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Council looks to conduct forensic audit concerning missing $20K

by CJ Carnacchio

June 20, 2012

If Oxford Village officials want to find out what happened to the municipality's missing $20,000 in property tax funds from 2010, the next step is to conduct a forensic audit.

That was the recommendation of Michigan State Police Det. Sgt. Joseph White at last week's council meeting.

Before there can be any type of criminal investigation, "the (Oakland County) Prosecutor's Office and the state police require that there be a forensic audit done on the funds that come in and go out of the village offices because of the amount that's missing," he said.

"The audit will tell us when the funds came in, where they should have gone and where they disappeared from," White explained. "(It) won't tell us who took them . . . (but) it would be an investigative tool for us. I, obviously, am not a (Certified Public Accountant). I haven't been trained as a CPA."

A forensic audit involves the application of accounting methods to the tracking and collection of forensic evidence, usually for investigation and prosecution of criminal acts such as embezzlement or fraud.

White noted that once the forensic audit was concluded, if there was a subsequent criminal trial, the auditor would become a "professional witness on the stand."

As a result of White's recommendation, council directed village Manager Joe Young to obtain some bids/proposals from certified individuals and firms that conduct forensic audits and present them for consideration at the 6:30 p.m. Tuesday, June 26 meeting.

On Tuesday, June 19, Young indicated he had contacted five or six auditors and received responses from three or four of them.

"That is the most important thing that we should be dealing with as a council right now," said Councilman Tony Albensi. "This missing money from the village and the DDA (Downtown Development Authority) needs to be investigated. We need to find out what happened to it."

An internal investigation of the village's finances last year revealed the municipality was missing approximately $20,000 in property tax funds from 2010. This amount consists of about $4,000 in cash payments and about $16,000 in check payments, according to Manager Young.

The missing DDA money to which Albensi referred was discovered by a forensic audit of that body's financial records conducted back in 2008. That audit revealed a discrepancy between village records and Oakland County records pertaining to the amount of tax revenue the DDA should have received.

The audit showed the DDA received $11,928 less than it should have for the 2005-06 fiscal year and $3,371 more than it should have for the 2006-07 fiscal year.

On May 21, the DDA board passed a motion requesting that any investigation of the village's missing $20,000 also include the DDA's missing money.

Albensi agreed. He noted the forensic audit should encompass all village funds, which include DDA funds since that entity and its budget are part of the municipality.

Albensi asked White who would be expected to pay for a forensic audit of the village's finances?

"In every investigation that I've had of that nature, the forensic audit falls to the victim, especially if it's a governmental agency," White replied.

White warned council that a forensic audit wouldn't be cheap. He recalled an embezzlement investigation that was "a little more extensive" in another municipality and the audit cost $30,000.

"That was on a more elaborate case, so it may be less," the detective noted.

Downtown business owner Mark Young noted the price will depend on whether the village wants a macro or micro forensic audit conducted.

Back when he was chairman of the DDA board, Young said that body had a macro forensic audit done, which simply determined whether or not money was missing, and it cost about $15,000.

If the village wants a micro forensic audit of all its funds, which is used to determine where missing funds went, that could cost much, much more than $30,000, Young explained.

Councilman Elgin Nichols was worried about spending such a hefty sum only to "maybe not find (out) anymore than you know now."

"(That's) a concern that I think all the community would have," he said.

Resident Sue Bossardet, a former village president who's property tax payment was allegedly embezzled back in 2006 (see related story below), wants the forensic audit conducted.

"As a taxpayer and a victim, I want you guys to find the money to do this forensic audit and do it right," she said.

Bossardet noted she wants a certified, professional from outside of Oxford to conduct it and find out "what the problem is within this village" and why there's missing money. "I want somebody held accountable for that," she said.

Village President Tom Benner noted $30,000 or more is "a lot of money in our budget situation."

"I hate to spend the money, but if the taxpayers are more than willing to see that money (spent on a forensic audit), so we (can) find out where our money is at and who is responsible . . . and correct the problem . . . I'm all in favor of it," he said.

Mark Young asked Joe Young to please explain how the village is missing approximately $16,000 in checks along with the approximately $4,000 in cash. Given there's checks involved, he believes there should be some type of "paper trail" concerning the checks. "I'm trying to connect the dots here," said Mark Young.

Joe Young explained that some folks pay their village property tax and water bills in cash, while others pay using checks.

"These checks for the taxes that we've identified that $16,000 were deposited, but they weren't posted to the tax system," the village manager explained. "So, what we believe happened is (someone) took the cash from the other payments and in place of that cash, deposited these checks that weren't posted to the tax system."

Young made it clear these checks were deposited in village accounts, just not the right account, the tax account.

So, based on Young's explanation, in reality, a total of $20,000 in cash is actually missing from the village, it's just that $16,000 in tax payment checks were used to cover it up, leaving a balance of $4,000 in missing cash that wasn't covered by any checks.

"We believe there was $20,000 cash taken," said the manager during the council meeting.