No body, no crime

“If we just think something has happened and we don’t know more about it, then we’re talking about a significant amount of cost and a significant amount of time to tell people that nothing has happened there.”

Following months of questions about the Town of Saratoga’s financial health and the status of several fund balances, there seemed to be some answers as James Childress appeared before the Saratoga Town Council on February 18.

Originally engaged by the governing body on September 18 at a special meeting, the Cheyenne-based certified public accountant was re-engaged following a report given during the November 5 meeting of the Saratoga Town Council (see “Childress reports to town” on page 1 of the November 13, 2019 Saratoga Sun). Among the tasks Childress had been assigned was to aid Town of Saratoga staff with preparing financial statements for an audit of the 2018/2019 fiscal year.

“Just last week, we issued to the auditors our final draft of the financial statements. Congratulations are in order because the Town of Saratoga has succeeded in preparing its own financial statements, which is a very good step in the right direction and a lot of entities nowadays are forced to take because of the way the accounting and auditing standards have changed,” said Childress.

He added that he was “almost 100 percent certain” that this action taken would remove the finding of inability to prepare financial statements given in the 2017/2018 audit. Childress went on to state that he believed that the Town of Saratoga would see at least three of the six previous findings eliminated in this most recent audit.

“I don’t know exactly what the status is with the auditors from here going forward. They might have some more detail testing and might have some more hoops to jump through but we did a very good step in the right direction,” Childress said.

Councilmember Steve Wilcoxson addressed the “elephant in the room” and asked Childress what he had found with the airport board fund, which still had a negative fund balance, and the landfill board fund, which still had a positive fund balance. Childress informed the council that, in regards to the airport board fund, there had been a series of unrecorded transfers that had been unrecorded across multiple fiscal years.

“It’s not the auditors’ responsibility to make the books look perfect. It’s their responsibility to issue an opinion and it’s entirely in their purview to issue an opinion and just say, ‘These books are wrong’ and that’s their audit. It’s called an adverse opinion and, most of the time, it doesn’t happen because auditors go the extra mile, they work with clients,” said Childress

He added that there comes a time when auditors must draw a line as to how much aid is given to a client, especially in regards to decisions that should be made by management, and he believed that Anton Collins Mitchell (ACM) had not posted adjustments as in years prior because of that.

“My feeling is that they didn’t post those same adjustments because they didn’t feel they could reasonably do so and they put that in as a finding and it was up to the Town to take the next steps from there,” Childress said. “That’s what prompted those significant shortages in those funds.”

While there had been, according to Childress, progress made on the airport fund, there was still work to do on the landfill fund. He informed the council that, following the questions from the governing body as to his timeline, his firm had paused work on both funds until they had received guidance on how to proceed.

Though questions around the fund balances has been one that has spanned across several council meetings, one of the more important questions for Mayor John Zeiger had been whether or not fraud had taken place within the Town’s finances. As was reported previously (see “How much will it cost?” on page 1 of the February 12 Saratoga Sun), Zeiger had informed the rest of the council that he did not want Town of Saratoga staff “thinking they’re under the microscope.”

According to Childress, following a review by a certified fraud investigator, Cory Bidne, it does not appear that any fraud has occurred within the Town’s finances.

“The Town, through my firm, has engaged a certified fraud examiner. Not for the purpose of conducting a fraud examination but for the purpose of bringing to light some of the issues related to the fraud discussion,” said Childress. “He says he can’t see where there is a body and a crime to investigate.”

He added that any discussion about fraud having taken place “somewhere” was “fearmongering” and “unproductive.” Childress stated that he believed it was more productive for the Town of Saratoga to put procedures into place to reduce the risk of fraud and to “get all of the internal controls dialed in so that the risk of fraud is dropped.”

One of the procedures discussed was the segregation of duties among Town of Saratoga staff. Childress stated that he had worked with clients in the past where the accounting staff was a single person, which made it easier to potentially accuse that person of fraudulent activity.

“What you have to do is; the person who receives cash should not be the same person as who records it as who disperses it. There’s so much control there it just creates a lot of questions that may not even have any basis in fact,” Childress said. “It’s just really easy to say that person could commit fraud.”

Following his report, the Saratoga Town Council unanimously voted to continue engaging with Childress and provided him an additional list of duties. Those tasks were; to integrate the adjusted journal entries, examine the airport fund balance, examine the landfill fund balance, examine the water and sewer fund, reconcile bill amounts from January to October 2019 and perform bank reconciliation for the Town of Saratoga.

Going from a month-to-month basis, the Town of Saratoga will continue to engage with Childress at a cost of $8,000 per month.

The next meeting of the Saratoga Town Council is at 6 p.m. on March 3 at Saratoga Town Hall.