Concerns over representations

The Town of Saratoga is one step closer to completing their audit of Fiscal Year 2018/2019 following approval of a representation letter to Carver, Florek and James (CFJ) at the July 7 meeting. The letter was approved on a 3-1 vote, with Councilmember Jon Nelson voting against.

As was reported previously (see “Bubble gum, duct tape and pickles” on page 1 of the July 1 Saratoga Sun), third-party accountant James Childress urged the Saratoga Town Council to sign the representation letter from CFJ to complete the audit. That letter, dated June 25, appeared before the council at their most recent meeting.

“I think the Town has signed similar letters as well as this is a very standard letter for governmental entities when going through their audits,” said Tom Thompson, legal counsel for the Town of Saratoga. “I know that James Childress suggested the Town sign this. I would defer to Suzie and Sammy in reguards to the representations made in the letter but I believe it’s necessary to complete the audit.”

When asked what his recommendation was, Thompson stated that he had no recommendations regarding the letter. Nelson, however, expressed his concern with the letter.

“I don’t feel comfortable with several of the representations made in this letter and the liability that will be placed on the Town, so I’ll be voting against it although I just want to state clearly that’s in no way reflective of any desire to try to hold up this process,” said Nelson. “I’ve stated before that I do want to conclude the audit but … I’m uncomfortable with some of the representations in this letter.”

The Saratoga Sun reached out via email to Nelson and asked for clarification on his concerns. 

“The only way we’re going to get this situation resolved is by being open and transparent about what has taken place. Part of what got us to where we are today may be due, in some part, to representations provided to prior auditors,” Nelson wrote. “One question I’ve continued to ask myself is how the prior auditors missed this for so many years. They should have been waiving a flag to prior councils going back years but they clearly missed something, so I wanted to ensure that nothing was being misrepresented to our current auditors.”

Out of 45 representations included in the letter to CFJ, Nelson listed eight representations he was uncomfortable with. Those were:

Item 12: All material transactions have been recorded in the accounting records and are reflected in the financial statements;

Item 15: We have no knowledge of any allegations of fraud or suspected fraud affecting the Town’s financial statements communcited by employees, former employees, regulators, or others;

Item 16: We have no knowledge of instances of noncompliance or suspected noncompliance with provisions of laws, regulations, contracts or grants agreements, or abuse, whose effects should be considered when preparing financial statements;

Item 19: There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices;

Item 28: There are no violations or possible violations of budget ordinances, laws and regulations (including those pertaining to adopting, approving, and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements, or as a basis for recording a loss contingency, or for reporting on noncompliance;

Item 31: The Town has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance;

Item 35: Components of net position (net investment in capital assets; restricted and unrestricted) and classifications of fund balances (nonspendable, restricted, committed, assigned and unassigned) are properly classified and, if applicable, approved;

Item 39: Interfund, internal and intra-entity activity and balances have been appropriately classified and reported.

Nelson added that he believed that Item 16 was a “blatant misrepresentation” to the auditors. Additionally, as it related to Item 19, Nelson had attached a letter sent from the Wyoming Department of Audit addressed to State Treasurer Curtis Meier. In that letter, dated November 7, 2019, Saratoga was listed as an entity that was out of compliance with the department. At the time, Saratoga was joined by Labarge, Granger, Pine Bluffs, Fort Laramie and others.

“While I in no way wanted to delay the audit process or prevent the audit from being issued, I was concerned that the Town or the town council members themselves could be assuming additional liability by making those representations to the auditors,” wrote Nelson.

As part of his concern, Nelson cited Wyoming State Statute 16-4-123(d). Part of the Uniform Municipal Finance Code, it reads “Any member of the governing body … who knowingly and willfully furnishes to the auditor or his employee any false or fraudulent information is guilty of malfeasance.”

“The fact that the town attorney declined to offer an opinion or recommendation to the council only reinforced those concerns,” Nelson wrote.

The next meeting of the Saratoga Town Council will be at 6 p.m. on July 21 at Saratoga Town Hall in Saratoga.