Financial Audit, Forensic Audit or Internal Control Audit

During a Financail Department Workshop at tonight's Beaumont City Council Meeting, Craig Hartzeim, from the accounting firm of Moss, Levy, and Hartzeim, answered questions from the council members as well as myself and other members of the public. This was before the council voted 5-0 to accept the firm's audit for the 2011-2012 fiscal year.

I wasn't completely satisfied with his answers to my concerns but there is a lot to discuss and I believe I will be able to address it better in a Beaumont Hangout. I recorded almost the entire workshop on my phone but the quality isn't the best and I'm not sure I can get the file posted somewhere I can link to so I recommend you take a listen to the City;s podcast when it becomes available in the next few days or weeks. 

Tomorrow night I hope to play the recording while John and I discuss some of the questions and answers. If you are interested in being part of the discussion, let me know and I will find a way to include you.

Mr. Hartzeim and the city council members discussed the three types of audits that have been a big part of the public discussion since I first asked the city to consider an agenda item to determine if an Internal Control Audit would be in the best interest of the city. This is the first time, since my official request, that there has been any real discussion about my proposal and it will ost likey be the last.

Mr. Hartzeim defined an Internal Control Audit, as I have, as an audit of all the controls the city has in place in regards to how they produce their financial statements and conduct business. He explained the forensic audit is more specific and parameters must be given to the forensic audting firm, which his firm is not, and would be made as a request usually from an outside entity. Everyone seemed to agree with what I have been saying that a forensic audit is not a first step and that the Internal Control Audit would be likely to reveal any problems that exist and may result in a forensic audit in the future. With some prodding from the council, Mr. Hartzeim told them he hadn't seen any serios issues that would warrant any audit other than the Financial Audit his firm was presenting tonight.

When I got home, I googled the following "hartzeim forensic audit internal control" and received some very interesting results. Mr.Hartzeim and his firm have had to address the a similar situation in Los Banos. When the city of Los Banos learned that one of their employees had embezzled $1.7 million over years that Moss, Levy and Hartzeim had been producing financial audits for the city, the City of Los Banos terminated their contract and began legal proceeding to suit Moss, Levy, and Hartzeim. Mr. Hartzeim in defending his firm was quoted as saying ""It's a financial audit,...Not an internal control or forensics audit."

Click Here to read the article - "Los Banos city OKs lawsuit in theft"

After all the questions concerning the financial health of the city, wouldn't you think our council might think that now would be better than later to order an audit of their internal controls. Mayor Berg doesn't think so, he said the audit they were accepting was done by an independent auditing firm. He also, in response to a comment I made, implied that the council members don't need to do their homework. He said they can't be experts at everything and that's why they pay people to give them advice.