Eide Bailey: 'No financial improprieties'

PRIEST RIVER — A long-awaited forensic audit has found no financial misconduct, West Bonner trustees were told by auditing firm Eide Bailey last week.

"So summary of observations from phase two, there's definitely some opportunity to improve retaining, and organizing supporting documentation," Brandon Waldren, the forensic auditor, told the board. "There are opportunities to update procurement, disbursement approval processes, policies, and training. As of right now, we have not seen a pattern or activity that may be indicative of financial improprieties."

The board approved a motion to review the draft audit, sending any questions to West Bonner board clerk Julie Hinshaw by April 8. Approval of the draft audit report could take place at the board's April 17 meeting after Eide Bailey has a chance to address any board questions.

In the audit covering a five-year period from July 1, 2018, to June 30, 2023, Waldren said his firm went over 260 transactions and 160 credit card charges. The audit had been planned to be done by the end of the month, but after noting the urgency in completing it as quickly as possible, the auditor said the firm offered to complete it early.

The 260 bank disbursements tested totaled $21,393,908 and while he was on site, Waldren said he was able to test 248 of them — roughly 95%.

During a visit to the district, Waldren conducted 13 interviews of both current and former employees as well as doing an in-depth review of a sampling of the district's financial transactions.

As part of the audit, Waldren said the firm listened to the concerns, reviewed the applicable data, including financial records and other documentation, and interviewed pertinent district staff and former employees.

"This is called a forensic audit for a reason. So we utilize forensic accounting methodologies to not only see if things were looking accurate and complete, but also we wanted to see if there was any indicators of potential financial improprieties," Waldren said.

As part of that process, Eide Bailey reviewed changes in the frequency and amount of bank disbursements and credit card charges, reviewed bank statement activity for suspicious transfers, and reviewed the district's financial documentation among other reviews.

While district policy requires invoices to be initialized as being OK to pay, roughly 75% — or 196 — of the invoices sampled lacked those initials. However, 13 of the transactions were "sweep transactions," an automatic transfer from one account to another often into one earning a higher rate of interest. Another 48 transactions had a purchase order that had been approved but the invoice had not been initialed. Of the remaining transactions without a former purchase order, 135 of them were connected to AFLAC reimbursements, workers' compensation, and benefits reimbursements.

In its review of the district's credit card charges, Waldren said there were 2,333 charges totaling $528,899. In its sampling of 160 charges totaling $105,000, the auditor said they were able to locate support documentation for about 152 — about 95%.

There, as with the bank disbursements, approval was missing for the authorization to pay; however, Waldren noted that 80 of those had purchase orders. Of the 11 that didn't have a purchase order, those were primarily for gas and food purchases.

Waldren recommended the district tighten up its purchase order procedures as well as submission of itemized receipts. He also recommended the district implement a hotline to allow those believing fraud is being committed a way to submit those claims.

He also recommended the district update its employee handbook to fit current times and practices, add a way to determine when goods have been received, and require employees to read, and sign off on, the employee handbook.

A majority of its recommendations are similar to those noted by the district's past annual audits, Waldren said.

"The audits have shown consistent expenditure balances, meaning there hasn't been a ton of overspending noted from the budget to the actual spending," he added.

Trustee Paul Turco said that with the results, he hoped the community can move forward.

"I think everybody can take that deep breath, the forensic audit came back and I quote, 'No pattern of any financial proprieties,'" Turco said to the cheers and applause of many in the audience