03/04/2020
FORENSIC AUDIT RELEASE
1. Until Last Night, This Audit Was “Not a Public Document..”
2. The Audit Findings and Conclusion
3. Where do we go from Here?
Over a year ago, a forensic audit on our Utilities fund was something we were all fighting for as Citizens here in Brighton. It took an entire community effort. It took regional news coverage. It took a full-on recall to finally bring this community together. Because of our efforts, I am proud to say there has been a complete shift in the culture here at City Hall! Friday, we received the draft report of the forensic audit. At the time, that this was “not a public document until the City Council as a whole says it is.”
The previous ‘Good ole Boy’ Council, and their City staff buddies (that are no longer working at City Hall!), would likely do anything to halt the release of this scathing report. The new Council, and the transformed City staff worked hard to find a legal way to release this as soon as we received it. I am happy to inform you that last night I was able to make a motion to do an unorthodox release of this draft copy of the forensic audit. Instead of a divisive discussion and/or divisive vote, we came together and VOTED UNANIMOUSLY to release this document today at noon! So proud of our new Mayor, our new City Council, and the transformed City staff as we finally have become a team and we are all shooting for real transparency.
2. The Audit
I am sad to say that many of our worst fears of what was happening with our utilities department over the previous ten years have now been confirmed. I will reiterate: The City staff that did this to us is no longer working at our City Hall. The facts of what they did to us is all found inside the third-party audit done by an impartial accounting firm. These superb accountants (Two Hills Accounting) was chosen by the Citizen board we appointed following the recall. Thank you to those of you that volunteered to do beyond your civic duty! None of this mismanagement of our funds would have been uncovered if it was not for Jeremy Torgerson, Philip Rodriguez, and overall resident persistence!
Instead of any kind of “spin” being put on this report by me, or anybody else, below I will display exact quotes written by the third-party auditor from their ‘findings’ section. The entire final audit report will be presented to City Council on March 17th. I will post this entire audit here, as soon as it is available. The following section will be direct quotes and test samples from the 3rd party forensic audit firm, with zero additions from me:
AUDIT FINDINGS AND CONCLUSIONS
DEVELOPMENT OF ANNUAL BUDGET NEEDS IMPROVEMENT
“The City’s annual budget is the most important control over ensuring that funds are spent wisely and in furtherance of the public’s interests… Because of the importance of the budget, the City’s Municipal Code includes specific requirements for budget development and presentation.”
“We found that Water, Wastewater and Storm Drainage budgets had not always been developed and presented to City Council in accordance with the Municipal Code.”
“The water treatment plant had the largest budget to actual variance for both 2015 and 2016. We found that although construction for a water treatment plant was not scheduled
to begin in 2015, the 2015 budget appropriation for the Water Fund included $18 million for that project. The inclusion of the $18 million was thought by staff to demonstrate the City’s intention to meet state and federal clean water requirements. We note, however, that the CIPs for 2015 through 2019 listed the water treatment plant as an “Unfunded Project.”
"Specifically, the CIPs included costs for water distribution projects and water treatment projects, but they did not include the cost for the new water treatment plant. Additionally, planning for the water treatment plant project had not been completed…"
“Because the total amounts budgeted in a given year exceeded actual spending needs by a large margin, staff carried over, or “re-budgeted”, remaining authorized amounts for some projects. As an example, the 2016 unspent budget was rolled directly into the 2017 budget for 18 of the 36 Water Fund projects. Nine of the projects that were rolled from 2016 to 2017 had no need for budget authorization in 2017 and were subsequently dropped from the 2018 budget.”
“The Brighton Municipal Code, as well as codes in other state and local governments, requires that budgets be restricted to the “ensuing” fiscal year to ensure that spending is limited to the amount authorized.”
“In addition to budget to significant budget to actual variances, we also found the total costs by project had high variances from the estimated cost. For the years 2013 through 2018, the actual, versus authorized variances were as much as almost 100 percent on several projects…a budget that authorizes spending well above amounts needed to fund capital projects, operations and maintenance expenses provides the opportunity for wrongdoing.”
RECORDING AND REPORTING SYSTEMS NEED IMPROVEMENT
“As part of this engagement, we were asked to evaluate reports on operating versus growth revenues and expenditures. Such reporting is important in rate setting and budget development. We found that information provided to decision makers on operating versus growth revenues and expenditures has been inconsistent and unreliable. Neither we nor staff have been able to generate consistent and reliable reports, because the City’s systems do not uniformly contain information on specific projects and subtasks.”
“In addition, the basis for significant estimates has been neither documented nor publicly disclosed. For example, we were not able to obtain a comprehensive description of each project along with the impact that the project would have on existing operations and the increased capacity to the system.”
“While the CIP is a living document and needs to be changed based on the latest information, large changes to the CIP can result in significant changes to consumer rates. We found that the rate studies for the 2018 and 2020 fiscal years had large differences in the proposed projects, the cost of those projects, and the allocation between growth and existing operations.”
“While some change in the allocation between growth and existing operations is understandable, we did not find sufficient justification for the allocation between growth and existing operations for the water treatment plant.”
CONTROLS OVER THE PROCUREMENT SYSTEM NEEDS IMPROVEMENT
“Controls over the City’s procurement system are essential to prevent fraud, waste and abuse.”
“However, during the course of our test work, we identified areas where improvements in the procurement system are needed. Specifically, we found that access to the master vendor list is not sufficiently limited and unique vendor numbers are not consistently and appropriately used.”
“The lack of a single unique identifier for each vendor leads to confusion: when faced with four vendor records, all of which contain the same name and address, it can be difficult for the staff member to determine the appropriate vendor. It can also lead to duplicate payments, where the same invoice is erroneously paid multiple times. Lack of controls over the master list provides an opportunity for fraud, waste, or abuse, including the addition of ghost vendors that allow for phony payments.”
3. Where do we go from Here?
All of the above led to our crazy high water rates, water price gouging, our unethical reserve fund of $70,000,000, and the lack of trust with our City. The staff members that did this to us are gone. The Mayor and most Council members that were misguided by immoral staff that did this to us are gone. The new Mayor, the new Council, and new staff have been working on this diligently since the recall. I am now asking for the following steps to be taken by our City Staff and Council: Admit the issues occurred. Apologize for the issues. Rectify the issues.
Much of these problems have begun to be rectified as a well-placed microscope was rightfully shined on us. I ask that all of us keep this microscope on. If we have this engaged, intelligent of a Council, this ethical, hardworking City staff, and a continual, well informed, vocal citizenry, WE can all ensure that this never happens again.
Matt Johnston
720-226-8839
