OpenCDA

August 2, 2016

Read and Decide for Yourself

Filed under: Probable Cause — Tags: — Bill @ 11:46 am

KC Int Audit Cover for OCdA PostOn July 26, 2016, our local skews paper, the Coeur d’Alene Press, published an article headlined ‘Audit of fair raises red flags.’   The article is available online for those who care to read it.

Then two days later on July 28, the Press published the Kootenai County Fair board’s response in an article headlined ‘Kootenai County Fair board responds to audit concerns.’  That article was not published online.

As a service to readers, OpenCdA is linking to the complete Kootenai County Internal Audit – Final Report – North Idaho Fair Financial Processes – June & July, 2016.  It is not some tedious tome.  It is readable and equally important, understandable by those of us with no accounting background.  Counting the one-page executive summary and the one-page table of contents, it is 24 pages.

The County’s audit report is well-organized and succinct.  Each  condition the audit team observed is reported.  The remedial recommendations are also reported.  And finally, the responses of the Fair Board accompany each condition and set of recommendations.

In short, by reading the Internal Audit Final Report, readers will have a far more complete understanding of why in late May 2016 the Kootenai County Board of Commissioners ‘… directed the Clerk’s internal audit team to review the Fair’s financial practices as soon as possible.’  It is likely readers will also have a much better understanding of why the Commissioners recommended the addition of two Fair Board members who have ‘deeper financial expertise’ that the existing Fair Board members.

We also suggest that readers read two sets of meeting minutes.  The first is captioned ‘Minutes of Meeting – Fairgrounds – April 19, 2016, 3:00 p.m.‘  The second is captioned ‘Minutes of Meeting – Internal Audit Committee, May 31, 2016, 11:00 a.m.‘   Both sets of minutes are relevant to the Audit Report, but equally important, they provide voters with some insight into the official conduct of elected County officials.

4 Comments

  1. This is the kind of stuff, I wish I had more time to study. They had me at “draw” on their future wages which was substantial, what a perk! Then it just really sank deeper into the gutter. I feel like Trump,

    ‘I mean really , they took draws. I mean draws on future wages! Years into their salaries … like76 % percent of their future draws include some type of future repayment structure and even in a two week period they were able to take a personal future draw of over 4K … seriously Future Draws! They do not even need to guarantee future labor! At this rate, they probably will make a cash deal for cattle on a slow boat to China with a cash carrying jet in order to secure future beef. due to debt caused from John Deere tractors still owed! Who needs a credible paper trail??

    Comment by Stebbijo — August 6, 2016 @ 4:52 pm

  2. Stebbijo,

    That was definitely one of the eye-openers. It suggests a massive failure of the Fair Board to properly supervise the employee.

    There were other major eye-poppers in the Audit Report.

    One was the horrendous failure of the Fair Board to properly check into applicants’ backgrounds. Good grief! Did the Fair Board (which fellow Fair Board member Linda Rider characterized in the second Press article as already ‘having five members with business backgrounds’) not learn anything from the convictions of two embezzlers (Sandra Martinson and Angela Spaccia/Sheffield) who had worked for former County Clerk Dan English? Did the Fair Board not learn anything from the conviction of Sheryl Carroll, a formerly convicted thief who was then hired to work in the City’s Finance Department, a failure by the City’s Finance Director and HR Director to not perform a proper criminal records check? Did the Fair Board not grasp the importance of preemployment screening followed by diligent supervision?

    Even our loopy local skews paper editor Mike Patrick couldn’t accurately headline the first article. The headline was ‘Audit of fair raises red flags.’ No, the red flags had been raised months earlier to the Board of County Commissioners but Patrick and his reporters didn’t seem interested in digging further.

    The County’s audit report was the sequel to the red flags raised by the County Clerk in February. The audit report produced an entire and complete Independence Day pyrotechnic display filled with flashing lights and loud sounds. Go back and review the Evaluation of Management Comments on p. 12 of the Audit Report. It reads:

    The internal audit team on this project included two CPAs [one of them a Certified Fraud Examiner], and despite out best efforts we were unable to achieve the goal of reasonable assurance that the Fair’s financial reports are accurate.

    What the Fair Board calls “problems of the past” have become problems of the present because daily decisions and future projections are being made from inaccurate financial data. Timely and accurate transaction recording is essential to accurate financial reporting.

    That ought to make the public wonder exactly what value the County’s taxpayers are getting from the annual independent audit by outside independent accounting companies, most recently Magnuson McHugh. That makes me question the competence of the Fair Board members’ ability to first define and then understand what an annual financial audit does and does not do. Did the Fair Board insist that the annual independent audits contain an explicit and well-defined plan to find fraud? Do Board members know how to properly and completely interpret the annual independent audit’s results? The answer to that may be why the County Commissioners recommended adding two additional Fair Board members with ‘deeper financial expertise’.

    Fair Board member Rider said in the second Press skews paper article, “There has never been a problem with misappropriated funds.” How does she know? It seems to me the best she can say is that the Fair Board has found no evidence (if they even know how to look and what to look for as evidence) of misappropriated funds. Now go back and read yet again the earlier blockquote which includes this: “The internal audit team on this project included two CPAs [one of them a Certified Fraud Examiner], and despite out best efforts we were unable to achieve the goal of reasonable assurance that the Fair’s financial reports are accurate.”

    Like so many small committees and commissions in Kootenai County, Fair Board members seem to be well-intentioned but professionally unprepared volunteers. They are seemingly clueless about their statutory and fiduciary duties and responsibilities to the citizens of Kootenai County. They were appointed because of their laudable desire to see the Fair succeed rather than for their demonstrated knowledge, skills, and abilities in public administration and stewardship of public funds.

    This absence of knowledge by Fair Board appointees and the condition of the financial reports as observed by the County’s own audit team create an opening for those who might want to exploit their neglect and ignorance for personal pecuniary gain. When the Fair Board’s financial records are deemed unreliable at best and when the Fair Board considers prior years’ external audit reports with “significant deficiencies” in payables, supporting documentation and check signatures; “material weaknesses” in cash receipts; and a “significant deficiency” over untimely accounts payable postings, for the Fair Board members to refer to the external independent auditor’s audits as “clean audits” seems to indicate the need for a forensic audit of the Fair Board’s records. Either the external independent auditor is missing something or the Fair Board is incorrectly interpreting or negligently ignoring the annual external audit reports.

    Comment by Bill — August 6, 2016 @ 7:58 pm

  3. Cda Press staff writer Brian Walker reported in his August 19, 2016, article;
    “It is unclear how the discussion of a possible forensic audit wound up on Tuesday’s agenda. Green and Eberlein said they thought Stewart put it on the agenda, but Stewart said he was on vacation and didn’t place it there.”

    Seriously? My question is…how the heck did the forensic audit wind up on the agenda? Now that is bizarre. Mr. Walker just left alone the most intriguing part of the story (at least until a forensic audit is completed). Apparently Mr. Walker missed the day in the journalism class when the topic was–“who…and why”?

    Comment by Tributary — August 22, 2016 @ 5:53 pm

  4. Tributary,

    ‘Bizarre’ is the correct word here. Obviously it wasn’t put on the agenda by County Clerk Jim Brannon, the recommendation’s proponent. Brannon had been scheduled to attend the statewide County Clerk’s conference in Shoshone County. Why would it be put on the agenda when the proponent wasn’t even going to be there? What is even more bizarre is that the County Fair Board and its Foundation had obviously been clued in ahead of time to be there in force. And as today’s press release from the County Clerk’s office clearly states, Brannon’s original recommendation was to conduct the forensic audit after this year’s fair was over. The agenda for that meeting only shows ‘David’ as the scheduled presenter of the agenda item.

    Comment by Bill — August 22, 2016 @ 7:44 pm

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