Forensic audit of fiscal 2001, 2002 will cost city of Crestwood $36,430
Brown Smith Wallace, the accounting firm that conducted a forensic audit of Crestwood's fiscal 2001 and 2002 books, has billed the city $36,430 for its investigation.
The $36,430 cost of the forensic audit excludes an additional $7,000 that will be paid to Brown Smith Wallace to restate the city's financial statements for fiscal 2001 and fiscal 2002.
The Board of Aldermen voted unanimously in October to adopt an ordinance selecting Brown Smith Wallace as the city's independent auditing firm for five years, subject to annual review and approval by aldermen.
Brown Smith Wallace is the same firm that performed a forensic audit of the city's fiscal 2001 and fiscal 2002 records.
The forensic audit of fiscal 2001 and fiscal 2002 was initiated earlier this year after current city officials began an internal investigation into the accounting practices used by former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels.
Brown Smith Wallace's forensic audit report alleges that Leichliter and Wuebbels violated the City Charter, numerous ordinances and their duties as fiduciary officers in their handling of the city's finances.
The city of Crestwood on Nov. 19 filed a lawsuit in St. Louis County Circuit Court alleging that Leichliter and Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city's true financial condition to Mayor Jim Robertson and the Board of Aldermen.
During an interview with the Call, City Administrator Don Greer noted that the costs the city has incurred as a result of the forensic audit and the restatement of the fiscal 2001 and fiscal 2002 books certainly were unanticipated when the Board of Aldermen adopted the fiscal 2004 budget.
Furthermore, city officials also did not anticipate the costs of legal action related to the forensic audit, Greer said, noting auditing and legal costs combined could total as much as $125,000.
"We are probably in the neighborhood of $25,000 to $30,000 in legal costs where we are right now. We've probably got another $40,000 to $50,000 in extraordinary legal costs through the rest of this fiscal year.
"The board makes their decisions on what they believe is appropriate and necessary and that's the path I follow,'' Greer continued. "They felt very strongly, it was unanimous to pursue this matter and that's what we're doing. That's how the attorneys have been directed. There's a bill to be paid for that. Obviously the city is in a position believing it will prevail. You wouldn't do that if you didn't think you were going to prevail, but who can predict?'
Besides the cost of the forensic audit and related work, Greer noted that the level of scrutiny the city's financial records have been given is unprecedented.
"It's significant in that never before have the, I think I can say never before, have the books of the city of Crestwood been so scrutinized,'' he said. "It was a forensic audit. I think any time you hear forensic in front of anything, you think of the detail that was necessary and our audit just for '03 is $18,000. So if you take a look at the forensic audit in terms of what they looked at for two fiscal years and especially with the detail that they did because I mean they checked every journal entry, they looked at documentation ... There was a lot of detail, a lot of scrutiny and it's a lot of money, but it's not unreasonable for what we got out of it.
"I think you see the results of what we discovered and by the time we're done, which, in essence for me means the restatement of '01 and '02 and then the audit for '03, by the time those things are done, what we'll have are three years of history, three fiscal years of history that I feel comfortable in using to project our future and to measure our success against. I'm not quite as comfortable going back further than that. So the fact is I'm so weary of all the negative connotations that are associated with this. The fact is that we're beyond that and we're moving forward ...''
City officials recently received a letter from State Auditor Claire McCaskill's office stating her office had received a petition requesting an audit of the city's finances.
The Nov. 21, letter, signed by Director of Local Government Audits Thomas J. Kremer, stated a petition containing 1,130 signatures had been submitted requesting a state audit, and 739 signatures were needed to trigger such an audit. Kelley Isherwood of Oakville, chairman of the Crestwood Smart Growth Alliance, told aldermen Oct. 28 that his organization had collected more than 1,100 signatures on a petition requesting a state audit.
Given the thorough examination of the city's financial records through the forensic audit and related work, Greer told the Call he believes a state audit would be "a gross misuse of taxpayer money.''
"... We got the notice. We're still curious as to exactly what it is,'' he said. "I mean we know some things about petition audits, we've done some research on petition audits, which is what this really is. I don't want to sound flip about it, I just think it's a tremendous waste of the taxpayers' money to think that the state auditor is going to come in and do a more thorough job than what we've already done. You know, the time for a petition audit may have been several years ago ...''
Greer is "assuming'' the state auditor will audit the city's books for fiscal 2003.
"... We're not going to be done with our audit until February, the middle of February. So that means that they're going to come in and re-audit what we've just audited. That's fine if they want to do that, I don't have a problem with that. If, in fact, they can give us some direction as to things that we ought to be focused on, that's fine. Maybe that will help us prioritize. I'm not saying that we're 100 percent fixed,'' but Greer noted many of the problems cited in the forensic audit already have been corrected.
" ... The part that really bothers me is it diverts our attention from many more important things and it's a gross misuse of taxpayer money to be that redundant,'' he said.
"If what they do is give us some help in terms of prioritizing what's left to do, if they're going to do '03, they may criticize a bunch of things we've already taken care of in '04. That's fine. I mean we get a chance to respond before it's published. My only reaction is that I think it's a gross misuse of taxpayer money. It's sad that those responsible for initiating this were not responsible enough to ask their own questions or interpret what was going on or pay attention to what was going on ...,'' Greer said, noting the city commissioned the forensic audit. "How many cities do a forensic audit? How many cities do? How many cities drop a dime on themselves and go through this?
"The board voted unanimously to get into this. They want to be responsible about what's going on and my reaction is it's a waste of money and that's just the cost for the state auditor. That doesn't count the time and energy that diverts my staff from having to do other things because it's very time consuming to have auditors in ...''