audit done by someone else, preferably a company with no other ties to any Coeur d’Alene officials. Although the principles that are followed are consistent among auditors, looking at the data with a different set of eyes would clearly have been in the City’s best interests — if the City has the best interests of the ratepayers, taxpayers, and residents at heart.

    It is inconceivable to me that at some time during its relationship with the City, Magnuson,McHugh has not offered either formally as a paid consultant or informally to give the City some obviously much-needed guidance in fraud and theft prevention and detection. It would have been money well-spent for the City to engage such a consultant. The Carroll example is a good one to demonstrate that fraud and theft protection of the City’s assets is a responsibility shared by more than one administrator and department head.

    Although I am a former employee of the Secret Service, it is not the agency I would have chosen to conduct the criminal investigation of Carroll’s alleged theft, and certainly not during a campaign year when agents are often forced to set aside ongoing investigations to go stand in front of doorknobs. I don’t know how and by whom the SS was chosen, but it was at best a curious choice.

    Comment by Bill — December 16, 2012 @ 2:30 pm

  4. Really think about it, Magnuson, McHugh and Co. are NOT a bunch of dummies. Call it what you will but maybe, JUST MAYBE, they were told to keep their mouths shut. It would all blo(em) over. Really? This IS their business and they did not catch it for TEN YEARS. Something is not right.

    You forgot Gridley. He needs to go as well for not prosecuting all involved. Tymesen, McDonald, Gabriel, Carroll, BLOEM, KENNEDY, GOODLANDER, along with previous council members that allowed this theft of taxpayers funds. What is his job anyway? For the city, or for the “taxpayers” of the city?

    Comment by concerned citizen — December 16, 2012 @ 8:51 pm

  5. concerned citizen,

    I agree with your statement that something is not right. If the decision-makers in City government wanted to pay a consulting accounting firm a fair fee to provide theft and fraud prevention and detection guidance, there are plenty of accounting firms available to do that. It would have been a responsible thing for the City to do proactively, particularly with the proliferation of wire transfers that began years ago.

    In the skewspaper article Tymesen reportedly said as a result of the investigation the City would “implement a second level of custody over wire transfers” and that “wire accounts will now have two people overseeing each transfer, meaning routing and accounting data will have to pass dual custody.” He reportedly also said the City would “also implement “mini-audits” on wire transfers during the year, in addition to keeping its annual audit.” Who came up with those? Tymesen? If he was smart enough to cook them up now, why hadn’t he thought of them years ago?

    Comment by Bill — December 17, 2012 @ 7:16 am

  6. Bill, They’re just closin’ the barn doors after the horses are out.

    Comment by Ancientemplar — December 17, 2012 @ 8:10 am

  7. Readers may also want to examine the Agreement on page 2 under the major heading Audit of the Financial Statements. The third paragraph under that heading (the paragraph beginning with, “An audit of the financial statements includes…”) includes this statement:

    The entity’s management [“entity” refers to the City] is responsible for establishing and maintaining a sound system of internal control, which is the best means of preventing or detecting errors, fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements and abuse.”

    That language appeared in earlier agreements between the City and Magnuson, McHugh.

    Comment by Bill — December 17, 2012 @ 8:17 am

  8. It’s a bit ironic that Tymesen’s staff report (included at the beginning of the link to the FY 2012-2013 Agreement) mentioned that last year, Tymesen had sought a competitive bid (quote?) from LarsonAllen in Spokane. LarsonAllen has the expertise the City needed to provide consultation in embezzlement prevention and detection.

    Comment by Bill — December 17, 2012 @ 5:05 pm

  9. Wasn’t Mr. McHugh was former mayor of CdA?

    Comment by concerned citizen — December 17, 2012 @ 7:58 pm

  10. concerned citizen,

    I don’t believe our (alleged) prosecuting attorney Barry McHugh has ever been the mayor of Coeur d’Alene.

    Comment by Bill — December 18, 2012 @ 6:50 am

  11. John McHugh, whom I believe is Barry’s father, was the Mayor of Cda during the period of 1969-1973. I guess my names should be ‘old’ river.

    Comment by up river — December 18, 2012 @ 10:31 am

  12. Gosh, Bill, we are certainly thinking alike today–I just posed my newsletter on basically the same topic! Your info is very well done.

    Comment by mary — December 18, 2012 @ 3:47 pm

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