Forensic audit? Bring in the TV cameras, Caribou CSI, we’ve finally made the big time! Right about now, anyone who doesn’t watch the council meetings on Channel 8 probably thinks I’ve finally gone off the deep end and am heading to the psych ward in Bangor.
First of all, for those of you who don’t watch the council meetings, (shame on you) one of our citizens approached council last August and was under the impression that a large sum of money had disappeared from the city coffers at some time in previous years and no one was aware of what happened to it. He asked if council would authorize a forensic audit. He returned in December to inform us that he had talked to a number of citizens and they were all in favor of doing this audit. He asked the councilors if they had decided whether they were in favor of proceeding with the audit.
I replied that I was not aware of any reason that we should conduct such an audit, and in my research it would require an expenditure of approximately $75,000 to $100,000 to do this type of audit. Since then, I have done further research on other municipalities who have conducted forensic audits and believe this estimate was probably low. This expense would have to be paid by the taxpayers of Caribou.
When questioned whether he had advised the people he had talked to that the taxpayers would have to pay the bill for this audit, I was advised they were not. It was suggested that if he had any information that Council was not aware of regarding the city’s financials, we would be more than happy to look at it and if it indicated we should be doing such an audit, I for one would certainly support it. As of the writing of this article, I have yet to receive any information, but would still be happy to review it if it is forthcoming.
Before we get any further into the pros or cons of doing a forensic audit, let’s take a step back and discuss how the money flows through the city and is accounted for. I think I know how the system works, but just to be sure I’ll make a run to City Hall and get them to walk me through the process.
Well I’m back and here’s the scoop. If you happen to suffer from insomnia, just keep this part of the article next to your bed and read it when you can’t get to sleep.
The department managers place their orders as needed with a vendor. The order is placed; the goods arrive and are checked for accuracy; the account to which the expense is to be charged is coded on the invoice, approved by the department manager and forwarded to the Deputy Treasurer. The Deputy Treasurer checks the invoices to see if there are discounts for early payment. The Deputy Treasurer will pay invoices according to terms and discounts. Most invoices are paid within 30 days.
The first step in paying the invoices is to create a new journal. Once a journal has been created the invoices are entered. From this the Deputy Treasurer creates a warrant preview. The warrant shows a listing of all the bills and the expense codes to which they are to be charged. This is where you can verify bills that were entered to check for accuracy and changes can be made. All warrants have to be approved and signed off on by the city manager. There is then a report generated for each department of all the expense items. Then the check register is generated. This includes the total check count and the warrant number to which all those checks are charged.
Next steps are printing the Warrant and posting the Journal. The amount of the Journal is put on a Daily Cash Sheet for the day it was processed with the Warrant Number. Finally, the checks are printed. Just in case we missed something a warrant recap summary is generated showing all the companies for which checks were printed. Once this is done the checks are mailed to the vendors by the executive assistant.
The checks have three parts. The check and one stub are mailed to the vendor. The other stub is attached to the invoice and is coded with the expense account to which it has been charged. All of the forms, checks etc. are generated by a financial software program called Trio.
When the bank statements arrive, the finance director goes into the Trio software program and reconciles all the checks to the bank statement to make sure there are no charges on our bank statement that are not accounted for.
Well, that pretty well covers the system for paying the bills, but what about the cash that comes in, you say. Again there are many checks and balances on this system. There is a daily cash sheet generated for all departments that handle cash. There is a daily cash receipting and closeout report that shows the total collected by cash and checks, which accounts they went to, as well as a list of all check numbers and cash transactions. Report sheets are done for each individual person handling money, and each one prepares his or her deposit summaries each day and these deposits are made daily. The financial director reconciles the deposits as well on the monthly bank statement. Hang in there; we’re just about through this.
We’ve now reached the yearly audit done by an independent accounting firm. Our financial department sends all our expense and revenue summaries for the year as well as the detailed expense and revenue summaries which include every transaction done by the city for the full year. They also include a general ledger summary and detail a listing of accounts receivable, and all journal entry adjustments. We also have to include our unopened year-end bank statement.
After reviewing the information, the auditors show up at City Hall and review the bank statements, the fixed assets, and the back-up information for all journal entries, and reconcile the cash for the year. They then perform spot checks on the accounts payable and payroll system. For instance, they prepare a list of random check numbers and the invoices that pertain to those checks have to be pulled and shown to the auditors.
City councilors also receive monthly expense, revenue, and general ledger reports to review. They all have the opportunity to question anything that is included in them.
Do we need to incur the expense of a forensic audit? In my opinion no, unless someone has information that I have not seen. The statement that there seems to be a lot less money in our reserve accounts than there was in past years is probably true. It was put there to spend when we needed to purchase capital equipment such as ambulances, computers etc., and we have. If someone wants to question some specific account and knows when the money supposedly disappeared, I’m sure our city employees can show you exactly who it went to and for what. Do we need to petition the State to do an audit? Not unless we want to pay them to do the exact same thing we already pay our city’s auditors to do.
I find it ironic that we spend a lot of time listening to people give their opinions on where we are spending money we don’t need to, but the same people are in favor of spending additional money to duplicate what we have already done.
The citizens of Caribou have every right to request a State audit by getting a petition signed by approximately 600 people. I just hope they have checked on all the facts and feel they have justification for doing so, as all the citizens of Caribou will end up paying the bill through their tax dollars.
Looking into our city’s financial system has convinced me of two things: I have now confirmed why I never wanted to get into the accounting business; and I need to get me a copy of that Trio software and put my wife on it. Maybe then I’ll know where my money is going.
“What have you done today to make Caribou a better place for all of its citizens?”
This column is strictly the opinion or view of Mayor Gary Aiken and does not necessarily reflect the views of the City of Caribou’s administration staff, its employees, or other council members. He may be reached at garyaiken@hotmail.com.
