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On July 29, 2016, Kootenai County Clerk Jim Brannon recommended that the Kootenai County Board of Commissioners authorize and fund a forensic audit of the Fair Board’s financial records. His recommendation was that the audit should be done after this year’s North Idaho Fair has concluded.
His recommendation was both reasonable and appropriate given the findings reported in the Kootenai County Internal Audit Final Report, June & July, 2016, concerning the North Idaho Fair processes. OpenCdA endorses that recommendation wholeheartedly.
Forensic audits are accounting processes used by specially-trained accountants to find and preserve evidence that will be admissible in court.
Notice the phrase ‘admissible in court’ is not limited to criminal court proceedings. At least one county commissioner has stated opposition to a forensic audit because he saw nothing in the cited internal audit final report indicating fraudulent intent or other criminal activity. The commissioner’s making his decision solely on the presence or absence of proven criminal activity ignores the budgetary duties of the county clerk serving in his role as county auditor. The county auditor’s budgetary role includes making sure that appropriated public (county) funds entrusted to the North Idaho Fair Board are being spent and accounted for properly and that those public funds are not placed in jeopardy by inappropriate or unlawful processes. The results of a forensic audit would also likely be admissible as evidence in a civil lawsuit by the County if necessary to recover funds inappropriately used.
The public relies on the accuracy of the North Idaho Fair’s financial reports to be assured that appropriated public funds are being properly spent. The Kootenai County Internal Audit performed this year contained this statement on page 12:
The internal audit team on this project included two CPAs, and despite our best efforts, we were unable to achieve the goal of reasonable assurance that the Fair’s financial reports are accurate.
That statement appears inconsistent with public statements made by North Idaho Fair Board members who assured the Commissioners that the annual financial statements audit performed by an independent outside accounting company was a ‘clean’ audit. That assurance may be true, it may be inaccurate, or it may be based on the inability of Fair Board members to define its expectations of the annual external audit or interpret its results correctly.
Regardless, the inconsistency must be resolved if the the public is to be confident that appropriated public funds are being properly and lawfully managed by the County.
Former Kootenai County Clerk Dan English’s Chief Deputy and Auditing Supervisor Sandra Martinson had been able to embezzle county funds for ten years without detection by the annual external audit. When English was rejected for reelection by the voters, his successor, Cliff Hayes, asked the Federal Bureau of Investigation to assign a Special Agent/Forensic Accountant to assist him and his team in assessing the condition of the County’s financial records and the processes used to assure their timeliness, accuracy, and completeness. The FBI agreed, however the US Attorney for the District of Idaho intervened, improperly and politically in our opinion, and nixed that relatively routine request for technical assistance.
There have been other instances of municipalities in Kootenai County having embezzlers on their payrolls, but the thefts went undetected by the annual external audit.
Given the very recent histories of embezzlement of public funds in Kootenai County, we firmly believe that County Clerk Brannon’s recommendation of a forensic accounting of the North Idaho Fair’s financial records is both reasonable and appropriate.
While a forensic audit of the Fair Board’s financial records might very well be a good idea what happened to the Countywide forensic audit once on the front burner is seemingly now buried forever. Is this a fair approach (no pun intended) when it was Clerk/Auditor Jim Brannon who told me he buried the 2015 internal audit of just two of the Sheriff’s operations at the request of the Sheriff? It was successfully buried when the Commissioners never even met in session regarding that internal audit report.
Currently the operation of the Kootenai County Auditors and Treasurers offices are the worst I’ve ever seen. For example the first day in October a new series of warrants/checks must be registered by the auditor and “All warrants must, at the time they are issued, be registered by the auditor.” IC31-2305. The chief deputy auditors response is that law is just too old and even though they have constructive knowledge of it there is no attempt at all to comply.
That would help maintain some structure and security but the fact is this law one among many others in Kootenai County that is 100% completely disregarded meaning no registration at any time of any warrants/checks period.
There are two parts to this next very easy law to understand. Part 1, “The board must require their clerk to furnish them with a list of all bills and accounts of every nature, giving the name of each person in whose favor an account or bill has been allowed, with the amount allowed him and out of what fund the same is to be paid. The board must review the list and certify to its correctness.” IC31-1502.
Instead hundreds of checks are written in Kootenai County every month that never make the list! This involves checks written by the Treasurer, Auditor and Sheriff that has only grown despite plenty of constructive knowledge across the County.
Part 2, “The county treasurer must pay no warrant that does not correspond with said list.” Again hundreds of checks across the County never come before the Commissioners to approve and certify. The Treasurer alone has two checkbooks that only the Treasurers office signs when handwriting checks, Treasurer Matheson informed me that he was shutting down these independently operated checkbooks when taking office. Instead to compare November 2014, 19 checks cleared the bank for $3,084.09 now we are at July 2016 there was 44 checks that cleared the bank for $521,313.30. Based on the gap sequences more checks were written during the month of July 2016 that didn’t clear the bank that month. The activity of the checks involves several uses at will.
Even though the law is clear in that the Auditor draws the warrants/checks IC31-2301 and one duty of the Treasurer is IC31-2101 (6) to “Disburse the county moneys only on county warrants issued by the county auditor, based on orders of the board of commissioners or as otherwise provided by law.” when the Treasurer and the Sheriff operate their own checkbooks the Auditor and Commissioners are benched.
Some times the Treasurer each month writes a few checks from a County account back to the Auditor who accepts the checks without questioning anything to do his part when his office writes checks that do not show up on any list for the Commissioners to approve. This is a very organized process just look at the payables list online the Auditors office facilitates different expenditures before the next list period starts. Search the last check number on any County Payables report then see what the number is for the beginning check number on the following list. Excluding the Sheriff’s two bank accounts and the Treasurers two checkbooks that already do not make the list hundreds of checks written each month through the Auditors office that are sequentially removed from the list.
This is a small fraction of the problems fiscally and financially going on at the County level if anything that is business as usual. A forensic audit should start with the Auditors and Treasurers office.
Comment by Appalled — August 27, 2016 @ 10:30 am