Author: Myles Riner
Three of IVGID’s Trustees (Dent, Schmitz, and Tulloch), and the Chair of the Audit Committee (Chris Nolet) have been insisting on the need for a forensic audit of past IVGID financial reports and administrative financial activities. Their justification is largely based on the existence of factors that are typically present when there is fraud, such as high turnover, unreconciled accounts and ledgers being out of balance. But some context is needed before jumping to a reckless and unsubstantiated conclusion that the existence of these factors indicated likely fraud.
We must acknowledge things are not perfect in the IVGID accounting and financial reporting space. There was sloppy accounting, particularly in the capital spending area a number of years ago that led to some large write-offs of fixed assets, but no fraud or malicious intent was noted. As a result, a number of IVGID’s policies and procedures on capital spending were improved, and in a special audit that examined compliance with revised capital spending accounting policies covering the entirety of fiscal 2022, no fraud was found.
IVGID staff have also failed to complete basic reconciliations and other internal financial controls processes. But much of this is due to a critical shortage of staffing, virtually all of which has occurred during the tenure of the three mentioned trustees. Much of this exodus can be traced to the behavior of these Trustees towards these employees, and the verbal harassment and unfounded accusations leveled at them at every Board meeting by the Perpetually Aggrieved. The fact that ledgers were out of balance was caused by the implementation of an entirely new financial enterprise system at the beginning of 2023. It is extremely common, in fact, generally expected, that old and new systems will not reconcile perfectly. There will always be issues with accounts or files that are mishandled in the transition. Again, this issue was exacerbated by the lack of staff.
Importantly, there has not been any fraud or malfeasance in the accounting space found to date. Nonetheless, these Trustees have insisted that a full forensic audit is necessary, in the hopes of justifying their effort to discredit the last IVGID administration, and/or justify their heavy handed approach to dealing with IVGID staff.
This Board approved a budget for the forensic audit and a scope of work for the project.
- Bids were obtained from several firms and the lowest came from Rubin Brown LLP.
- At the November 8, 2023 public meeting, the Board authorized Trustee Tulloch to negotiate terms and conditions with this firm, as well as the final scope of work to be conducted on a forensic due-diligence audit for IVGID. It was expected that any substantive changes would be sent to the Board for their review and approval.
- The dollar amount budgeted by the Board for the contract was to be for a total fixed-price of $110,000 for either a three fiscal years’ review or $160,000 for a five fiscal years’ review.
Sometime between November 8, 2023 and January 10, 2024, the scope of work was increased, and this led to a contract amount “not-to-exceed $350,000” just for a three year audit. Almost $250,000 more than was approved by this Board. Seems like a bait and switch from Rubin Brown and mishandling of the negotiations by Tulloch.
Trustee Tulloch and Interim Finance Director Magee revised the contract and presented it to Interim District Manager Bandelin for his signature without first sending it to the Board for their review and approval, or giving the community the opportunity to learn about, or comment on, this substantial change in scope and contract pricing. This represents multiple violations of Board Policy and Nevada OML.
At the 1/31/2024 Board meeting, the Board approved a revised ’not to exceed’ contract amount at $230,000 by a vote of 4 to 1, with Trustee Noble voting no because he felt the scope of the forensic audit was too open-ended. Trustee Tonking expressed her feeling that “the whole (contract negotiation) process has been behind closed doors, secretive, and (kept) from the community and the people who are supposed to be overseeing the audit.”
Tulloch and Magee should explain why they kept the changes in the potential cost for this forensic audit from the rest of the Board and the public. The timing of this audit in the midst of the effort to recall two of these Trustees raises a lot of questions, and one would think that negotiating a contract for a forensic audit of IVGID’s financials would call for great care to comply with IVGID’s own financial policies and the Open Meeting Law.
This community also needs to understand that the expense of this forensic audit is not just the cost of the Rubin Brown contract (which is now either $110,000 or up to $350,000), but the additional expense of the consultants like Pam Day, Baker Tilly, and other individuals you have hired that will need to stay on and assist IVGID staff during this audit. There are real, hard costs, of this pet project of yours.
Trustees Tonking and Noble deserve praise for bringing this increase in contract scope and terms to the public’s attention, and challenging the way this contract was negotiated.