Cd'A to stick with accounting firm in 2013 - Coeur d'Alene Press: Local News

Cd'A to stick with accounting firm in 2013

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Posted: Wednesday, December 19, 2012 12:00 am

COEUR d'ALENE - The city of Coeur d'Alene agreed Tuesday to contract the same accounting firm, Magnuson, McHugh and Company, to perform its annual financial statement audit as it has done for the city since 1999.

Whether the city takes a deeper look inside its finance department in light of the approximately $365,000 embezzlement uncovered this year will be decided after Feb. 5, 2013 - when the former employee who pleaded guilty to the crime is scheduled for sentencing.

In the meantime, the city council said, Magnuson, McHugh and Company remains a reputable firm capable of continuing to handle the city's statutorily required financial statement audit.

"That's real life in the outside world," Councilman Woody McEvers said, on the city implementing several safeguards since learning of the six-year theft in the summer. "You get stronger and you get smarter ... That's what growth and life is all about."

The contract is for $29,500, and includes a single audit as well as the financial statement audit. Single audits focus specifically on federal dollars given to a city when that total exceeds $500,000, which Coeur d'Alene surpassed. A financial statement audit samples and checks the reliability of financial statements.

What neither performs, however, is a forensic audit, which are audits launched when stealing is suspected and trace individual transactions all the way though as they probe for the suspected theft. Rarely do the audits cross paths, so if Coeur d'Alene wants another entity to dive into the embezzlement, they could contract out for that later.

That discussion could come back to the council early next year. The city, at advice of its legal department, wants to wait until litigation around the case wraps up.

Sheryl L. Carroll, 52, pleaded guilty to six counts of wire fraud stemming from the embezzlement and is scheduled for sentencing at the federal courthouse Feb. 5.

She faces up to 20 years in prison on each count.

After she is sentenced, the city plans to present a report on what happened, how, and what the department has implemented since then.

Since city staff discovered the financial irregularities, officials have implemented several safeguards, including ceasing most automated transactions, adding more employee oversight on wire transfers and banking security on check payments.

Besides exploring a forensic audit, which could cost up to $100,000, the city could kick around the idea of forming an independent steering committee, comprised of volunteers or experts, to look at the finance findings.

Councilman Dan Gookin was the lone vote against retaining Magnuson, McHugh and Company, saying he preferred to see if other firms would be willing to bid on the work. But other firms bid higher costs last year, and an early March deadline to have the work done looms, other council members said.

"There's another phase we can get to," Councilman Mike Kennedy said, about exploring more options after the new year. "This is not the end of the line for this topic."

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  • concernedcitizen posted at 6:57 am on Thu, Dec 20, 2012.

    concernedcitizen Posts: 2530

    I disagree hard nose. We are not talking about $300 or $3,000. We are talking about $365,000. That is equivalent to one year worth of taxes collected on almost 250 homes.

    I bet if someone stole $1,500 to $2,000 from the mayor, any one of the council members, Tymesen, McDonald, Gabriel or any one of the auditors they would be SCREAMING a different tune.

  • hard nose posted at 3:22 pm on Wed, Dec 19, 2012.

    hard nose Posts: 1

    I don't think we can blame the accounting firm for all of the problem. What were the city finance dept heads doing for the last 6 years it's their job to oversee the day to day work of the people under them. In any private firm the supervisor would have been fired from their job .Since they work for the city they will use their good old boy contacts to keep their job. supervisor job with the city job for life.

  • CClavin posted at 1:23 pm on Wed, Dec 19, 2012.

    CClavin Posts: 221

    I was at the meeting last night and I guess my mind may have changed a little. I think the council wants to tell the public what happened, but want to make sure it does not hamper the justice system. To me that was a lame excuse of needing more time for their internal audit. I understand that picking an outside accounting firm can take time & bring them up to speed, the March deadline would be missed. I also know understand that it was not M&M's job to look for fraud. However, Woody is still out there with some of the stuff he comes up with.

  • mister d posted at 7:49 am on Wed, Dec 19, 2012.

    mister d Posts: 1531

    Another bad decision by the city council. Everyone knows it pays to have connections.

  • ancientemplar posted at 7:38 am on Wed, Dec 19, 2012.

    ancientemplar Posts: 1268

    Kum-by-Yah Woody, "its life in the outside world." Huh? Now that's one for the voters. You get what you vote for.

    They could have spent the $100k on an audit if the embezzler hadn't absconded with the $365,000. They would have been $265K to the good.

    Nice of them to wait until the last minute since the paperwork has to be finished in March. Poor planning or well planned, you decide.

  • Mary Souza posted at 7:29 am on Wed, Dec 19, 2012.

    Mary Souza Posts: 808

    Magnuson McHugh has deep ties to the city. That's not to imply they are not a good accounting firm, but I am sure the city does not want to offend any of the very well connected folks at the firm.

    (Retired partner John McHugh is a former Mayor of CdA and still active in many groups, his son Barry is our County Prosecutor. The Magnuson side started with Harry Magnuson, the Wallace civic leader whose son John is a prominent local attorney here. Many of the accountants currently at the firm are highly involved in city and community groups. None of these are negatives but they indicate possible heavy influences, going both ways.)

    I think the city should hire an audit firm from outside the area to do a complete forensic audit.

  • NoName posted at 6:52 am on Wed, Dec 19, 2012.

    NoName Posts: 253

    Really???? The same bean counters???? I guess Arthur Andersen wasn't available.......... Steve voted for this too? At least Dan is doing his job.

  • concernedcitizen posted at 5:50 am on Wed, Dec 19, 2012.

    concernedcitizen Posts: 2530

    Of COURSE the city wants the same accounting firm that did not catch embezzlement for six years. Maybe something ELSE even MORE undesirable might turn up. HMMMMMMM

    Thank you Dan for being the one voice of reason.

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