Send in the forensic auditor!

Oxford Village officials are employing the services of an outside professional to get to the bottom of their missing money mystery.
‘You’re victims,? said Karl Haiser, who co-owns the Ann Arbor-based Michigan Forensic Accounting, Inc., as he addressed the council last week. ‘The people in this room are victims and you need to bring closure. I help bring closure with my staff.?
Council voted 5-0 to award a contract not to exceed $28,500 to Haiser’s firm to conduct a forensic audit of all the village’s funds including the Downtown Development Authority (DDA).
‘I don’t like to spend money unnecessarily, but I think this is a necessary thing,? said Councilman Elgin Nichols. ‘It needs to be done, it needs to be cleaned up and we need to get over it.?
‘It’s a large sum of money, but I feel like we owe the taxpayers an explanation,? said village President Tom Benner.
Council is trying to determine what happened to a total of $21,177 in missing funds.
Of that total, $20,594 consists of missing property tax monies from 2010, which includes $4,217 in cash payments from nine taxpayers and $16,377 in check payments from 24 taxpayers.
At the June 12 meeting, village Manager Joe Young speculated that the $16,377 in check payments were deposited in the wrong municipal accounts ? and not posted to the tax system ? as a way to cover up potentially stolen cash payments for other things like water/sewer bills.
The remaining $583 consists of police department funds involving drug forfeiture monies and fees for Preliminary Breath Tests. These funds were also from 2010.
Haiser, who is a certified public accountant (CPA), warned council that by the time his investigation is complete, as a ‘general rule,? the amount of missing funds will most likely be much higher.
‘There is more,? he said. ‘In my experience, there’s more. Whatever you hear, multiply (it) times two.?
Haiser’s investigation will also include a forensic audit the DDA paid $15,000 to have conducted back in 2008.
That audit revealed a discrepancy between village records and Oakland County records pertaining to the amount of tax revenue the DDA should have captured. The audit showed the DDA received $11,928 less than it should have for the 2005-06 fiscal year and $3,371 more than it should have for the 2006-07 fiscal year.
‘It’s important that this forensic audit be all-encompassing,? said Councilman Tony Albensi. ‘This is the most important thing we’re dealing with as a council in my opinion.?
A forensic audit is very different from the standard audit of their financial records that local government units have conducted annually. That’s basically an overall review of internal controls and a report on whether or not a municipality’s financial statements give a true and fair view of its condition, position and operations.
A forensic audit involves the application of accounting methods to the tracking and collection of forensic evidence, usually for investigation and prosecution of criminal acts such as embezzlement or fraud.
‘We’re talking about developing hard copy documents, like CSI, in terms of how (the fraud or embezzlement) was done and here’s the paper trail,? Haiser explained. ‘That’s what I do.?
The results of Haiser’s investigation could be used for the purposes of a criminal prosecution, in which case he could testify as an expert witness as he’s done before. His findings can also be used as a basis for the village to possibly recover money from its insurance provider.
Haiser made it clear to council he will leave no stone unturned in his investigation.
‘Everyone in my scope is fair game,? he said. ‘Everyone’s assumed to have knowledge. Everyone’s a suspect until I clear them.?
‘Everyone who’s (involved) in what I call the cash transaction will be interviewed,? he noted. ‘I do not have any preconceived people (in mind) to start with.?
Albensi asked Haiser if his investigation would include both current and former village employees.
‘Yes,? he replied. ‘We’re going back in time.?
Haiser indicated his focus will be on cash activities, the general ledger and auditor’s reports from previous years.
‘I’m very good at grilling the auditors,? he said. ‘Auditors don’t like talking to me.?
During the investigation, Haiser indicated he’ll be looking for ‘red flags? such as possibly forged signatures and initials, ‘altered checks? and columns that don’t add down on deposit slips.
In addition to his skills as a CPA, Haiser believes his ‘most important? qualification for this type of work is the fact that he spent two years as a line sergeant in the United States Marine Corps.
‘I learned a lot,? he said. ‘What’s important, what to keep and what to throw away.?
When asked how long the forensic audit would take, Haiser replied, ‘Most engagements are wrapped up in less than sixth months.? He promised to provide council with a progress report in August and any other updates as needed.
‘You will be in the loop on a need-to-know basis as we go forward,? Haiser told council.
When the investigation’s over, he will make a public presentation of his report in an abbreviated form.
Haiser made it clear that his firm has no prior relationships involving anyone on the village council or in the village administration. ‘We are independent of any people or persons here,? he said. ‘This is the first time I’ve met any of you individuals here.?
Being independent is one of the keys to conducting a forensic audit. ‘You’ve got to go into the tiger’s den and get the cubs and come out,? he said. ‘That’s what I do.?
Nichols wondered if the village had received any input from the citizenry as to whether or not it wished to have taxpayer money spent on a forensic audit.
Councilman Dave Bailey indicated he had a resident tell him that to spend more money for an audit than is actually missing is ‘throwing good money after bad.?
He disagreed because he believes there’s a ‘prevention aspect? to conducting this investigation. ‘If we don’t go after this issue, then everyone out there will (say), ‘Hey, you can take money from the village and get away with it. Let’s do it,?? Bailey said.
Resident Sue Bossardet, who once served as village president and had her 2006 property tax payment allegedly stolen, agreed it needs to be done in order to clear the air.
‘Trust me, you (the council) already have a cloud over you and the village already has a cloud over it,? she said. ‘You need to get on with this and get it taken care of, so you can move on to business.?

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