Auditors for Wiscasset’s 2008 finances said it would have been impossible to detect missing funds in past audits.
Auditors had to pour over financial statements starting from 2002 up through October when local law enforcement arrested Town Clerk Sandy Johnson and charged her with theft by deception. The town discovered the fraud by happenstance last October.
“No person on earth could have discovered it,” said Ron Smith of RHR Smith & Co. CPAs.
Smith and two of his employees met with selectmen and the budget committee Wednesday principally to go over the 2008 audit, but selectman Phil DiVece asked him why it was not discovered during previous audits. Local citizens have been asking about it, DiVece said.
“I am in full defense of my company,” Smith said. “Your system was willfully manipulated,” he said.
Smith said the money was taken bit by bit over that time period amounting to about $56,000 starting in 2005 through June 2007. More was missing after, but Smith could not divulge any more information out of concern for the case.
“The district attorney is looking to recover some money the Town of Wiscasset is entitled to,” he said.
Although the audit report gave the $56,000 figure as missing for fiscal year 2008 it should say “years” including amounts that date back as far as 2005, Smith said. The audit, however, only includes those figures and does not cover the forensic audit done from July 1, 2008 through Oct. 2008 at the time of Johnson’s arrest.
Smith told The Lincoln County News the auditors obtained all of the information necessary for the District Attorney’s case, which awaits grand jury review some time next month.
“You have a procedure in there which enables you to catch something now, but there is a fundamental flaw in the software,” he said. The town currently uses TRIO software for its accounting purposes.
Smith also recommended a change in the arrangement in the town office, which leaves certain areas hidden from view. He recommended changing the situation to make it more difficult to do what allegedly transpired.
The additional figures presented last week showed no overdrafts occurred in the accounts, Smith said. All the report lacks now is final board approval and any final tweaking that has to be done.
During the session, budget committee members had a chance to have questions answered about the independent audit, and there was a discussion about so-named enterprise accounts.
Smith told the boards the accounts the town has been calling “enterprise accounts” do not meet the criteria for enterprise accounts. The sewer treatment, for example, has been an enterprise account.
“Clearly it is business you’re not running with tax dollars,” Smith said. “If they’re not self-sufficient, they’re really not enterprise funds.”
Smith said it makes it cumbersome to keep carrying forward within each department as is currently done. Instead, he recommends handling them the way the town handles other accounts.
“It makes it more transparent,” he said. “You have what you expend and what you take in.”
Unaware of the school systems involved, including the Wiscasset school system, Smith said the memorandum of understanding for the unit amounts to a bill of sale and the town should have considered the school buildings more carefully before signing the agreement.
“If you are bringing infrastructure, there needs to be some benefit to the town,” Smith said.
