Wednesday, March 28, 2012

City learns about forensic audits

Sun Valley’s internal investigation still under wraps

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By REBECCA MEANY
Express Staff Writer

Sun Valley officials got a primer in forensic audits Friday as they prepare to undertake a thorough review of city departments.

John Curran, with Hagen, Streiff, Newton & Oshiro, a forensic accounting firm based in Seattle, gave a presentation to the City Council on what forensic audits are and how they can be carried out.

The council at a meeting earlier this month discussed pursuing an audit of the city but did not give a specific reason as to why. Council members have said they want to embark on their own investigation of internal matters while external investigations are under way.

An annual independent audit last year uncovered issues of which the city wanted further review. At the same time, an internal investigation conducted late last year prompted the city to seek an investigation by the Blaine County Prosecutor's Office. The exact nature of these investigations has not been publicly stated.

Council members wanted to hear from potential accounting firms before they decide whether to move ahead with a forensic audit.

"The council hasn't taken any definitive action on a forensic audit," said Mayor Dewayne Briscoe. "They may make a decision at a future meeting. This is just an informational meeting, what we call a work session, so we can learn something about forensic audits."

Curran told the mayor and council that a forensic audit is more than a review of transactions.

"The forensic part of this is using principles that include auditing but also investigations of transactions that go beyond just looking at the numbers," he said. "The process means looking at controls, processes [and] procedures. ..."

Curran said the audit could help the city improve its procedures.

"This is a very important part sometimes of the investigation's forensic accountants because ... there may have been something that occurred that was not either appropriate or out of the ordinary," he said. "So, the question is, how can we improve to have that not occur in the future?"

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Curran said the City Council and the accounting firm define the scope of work. Typically, it would include looking at the history of transactions for a period of time and conducting interviews.

Documents that may be reviewed include financial statements, invoices and ledgers of transactions, purchase orders and approvals.

"All of the things that you can imagine that are developed in the process of doing the business, in this case, of the city," he said.

He said electronic documents would be part of the audit.

"In today's world with so many things being done electronically, it's important to be able to go in and investigate not only paper records but also records that have been developed through electronic processes," he said. "The idea would be to look for things that are unusual, out of the normal context of whatever the transactions are."

If something questionable comes up, auditors would work with legal counsel to determine whether it is relevant.

Curran said hourly rates for a forensic accountant can run $125 an hour to $275—and much higher in large cities—depending on the expertise necessary to conduct the work.

"There are a number of ways that these things can be accomplished," he said. "It needs to be customized to the specific situation. That's important."

Rebecca Meany: rmeany@mtexpress.com

Another forensic-audit presentation today

A special City Council meeting is set for 3 p.m., today, March 28. On the agenda is a presentation by Daniel Rondeau, with Sage Forensic Auditing, as well as potential other presentations by forensic auditing firms, on an audit of the city. The council also may authorize the mayor to select a forensic auditor and to prepare a prioritized scope of work, including a cost-not-to-exceed estimate, for council approval.

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