The city of Durango plans to examine every financial document, transfer, nook and cranny from a two-year period – 2018 and 2019 – in response to suspected embezzlement by a former employee.
City staff members have already taken steps to tighten internal financial checks and balances since it came to light earlier this year that Julie Brown, former finance director, allegedly stole more than $700,000 from the city over 17 years. This week, City Council set the scope of additional in-depth, citywide investigations.
“We’re going to be looking at all of your cash accounts, which are pooled accounts, which cross all of your funds,” said Kim Higgins with Eide Bailly during a City Council study session this week. “We’re going to be looking at everything that comes and goes out of those cash accounts.”
Eide Bailly LLP fraud investigators presented options for two types of investigations, a forensic exam, which takes a detailed look into multiple years of city finances, and an Internal Controls Examination report, which reviews 2020 policies and procedures.
City Council agreed to do both investigations and set the time period for the forensic exam. The next step is to finalize and sign the contract. Seven to 10 days after that, Eide Bailly will start its investigation.
If there are any other issues or misappropriations within the city, the forensic exam would aim to find them. The exam, estimated to cost up to $37,500, reviews cash and bank accounts, vendors, payroll, tax filings, wire transfers, grant transactions and more. It will span all city funds, like the general fund or enterprise funds.
Councilors considered options to do five-year or longer investigations, which cost more money, but settled on starting with a two-year forensic exam. They supported going further back in city finances based on what the investigators discover.
“This council committed to do the right thing and expend the right amount of resources to assure the public that we’ve done ... the right amount of review of our books,” said Mayor Dean Brookie. While he prioritized looking ahead with secure financial policies, he wasn’t averse to looking further back if necessary.
As the city looks to the future, the ICE report will help staff members shore up checks and balances to make future fraud difficult. This report, which costs about $12,500, will check specific policies and procedures in 2020.
This is the latest effort by the city to analyze its financial policies and prevent future fraud.
The staff has also conducted its own internal controls analysis and “fortified the fort” by ensuring the city was following Government Finance Officers Association best practices, said Devon Schmidt, interim finance director. The Colorado Department of Local Affairs also analyzed internal control systems to identify any potential weaknesses.
Doug Cash, Eide Bailly fraud examiner, suggested people call him if they would like to discuss something they know – not something they believe.
“Information is power. I’d rather have the information and not need it, than need it and not have it,” he said.