Author: Kristie Wells
Incline Village and Crystal Bay (IV/CB) residents should know the forensic due diligence audit contract is up for approval at the January 31st IVGID Board meeting.
It’s been a wish, desire, and siren call from a small, but very vocal number of members in our community. This item, General Business Item H.3 on the January 31, 2024 Incline Village General Improvement District (IVGID) Board of Trustees meeting agenda, will be seen to those few community members as a win, and demonstrate that Trustees Schmitz, Dent, and Tulloch are acting on their behalf.
As a reminder, Trustees Tulloch, Chris Nolet, the Chair of the Audit Committee and Bobby Magee, the Interim Director of Finance, have all stated there has been no indication of fraud or suspected fraud, but they want to move forward with a forensic audit to determine if the elements of the ‘fraud triangle‘ are present.
On the bottom of page 56 (noted as 54) in the December 20, 2023 Audit Committee Agenda Packet, Interim Director of Finance Bobby Magee believes the likely scenario is that no fraud will be found:
If you would like to learn more about what has really been happening inside IVGID’s Finance Department, you should read this article penned by Mick Homan, a former Committee Member on the IVGID Audit Committee. He discusses the financial issues within IVGID, and also reiterates no fraud has been found to date.
But here we are.
The Request for Proposal (RFP) for this audit was written and advertised. These are professional services, as defined by the Nevada Revised Statutes, so the rules are a little different for selection. The key one is: you don’t have to select from the responses based on lowest price.
The bids were to include pricing for a one year plan, and also a three and five year span. Three responses came in, according to the accompanying memorandum.
RubinBrown LLP provided the lowest bid at $110,000 for either a three fiscal years’ review or $160,000 for a five fiscal years’ review. Baker Tilly was in second place. Moss Adams was a distant third (and distant is based on price). Interesting thing here is that RubinBrown LLP is a part of Baker Tilly International, so they provided two of the three bids.
IVGID’s Interim Director of Finance Magee was hired onto IVGID’s payroll as a recommendation from Baker Tilly, and IVGID paid Baker Tilly a $10,000 ‘finders’ fee (see the invoice below). As noted above, RubinBrown LLP is part of Baker Tilley. So should Magee, placed by Baker Tilley and now on IVGID’s payroll, have been allowed to negotiate with RubinBrown LLP? That’s for the reader to ponder, but the opinion of this author is no. He should have been recused from these discussions, at least for transparency’s sake.
At the November 8, 2023 Board of Trustees meeting, the Trustees gave very specific instructions, via a motion, to the Treasurer of the Board (Tulloch) and the Interim Director of Finance (Magee) to negotiate with the low bidder, RubinBrown LLP, who again is a part of Baker Tilly International.
Sometime between November 8, 2023 and January 10, 2024, the scope of work was increased that led to a contract amount “not-to-exceed $350,000”. Almost $250,000 more than was approved by this Board. Seems like a bait and switch from Rubin Brown LLP and mishandling of the negotiations by Tulloch, and by Magee.
When you go back to prior Board discussions about this “due diligence” audit that has now turned into a “forensic audit,” there was and interesting dialogue between Trustee Schmitz and Magee in the August 24, 2023 meeting where Magee was asking for approval to put out an RFP for the forensic audit.
In that discussion Schmitz asks for likely range for forensic audit. Magee says $50,000 – $150,000 and then goes on to mention that someone may offer all kinds of amazing stuff and it will be $350,000 (he actually used that exact number). He then goes on to say those kind of proposals generally get rejected (see the screenshot below). This starts at the bottom of page 258 of 657 of Item F.3 of the September 19, 2023 materials, which is the transcript from the August 24th meeting. Coincidence?
The negotiations ensued with RubinBrown LLP and both parties came to a mutual understanding, and the work began. Yes, the work began. Even though no executed contract has been provided in response to public records requests and, to date, no notice to proceed has been provided. The contract in the Board packet states this very clearly in the paragraph entitled Term. The work began on January 8, 2024.
Now this puts the “House of Cards” out into the sunshine, and exposes a very awkward arrangement initiated by our Interim Director of Finance, Treasurer to the Board and the Audit Committee Chair. To add insult to injury, this contract was presented to IVGID’s Interim General Manager, Mike Bandelin, for final signature before negotiated changes, in both scope of work and a contract fee that more than doubled from the original bid, to the Board for final review and approval, and to the IVGID residents for their feedback.
The community should be outage at this act of bait and switch.
Let’s recap. The IVGID Board of Trustees is about to approve a $350,000 contract to a firm that has deep ties to our Interim Director of Finance, and the process has been flawed from the onset, and Trustee Tulloch admitted that if there were any mistakes with this process, he was to blame. Just go watch the start of the January 10, 2024 Board of Trustees meeting on Livestream.
And here’s a little preview of what’s to come, as the gamesmanship continues. The District representative on this contract would be the Interim Director of Finance, who will also approve the invoices on this contract.
Community members this is your wake-up call. You need to make your voices heard and demand that the Interim General Manager be the District’s representative on this contract, and that the Director of Administrative Services be the person who gets the invoices for approval. Sure, the Interim Director of Finance must be involved, but he now has a team of people who can help; so let’s bring these people forward and make this audit, which we all know will find absolutely no fraud, a transparent process. After all, that’s the Trustees motto – transparency.
Let’s pull back the curtain and let the sunshine in.