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FOR IMMEDIATE RELEASE 6/28/2001Issued By: County ExecutiveView only releases from County Executive
Dane County Executive Kathleen Falk today (7/9/01) announced steps she is taking to correct a $1.5 million charge against Dane County’s Reserve Fund. The charge against the fund was caused by a series of bookkeeping errors made by a retired former county employee. Corrective steps were delayed due to the failure of the county’s former independent auditing firm to discover and report the errors to the county.
Falk was joined in the announcement by Dane County Board Chair Kevin Kesterson and Supervisor Larry Olson, Chair of the Personnel & Finance Committee.
Falk said that new auditing procedures initiated by the County Department of Administration discovered faulty journal entries from 1997-99. A thorough, detailed investigation conducted at Falk’s direction by the county’s Department of Administration and an independent auditing team revealed the following: According to the county’s new auditors, a county bookkeeper made a series of errors in 1997, 1998, and 1999 such as double-booking revenues. At the end of each year, the bookkeeper apparently initiated large, unsupported journal entries each year to reconcile the books, instead of correcting the mistakes. The County’s former private auditing firm of Deloitte & Touche, contracted by the county to independently audit these records, failed to identify and report the unsupported journal entries to County officials.
Falk said as part of the county’s investigation, the county brought in a new independent audit team from the firm of Virchow Krause and Company, LLP. This team has concluded that no misappropriation of county funds occurred and that the county’s cash position has not been compromised.
Based on the results of their review, Virchow, Krause said in a July 6, 2001, letter that they expect to issue an audit opinion that is the “highest level of assurance” they can provide on Dane County’s 2000 financial statements.
Falk said: “I am taking immediate steps to deal with this serious matter to protect the taxpayers of Dane County. Our new procedures found the problem and we are taking these steps to fix it: 1) I have directed the Department of Administration to institute new control procedures and to assign responsibilities so that these errors will never happen again. Most of the measures have already been implemented. The others will be as soon as the new Controller is on the job. 2) I also directed that the Department of Administration identify any recoverable revenue and to work with department heads to secure those funds. 3) We have initiated discussions with our previous auditors to determine what their role and contribution should be in correcting this problem. We will take appropriate legal actions, if necessary, to secure fair compensation. 4) Finally, I am proposing a specific list of cost-saving measures to begin the restoration of our reserve account.”
Dane County Board Chair Kevin Kesterson said: “These measures will insure that Dane County remains in excellent fiscal condition. The County Board will work with the County Executive and county staff to make sure these new steps are fully implemented. Chair of the Personnel & Finance Committee Larry Olson added: “The Personnel & Finance Committee will review the control procedures with the new Controller to see if we need to take any additional steps. I also want to acknowledge the hard work of the DOA staff who tracked down these mistakes.”
Falk noted that both the employee who made the errors and his supervisor in the Controller’s Office have retired which means that disciplinary action is not possible.
After Department of Administration staff identified the problematic journal entries, they thoroughly searched electronic and paper records and consulted with the county’s previous auditing firm to find out what the entries referred to. When they could not find supporting material, staff notified the County Executive. Falk directed that they secure all the records and bring in the independent audit team. She met with County Board Chairman Kevin Kesterson and Supervisor Larry Olson, Chair of the Personnel & Finance Committee, to advise them about this situation. As of July 5, the audit team and DOA have completed their identification of the mistakes concealed by the bookkeeper’s journal entries.
Falk said: “After all of our work to recover costs and negotiate with the previous audit firm, there may still be a substantial charge against the Reserve Fund. Keeping that fund in good shape is important to the county’s ability to respond to emergencies. While we will have a balance of at least $4.7 million in the Reserve Fund after correcting these errors, it makes sense to restore some of the amount lost to these errors as soon as possible. To accomplish this, I am taking these steps. First, I am ordering changes in hiring for county positions immediately. We’ll continue to hire employees essential to public safety – deputies, domestic violence workers, 911 operators and medical staff at Badger Prairie – on our normal schedule. For other open positions, I directed an eight week extension of the recruiting process. We will have an appeal process to make sure that other essential services are not affected. In addition, I am ordering a freeze of some other county spending. The total savings realized by these two actions is expected to be approximately $800,000 by the end of the year.
Falk briefed the full County Board at a meeting on Monday, July 9.