CLAREMONT — A city councilor’s request to discuss a forensic audit of the city’s finances was not embraced by the council at last week’s and drew an impassioned response from Finance Director Mary Walter.
In July, City Councilor Jonathan Stone asked that a discussion of a forensic audit be placed on the agenda, but it is not clear whether Stone understood that such audits are meant to uncover illegal activity.
Auditor Robert Vachon, with the Manchester firm of Vachon, Clukay & Co., told the council Wednesday that a forensic audit is done to present evidence in a court of law under a legal proceeding.
Embezzlement, employee fraud or vendor fraud are some of what forensic audits looks to discover.
“We look for something specific to derive evidence,” Vachon said.
Noting that Claremont has had three different audit firms since Walter was hired 18 years ago and all of the audits have been “clean,” with no deficiencies in city finances, internal controls or compliance, Vachon said the council needs to decide what specifically the audit would look for.
“You need to define what the audit would do,” Vachon said.
He said a complete audit — examining all transactions — would be prohibitively expensive, $100,000 to $200,000 at least and the cost-benefit may not be there.
In one example, Vachon said the town of Newmarket, N.H., spent $100,000 to uncover $100 that was inappropriately spent on a spa treatment.
If the city were to define the area to be audited, the price would come down but still be expensive, Vachon said.
But no one on the council, including Stone, offered an area of the city’s finances that should be subject to such extensive scrutiny.
A few councilors asked to Stone to clarify why he wanted to discuss a forensic audit, and he eventually allowed that it was because of recent problems with the school district, including an IRS fine of $320,000 in June for failing to comply with requirements under the Affordable Care Act.
In that case, there was nothing in the IRS ruling that suggested fraud or criminal activity on the part of the school district.
“I don’t want any surprises like the school district had,” said Stone, who said he is not insinuating any wrongdoing.
But Walter and at least once councilor, Assistant Mayor Allen Damren, said by using the term forensic audit in public, Stone automatically implied criminal suspicion.
In a prepared statement, Walter cited the internal controls and segregation of duties in the finance department as “a basic building block of sustainable risk management and internal controls in the finance field.”
“The city has an audit every year and, in most years, has a second, more rigorous federal single audit,” Walter said,
She went on to say there has never been any suggestion of fraud or criminal intent, yet Stone’s request implied just that.
“The implication is not just disparaging to me as Finance Director but all the Finance staff,” Walter said. “Councilor Stone, in his position of authority, has publicly implied, by wanting to discuss a forensic audit of the city’s books, that there is a suspected criminal act by myself or the finance staff. There is no way of walking back this implication and the detriment to the reputations of those involved.”
In conclusion, Walter said while such an audit is prohibitively expensive, she put Stone and the council on the spot, and said the only way to restore reputations is for her to request the audit be done.
There was no apparent desire for the council to pursue that request.
“There is no way the cost is going to justify the action,” said Mayor Charlene Lovett, who said she had not know a forensic audit implied illegal activity.
Damren, a former business manager for the SAU 6 school district, came to Walter’s defense saying at one point he was “appalled” Stone used the term publicly and knew immediately what it implied.
“I apologize to the finance director and finance staff,” said Damren, who made a motion that the city not spend any money on a forensic audit.
But councilor Andrew O’Hearne said making a motion not to do something was not necessary. His motion to table the issue failed in a 4-4 vote and no further action was taken.
Patrick O’Grady can be reached at pogclmt@gmail.com
