Should Berlin have an internal auditor to help prevent waste, negligence, and fraud?

There's an old saying:  "Who's minding the store?"  My question is, with a $71 million budget, who's minding our tax dollars?

With all the reported investigations occurring in our neighboring City of Hartford, perhaps it's time for Berlin to be proactive and have an internal auditor on board to detect and prevent inappropriate use of our tax dollars.  There's only so much our unpaid Town Council members can do.  And with a five-year capital budget of $100 million, a school renovation project of nearly $85 million and probably a lot more when it's completed, and an annual budget of $71 million (and still growing), perhaps it's time to start minding our store before we become another City of Hartford.

Fraud can take many forms:  for example, people serving in a governmental capacity and favoring certain businesses for contracts, as may be occurring in Hartford and currently under investigation by the FBI.  Or it may be simply unauthorized use of City tax dollars and property, as occurring in Hartford with City vehicles and credit cards.

Our society needs watch dogs now more than ever.  There is a lot of white collar crime today:  have we all forgotten the recent fraud of banksters and Wall Streeters, stealing trillions?  Do you think that our governmental officials were not influenced by political contributions from Wall Street?

A recent study by a distinguished professor at the State University of New York found that 16.3% of all fraud cases, or one out of six cases, involves a government entity, and that over half of these involve a government with fewer than 1,000 employees.  When sorted by industry, government and public administration had the third highest number of cases, following banking/financial and manufacturing.  His study found that municipal governments, especially towns and villages, may be especially vulnerable to fraud.  {"Journal of Forensic & Investigative Accounting", Vol. 3, Issue 3, 2011}

I recommend an independent internal auditor to report directly to the Town Council, independent of all City employees and administrators.  This way the Town Council members can get a direct report from an independent source outside of the municipal system.

The objective of the audits performed by our outside Certified Public Accountants is not to detect fraud.   The auditor's report "does not state an opinion" on the Town's internal controls and the Town's compliance with laws, regulations, contracts, grant agreements, etc.  This disclaimer is right in the outside auditor's report.  Consequently, much more is needed to detect and prevent waste, negligence, malfeasance, misappropriation of assets, and fraud:  and an independent, proactive internal auditor can be an effective deterrent to fraud and waste.

You can be certain that when there are millions of dollars involved, there may be individuals tempted to get their hands on those dollars.  Moreover, when they are public dollars, individuals may not be as vigilant in their conservation and protection as when those dollars are their very own. 

Every athletic event has a referee to ensure that all players abide by the rules.  We have nearly 50 police employees, but do we have one qualified and independent internal auditor in our Town? 

Every municipality needs an independent internal auditor on board to maintain and monitor effective internal controls on an on-going basis in order to detect and prevent waste, negligence, and fraud.  The time has come for Berlin to consider such a prudent and proactive step.  Let's not wait and experience the misappropriation of assets that Hartford has been reported to have incurred.

William Brighenti, CPA