Saturday, February 8, 2014

Forensic Audits, Another Tool Related to Transparency

Couple of years ago in Saugus, Massachusetts, the Board of Selectmen engaged an accounting firm to conduct a forensic audit of the town's water and sewer enterprise fund.  Financial irregularities were suspected and subsequently found.  There was public anger over the revelations.  Some had been lied to in town meetings.  The matter was reported in the Saugus (MA) News on May 2, 2012.

On completion of the forensic audit, one of the accounting firm's members appeared before the Board to answer questions.

The accountant, Jim Powers, said the mischief  "...could have been stopped at any time...checks and balances are dependent on people doing their jobs."  How could the shenanigans have gone unnoticed so long?  Selectman Castinetti asked, “Why did it take a forensic audit to bring all this to light?”  Why didn't the town's previous accountants discover the violations?

Selectman Horlich knew part of the answer.  As soon as the previous accountant asked embarrassing questions, the former town manager got himself a new accountant.  Horlich said,  “I believe the feeling was ‘If you open your mouth, you’re going to get fired.’”

Powers summed it up, saying that a town could avoid this kind of trouble by assuring greater transparency and wider distribution of power.  A financial committee member observed, "It’s incredible, the depth of this forensic audit."

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