As the Palm Coast City Council seeks an education on forensic audits–either to conduct one or to learn that it may be too prohibitively, unnecessarily expensive absent imperative reasons to do one–Palm Coast government intends to award the contract for such an education to Orlando-based MSL, P.A. The accounting company specializes in audits, including fraud and forensic audits, business, tax and financial consultancies.
It isn’t clear how many companies formally responded to the city’s request for proposal, issued last February. But just two companies qualified. MSL outranked Carr, Riggs and Ingram, a Palatka-based accounting firm, according to the notice of intent to award the city issued late this afternoon. MSL’s cost for the 60-minute presentation: all of $50. (See its bid here.)
The City Council has to ratify the decision.
To be sure, the award should not be confused with a step toward conducting a forensic audit. The city is only exploring what such an audit consists of–some council members and almost every person who has demanded such an audit is not aware of what forensic audits entail–what it would cost, and whether to conduct one.
Based on bid documents, the presentation MSL will make will “educate and inform the Council members about the cost, process, and expected results of conducting a forensic audit within the municipal context.” The presentation will help council members “make informed decisions and provide transparent information to constituents on the topic of forensic audit,” while the “audit firm’s insights will contribute to enhancing the City’s financial accountability, transparency, and overall governance.”
The bidding documents nowhere suggest that MSL would conduct such an audit, though once the council has heard the presentation, it’ll be up to its members to decide what direction to take.
The council is attempting to balance generally misinformed but sensational requests from a small number of residents to conduct a forensic audit with their fiscal responsibility and realities on the ground: forensic audits are usually conducted when an organization suspects criminal fraud or has at least some evidence of fraud. Neither the City Council nor the administration have learned of anything approaching that.
Forensic audits can also be prohibitively expensive. MSL is charging only $50 for a presentation to the council, but its hourly rates for additional services, if there was to be a forensic audit, would range from $65 to $85 an hour for its lowest-paid paraprofessionals, to $95 to $115 an hour for rank and file staffers, to $180-$260 for managers and $250 to $305 an hour for its partners. A forensic audit would likely entail hundreds of hours.
Residents appearing before local governments–not just in Palm Coast or in Flagler County–have over the past few years demanded forensic audits on speculative assumptions that something must be wrong. A handful of people have done so before the Palm Coast City Council, one of them (who’s been absent in recent months) repeatedly imploring city staffers to call the local Sheriff’s Office, the State Attorney’s Office, the Florida Department of Law Enforcement or other agencies and report fraud at the city, as if he were convinced that fraud was rampant. He had no evidence of any, and his statements were no different than slanders at the expense of the same city staffers he was seeking to recruit as allies.
No one appears to have called any of the law enforcement agencies.
The city’s books are subjected to annual audits by an independent firm. Unlike forensic audits, those audits sample the books to rather than examine every transaction. But none of the audits have caused alarm. Rather, the Government Finance Officers Association of the United States and Canada has recognized the the city for its excellence in financial reporting for 22 consecutive years, receiving the GFOA Award for Outstanding Achievement in Popular Annual Financial Reporting for the past 10 years and the GFOA Distinguished Budget Presentation Award for 20 consecutive years.
The city administration made a point of highlighting that history in a release last March, immediately after the completion of its annual audit (by James Moore and Company, the accounting firm), no doubt as an intended message to critics who, lacking evidence, have damaged the city staff’s reputation by innuendo, and by successfully pressuring the council into pursuing an “education” into forensic audits.
The council last August actually directed its administration to explore what a forensic audit would entail, only to backtrack a week later, when Council member Nick Klufas said that “forensic audit to me is essentially the same thing as saying fire without even being able to point to smoke.” There has yet to be any smoke. Council member Ed Danko has continued to push for a forensic audit as his colleagues have been more reluctant. (Both Klufas and Danko are running for County Commission seats.)
The council is not expected to ratify the award to MSL until the second half of June, though it may discuss the award before that.
JOE D says
Just because things are expensive and the taxes are high, doesn’t AUTOMATICALLY mean there is FRAUD involved. Since the budgets are public knowledge, and open to the public, it’s unlikely (but not impossible) that any fraud occurred (unless there are other indications of misappropriation of public funds).
The COST (to taxpayers) for forensic (financial) audit to trace tax funds and their ultimate payout, is EXTRAORDINARILY EXPENSIVE!
So before THAT kind of money is put out, you should have SOME kind of proof, which might indicate further fraud in other budget areas.
I noticed the COST to Palm Coast of this “EDUCATION” process was not clear in the article….I hope the results are worth the EXPENSE!
James says
I sorta agree with your assessment of the situation.
But perhaps even Klufas might have a small glimmer of doubt now as to the inappropriateness on the part of some in the public for simply making the suggestion.
This in light of the recent management shake up… for which he was apparently unaware was going to happen.
Just an opinion.
Bobby says
The City of PC counsel is constantly throwing money down the drain. Stop with your spending.
Jim says
I can’t wait to see what this costs. Other than some loud mouths screaming for an audit and providing zero evidence (or even in what direction to look) of any financial mischief, what is the reason for doing this? What benefit is Palm Coast getting?
This is what happens when tax dollars are available to politicians. A private company would never do this. Instead, if there was a legitimate need for this information, they’d contact a qualified law firm and submit questions to them and get a response at an hourly rate (probably not to exceed a certain amount). And then, they’d only do this if they had strong suspicions that something criminal was going on.
But, hey, raise my taxes! Between this, the council’s pay raises, payment to the fired city manager, etc. I’d hate for them to start trying to manage costs now…
JNunez says
Finally!
Money well spent!
Ray W. says
Like the five commenters above, I read the article. What I saw was simple. The city council sought bids from businesses that possess a certain expertise in forensic accounting. The goal? To better educate themselves about a particular subject matter so that they could perhaps make an informed decision. One bid came back at $50 for a 60-minute presentation. How could anyone oppose this? People with expertise in a narrow field are willing to drive from Orlando to offer their knowledge and experience to people we entrust with political power so that our leaders can better decide what to do for 50 bucks. Really?
One thought that comes to mind is that other political leaders could attend the presentation. FlaglerLive readers might watch it live on streaming video. Perhaps Mr. Tristam could cover the presentation and condense it into a story, though I hesitate to volunteer any task to him, given the fact that 130,000 citizens can keep any person busy with their myriad, mysterious, and sometimes inexplicable reasons for doing what they do.
Again, why would anyone oppose this? Normally, it a city council wanted an education on a particular subject matter, they would drive separately to a seminar, pay the entrance fee for each participant, and purchase meals at council expense. Per diem reimbursements for a day trip to Orlando or Tallahassee would cost many hundreds, if not thousands of dollars to get the same presentation.
My curiosity aroused of what possible psychology might be behind those who oppose the $50 expenditure, I began looking for possible syndromes or hypotheses.
As I pondered the issue, the thought that study after study of American drivers reveal that we almost always overestimate our driving skills. Very few Americans describe themselves as average or poor drivers. Think about this, please. Almost all of us drive for significant periods of our lives. Some of engage in racing activities of many types. As children, we look forward to driving. As seniors, we fear the loss of driving privileges. It is a huge part of our lives. We see how we drive. We observe others as they drive. But most of us think we are good or excellent drivers when by definition a significant number of us have to be average drivers. For every good driver, on a bell curve, there should be a poor driver.
I began with driving in mind. I came across a 1999 hypothesis called the Dunning-Kruger Effect. There are detractors to the Effect, but the detractors themselves are widely split on their own theories; they do not seem to offer a coherent explanation that disproves the hypothesis, which is the heart of the scientific method. I am not saying that the Effect has been proven. But it remains a viable argument.
One of several definitions of the Dunning-Kruger Effect is that it is a cognitive bias in which people with limited competence in a field overestimate their abilities. It is not an issue of intelligence. It is not a general overconfidence of people with low intelligence. It is a specific overconfidence of people unskilled at a particular task.
This, to me, is interesting. If the definition of the effect is accurate, is it possible that when we elect any novice to a political position, by definition, we are electing someone to a position that requires a particular expertise when the candidate doesn’t know enough to know that he or she is unfit for the job, sans training? Many a novice politician claims that he or she can clean up the mess, that they alone can fix the problem. Are they victims of the Effect? The problem is that they might not even be able to know how to fix the things they propose to fix; that they are overestimating their abilities. And when we don’t properly investigate their backgrounds, are we demonstrating our own inability to understand what we are doing when we elect them?
As an aside, some researchers note an opposite effect in highly skilled people. They tend to underestimate their skills.
If the Effect is a true explanation of the human condition, shouldn’t we want the best possible education for those perhaps many inadequately experience people among us who overestimated their skills when they decided to run for political office? For only $50 to better educate the possible clueless among us who have achieved political power. Can it be argued that the only skill many of our politicians possess is the skill to persuade the gullible among us to elect them? That they couldn’t lead a community if the community’s future depends on them because they can’t even see their own weaknesses?
David Dunning, one of the authors of the Effect, wrote:
“[T]he knowledge and experience that are required to be good at a task are often the same qualities needed to recognize that one is not good at that task – and if one lacks such knowledge and intelligence, one remains ignorant that one is not good at that task.”
More questions to come.
Ray W. says
When I reread this comment, I noticed that my proofreading skills will not up to the task. Something, perhaps, distracted me. Oh, well. Please accept my apologies.
James says
“… for 50 bucks. Really?…”
LOL, talk about being “pennywise and pound foolish!”
I thought there was “k” after the 50 for some reason… good catch Ray.
And it illustrates perfectly a point… that being, should I (and perhaps anyone else out there) even entertain the notion for even a moment, of selling their house without legal representation?
Thanks again Ray. 👍