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Wednesday, February 20, 2008

So just how much does an "audit" cost?

After Concerned Citizens received the audit and read the Independent Auditor's Report, we had that very same question so we FOILed the invoices and all correspondence between the town and Barone, Howard & Co., CPA, PC.

In answer to our FOIL, we received a letter from Barone, Howard (signed by John F. Howard, CPA) dated December 20, 2006 acknowledging that they had been contacted by the town and asked to give "an estimate of the cost to the Town for audit and accounting services for calendar year 2006". The letter goes on to state that their "proposed fee for those services is estimated to be between $7,500 and $8,500".

Next contact with Barone, Howard & Co. for the 2006 audit is on June 5, 2007. They send the town their Letter of Engagement. This will state exactly what Barone, Howard & Co. plan to do for the Town of New Hartford. As you will see, they fully intend to do an audit for the year ended December 31, 2006.

As you will recall, Concerned Citizens kept trying to get a copy of the financials throught the FOIL process, but as of June 2007, we were told they were not available. We asked in July, August and so on and as you can see by looking at the date of the Independent Auditor's Report, the financials were not finished until October 15, 2007...almost a year after the December 31, 2006 closing date.

Next we receive the invoice from Barone, Howard & Co. along with the purchase order and voucher. Look at the invoice...Annual Audit of Your Financial Statements $17,900 with a "courtesy discount" of $5,900 making the total paid to Barone, Howard & Co. of $12,000 for their audit...ten (10) months after the closing of the fiscal year. $17,900...over double what they initially quoted for the what was the problem.?

One other little minor thing...the Letter of Engagement from Barone & Howard that was dated June 5, 2007 was NOT signed by Town Supervisor Earle Reed until November 13, 2007...after the audit was prepared. We've had some people with an accounting background look at that letter...their review was that this letter would appear to be extremely ambiguous...almost like it was written after the why would that be?

Are you outraged yet? Well, hang on. We thought you might want to see what the Town of New Hartford has been paying Mr. Frank Basile for his help with the budget and other accounting duties as needed per his contract. If you remember, he was hired in September 2007. Since then he has billed the town for:
$4,844.50 for the month of September (of course that is AFTER a 15% "APPRECIATION Discount")

$8,687 for the month of October

$5,200 for the month of November

for a total of $18,731.50 for 3 months
Thank goodness for "courtesy discounts" and "appreciation discounts". And to think that according to Town Law, the Supervisor is the Chief Financial Officer of the town:
5. The term "chief fiscal officer" shall mean:
(c) In the case of towns, the town supervisor; if a town has more than one supervisor, the presiding supervisor.
Remember the brochure that Supervisor Reed sent to everyone's home when he was trying to get elected? We are now just over the mid-point of his term. How's he doing?

We received an email letting us know that actually the town received an "Adverse Opinion", rather than an Unqualified Opinion; therefore they were technically audited. What is an Adverse Opinion? According to Wikipedia:
Adverse Opinion report
An Adverse Opinion is issued when the auditor determines that the financial statements of an auditee are materially misstated and, when considered as a whole, do not conform with GAAP. It is considered the opposite of an unqualified or clean opinion, essentially stating that the information contained is materially incorrect, unreliable, and inaccurate in order to assess the auditee’s financial position and results of operations. Investors, lending institutions, and governments very rarely accept an auditee’s financial statements if the auditor issued an adverse opinion, and usually request the auditee to correct the financial statements and obtain another audit report.

The wording of the adverse report is similar to the qualified report. The scope paragraph is modified accordingly and an explanatory paragraph is added to explain the reason for the adverse opinion after the scope paragraph but before the opinion paragraph. However, the most significant change in the adverse report from the qualified report is in the opinion paragraph, where the auditor clearly states that the financial statements are not in accordance with GAAP, which means that they, as a whole, are unreliable, inaccurate, and do not present a fair view of the auditee’s position and operations.

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