Members of the Wellington Village Council heard concerns last week from an auditing firm hired last year to scour Wellington’s books for waste and mismanagement. But the concerns were less about financial matters than staff response to auditors’ concerns.
Auditor Antonio Grau of Grau & Associates told council members that he felt “uncomfortable” with the response from management during the process.
“[The audit] ended up being more difficult than we anticipated,” Grau said. “What I found a little unusual was the pushback based on what we found. We’re trying to do our job. We’re here to help the city. I think the response to our findings, I don’t agree with them.”
Councilman John Greene asked Grau to elaborate.
Grau noted that during the audit process, management is kept up to date on any inconsistencies found.
“We point them out immediately,” he said. “We don’t just put it in the report without management knowing about it. In many cases, management may not agree with some of the facts included in the finding, so we try to work that out. It’s a negotiation. They don’t want anything in there that makes them look like they weren’t doing what they were supposed to do.”
Though Grau said it is common to negotiate the significance of the inconsistencies, he said he felt uncomfortable with the response from management.
“I’m used to these situations, discussions and negotiations, but this was at a higher intensity,” he said. “We were going through it over and over again. I’ve been doing this for 30 years with hundreds of clients, and I felt it was a little over the top. It made me uncomfortable.”
Grau stressed the importance of the audit being independent to effectively help Wellington.
“We can’t feel like we’re being pressured,” he said. “It’s unacceptable for us to feel like we’re being pushed down. I will never back down on anything I feel is a significant problem. I try to look at each issue from all points of view, and I try to be as fair as possible.”
Grau said it was not his findings that were of great concern but the response to them.
“I don’t think the situations were that bad here,” he said. “I think the reaction to our findings was bad.”
Village Manager Paul Schofield asked whether Grau had addressed his concerns with upper management. “At any time did you communicate [your concerns] to me?” he asked.
Grau said he had not. “I think I probably should have raised more issues,” he said. “But I didn’t realize how uncomfortable I felt until the very last day when I went to sign the report. I wasn’t uncomfortable with the numbers, but more uncomfortable with the process.”
Greene asked whether Grau felt any of the issues merited reporting to a higher authority, but Grau said he did not.
“I just think there were some issues that could have been avoided,” he said. “I’m not saying we did everything perfect, but I just didn’t understand why there was this push-back to these findings. I think it wasn’t necessary.”
The firm found two notable areas of concern stemming from the 2012 fiscal year, auditor Racquel McIntosh said. One was the way Wellington’s utility system billing is handled, and the other was an issue with the classification of some employees in the Florida Retirement System. “A major concern was that the utility billing system was not reconciled to your general ledger,” McIntosh said. “Your general ledger is what produces your financial statements. They need to agree. There has to be a reconciliation done monthly to ensure that everything that is being billed is being reported.”
The issue caused a discrepancy of approximately $330,000, she said.
“We felt it was a significant issue because it occurred early on — in May 2012 — and it was not caught and corrected by the internal control system,” McIntosh said.
Councilwoman Anne Gerwig asked how the issue was brought to the firm’s attention.
McIntosh said that typically during an audit, she would request a billing register from a randomly chosen month.
“We requested one month of the billing register, which usually comes in every cycle that you run,” she said. “We selected a random month and subsequently found out that the reports were held off-site by your software maintenance provider.”
When the reports were brought in-house in August 2012, previous reports were lost, she said.
“Unfortunately, when those reports were brought in, that portion of the system was not,” she said. “The reports were no longer available, and you can’t re-create them. Once the billing is done, that’s it.”
Since she couldn’t get the reports, McIntosh said she was unable to verify what is reported in the general ledger with what was billed in those months.
Councilman Matt Willhite said he was concerned about the lost reports.
“How do I expect that members of the public can get that information?” he asked. “We say we have Open Wellington and you can go online to get all our records.”
The second concern was that a change to the definition of a “regularly established” employment position in the Florida Retirement System meant some employees were not enrolled in the system when they should have been.
Grau said the issue was raised at the last minute. “We’ve never had it happen before that something so significant, which could be a potential liability, pops up at the end of the audit,” he said.
McIntosh said the information came days before the firm was scheduled to issue its report.
“For something of this significance, it’s something you tell an auditor going in,” she said. “It’s not something to wait until the last minute to say something about, because it could potentially change multiple numbers in the financials. You almost have to do a complete rework of the financials.”
Mayor Bob Margolis asked Grau whether he had any reason to question previous audits, in which these issues did not arise. Grau said he did not.
“I would have to go back and redo the audits,” he said.
Schofield said he wished that he had heard about Grau’s concerns before that night.
“I would hope, in the future, that if you have that level of discomfort, you come to me,” he said. “I do not expect that the relationship between management and auditor will ever be the smoothest path, but if you’re having issues, I need to know that.”
Sorry but a $ 330,000 discrepancy with the general ledger is a problem that should get someone fired. How far up the ladder did this go.
There was no illegal activity, fraud. There are disagreements on many ways to handle transactions.
The auditor needs to have a powerpoint in next audit presentation to village council and residents.
Verbal presentation and handouts just don’t cut it with the viewing public.
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