IVGID’s Auditor refuses to issue audit opinion
CPA firm Davis Farr issued a “Disclaimer of Opinion” letter to the Incline Village General Improvement District for the audit of its fiscal year ending June 30, 2023. A disclaimer of opinion means there was not sufficient, appropriate evidence for auditors to even issue an opinion.
The letter, dated March 27, 2024, stated these reasons:
The introduction of a new accounting system in July 2022 and significant turnover of District finance staff resulted in numerous misstatements in the accounting records. As of the date of our audit report, management was still in the process of identifying and correcting system deficiencies.
We were unable to complete our analytical review procedures of revenues and expenses, we were unable to obtain sufficient audit evidence supporting other amounts in the financial statements, and we were unable to evaluate the results of the ongoing forensic investigation to determine if any additional audit procedures are necessary.
As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in the accompanying financial statements.
This confirms our article about IVGID’s financial meltdown and failed accounting system implementation. LINK The implementation has resulted in a system that is over $5.3 million out-of-balance. If the external auditor Davis Farr doesn’t trust its financial statements, why should stakeholders? Stakeholders, including parcel owners, creditors of IVGID, and other local governments, should be concerned. IVGID has been paying its employees and vendors – but its accounting system for budgeting, tracking and reporting on those payments is broken.
Stakeholders should also ask why Davis Farr was “unable to evaluate the results of the ongoing forensic investigation.” This appears to be a “scope limitation” – which is never positive thing when auditors are involved.
The head of IVGID’s Audit Committee, Chris Nolet, resigned February 26, 2024 [updated 3-29-2024]. He gave no reason for his resignation and had one more year on his term. IVGID’s Controller, who had only been there five months, resigned in March. The temporary Director of Finance, Bobby Magee, who is not a CPA, was appointed by the Board as General Manager. He is working remotely from the Los Angeles area. There is no current Director of Finance.
IVGID has already received three extensions from the State of Nevada Dept of Taxation for filing its Auditors Report. Per Nevada law, “The opinion and findings of the auditor contained in the report of the audit must be presented at a meeting of the governing body held not more than 30 days after the report is submitted to it. Immediately thereafter, the entire report, together with the management letter required by generally accepted auditing standards in the United States must be filed with … the Department of Taxation.“ (NRS 354.624(6))
Since a disclaimer of opinion is NOT an opinion, the report does not appear to meet the requirements of Nevada law. It remains to be seen whether the Board will try to ignore the facts, and file the DISCLAIMER of Opinion with the state. IF the Tax Department accepts it, it is proof the Nevada Tax Department can join IVGID on the the list of broken government agencies.
[updated Friday, March 29, 2024]
PUBLIC COMMENT from Chris Nolet to the IVGID Board on March 28, 2024
Good afternoon.
Chris Nolet, Incline Village resident and former audit committee chair through February 26, 2024.
I want to address two matters tonight.
The first was discussed at the town hall last night, that is, staff retention. I understand that we are now on our third controller in 15 months.
If true, it seems obvious to say that we need to take a new approach to training and retaining this professional. One suggestion is to provide several weeks of extensive off-site professional training focused on one, the controllership function, and two, US GAAP and GASB standards, which are the basis of the district’s financial statements.
The second matter I want to speak to tonight relates to the false assertion that the 2023 financial statements are audited. I listened for over 90 minutes to Monday’s audit committee meeting where the term audited was used almost a dozen times. The reality is that the current draft audit report from Davis Farr disclaims an opinion on the financial statements and notes the following and I quote, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. There were numerous mistakes in the accounting records. We were unable to complete the audit procedures, particularly over revenues and expenses. We were unable to obtain audit evidence, sufficient audit evidence supporting other amounts in the financial statements. The audit also noted, as did the audit committee members Monday night, that other additional adjustments are likely required in order for the financial statements to be fairly presented.
The auditors also reported the district did not maintain an effective system of internal control for
the year ended June 30, 2023, noting two material weaknesses and one significant deficiency.
To have described these financial statements to our community as audited, as is agendized and on
the website tonight, is very misleading. And lastly, we should all know and recognize that it will be extremely difficult to complete the 2023 audit at a later date, which will be a requirement before you can start the 2024 audit. The dramatic state of disrepair of our financial reporting systems noted by our auditor this month was left to us by Paul Navazio and Indra Winquest last summer. While the current finance leadership team has made significant strides to get us far along the path back to being able to produce financial statements that are fairly presented, let’s not compound the current circumstances by asserting that the June 30, 2023 financial statements are audited when clearly they are not. If you read the [external auditor] Davis Farr draft report, it couldn’t be more clear.
And lastly, I just want to clarify because these kinds of questions come up, the fact that we get a
signed report does not mean the financial statements are audited. if you look what’s online and you look what was handed out Monday night, it’s a complete 100% disclaimer.
Thank you.
[Update: Friday, Apr 26, 2024]
Public comment made by Chris Nolet at the April 24, 2024 IVGID Board Meeting
Chris Nolet, Incline Village resident, retired CPA, and former IVGID [Incline Village General Improvement District] Audit Committee chair through February 26, 2024.
This is not the first time that I’ve spoken to this group on the topic of the June 30, 2023 financial statements included in our ACFR [Annual Comprehensive Financial Report] for not being audited.
Contrary to repeated assertions made by district staff and all trustees in a press release dated April 3, 2024, the financial statements are not audited.
The signed report from Davis Farr dated of March 27, 2024 notes the following and for everybody following along this can be found on page ten of the PDF ACFR [Annual Comprehensive Financial Report] on our website.
“We have not been able to obtain sufficient appropriate audit evidence to provide a basis for an opinion on these financial statements” – period.
It goes on to say, “we do not express an opinion on the accompanying financial statements.” End quote.
I fail to find how anyone can misunderstand these two clear, unequivocal comments. I have worked very closely with several of the individuals who have continuously made this false statement. They’ve always appeared to me to have sound written and verbal communication skills. Hence, I’ve come to personally conclude that their repeated false assertion represents
an intentional false statement.
Last summer, I gave two presentations on the definition of accounting and financial reporting fraud related to a financial statement audit as defined in
statement and auditing standards number 99 [SAS 99]: Consideration of
fraud in a financial statement audit. Moreover, GM [General Manager] Magee has referenced the fraud triangle contained therein on several occasions in the last nine months.
In my professional judgment, as a retired CPA with more than 40 years of audit and related experience, I believe the repeated false assertion made by district financial staff and the BOT [Board of Trustees] that the June 30, 2023 IVGID financial statements are audited represents a material intentional financial reporting fraud fitting broadly within the scope of SAS 99.
Thank you.
[Note: The YEARs have been corrected in the transcription of Apr 24, 2024]
Thank you for continuing to follow this matter! I thought it had been resolved and not just moved to the right. Hopefully the Trustees will address this matter in a forthcoming BOT meeting!
No, the Trustees are going to send the letter from Davis Farr to the State of Nevada, even though it does not comply with NRS 354.624 requirements. Hoping the Trustees will do something is wishful thinking.
The Local Government Finance Committee needs to be informed about the lack of audited financial statements, and Davis Farr’s Disclaimer of Audit Opinion. They are the Committee who have the power to do something.
https://tax.nv.gov/Boards/Committee_on_Local_Govt_Finance/Committee_on_LGF_Staff/
Their emails – change the $ to @:
marvin$comnett.net,
tciesynski$gmail.com ,
jessica.colvin$clarkcountyNV.gov,
jcronk$cityofsparks.us ,
comptroller$lyon-county.org> ,
marty$jnaconsultinggroup.com ,
paul.johnson$wpcnvadmin.com ,
Jim.McIntosh$cityofhenderson.com,
gina.rackley$humboldtcountynv.gov ,
ayacoben$washoecounty.gov , marywalker$gbis.com
Thank you Village Alliance for continuing to keep our community apprised of the inept, incompetent, mismanaged, BOT. It is appalling that the BOT has let this situation continue. WHY? In the “real” world people would be fired for this level of incompetence.
Recall?
It is too close to elections to make a recall worthwhile. The IVGID Board meeting is tomorrow night, March 27. The agenda item says, “Receive, Review, Discuss and File Receipt of the Incline Village
General Improvement District’s Audited Financial Statements” – But there ARE no AUDITED Financial Statements.
So emailing the Local Finance Committee about the Board’s incomeoetence (emails below) is the best course of action.
Thank you for your comment.
It appears evident that IVGID never was and continues to be miss-managed. It is not clear that the Trustees have stepped up as a body to fill in the void. Their current review of IVGID activities while justified is suspect because of the lack of visibility in their criteria for this review. I was not aware that the new general manager works from LA – has he ever been to Incline?
Yes, the GM comes to Incline for the Board meetings. But he wotks remotely. Prior to Indra Winquest, the GM was required to live in Incline. Former GM Steve Pinkerton did not really do that; he lived in California and had an apartment in Incline – his family was in California. Prior GM Indra Winquest lives in Reno. This is an issue.
The writing has been on the wall for over two years! Key members of the BoT and previous Audit Committee before Chris came on board had been working on exposing this and purging the previous GM, Director of Finance and several others in IVGIDs Finance Dept who clearly did not have the competency, experience and skills needed to manage IVGID’s finance operations and capital projects. Nor did the previous management team have any idea on how to implement a new financial system. These key members of the BoT and previous Audit committee had to do this while a fighting off a “pitch fork gang” of ignorant, spiteful and naive members of the community, former employees, and the previous BoT Chairman enamored with the last GM and members of his staff. This gang felt it was more important to remove these hard working BoT members and smear their reputations versus pay attention to the train wreck they were being warned about. This delayed getting on top of this disaster and getting competent management and governance in place. I hope the community learns from the repercussions the failed recall effort and smear campaign caused, and gives the current BoT and new GM the breathing room to get this mess cleaned up. Otherwise we are in for more of the same in the years to come.
Calicratte, Krolick, Becker and friends basically succeeded in deflating the reform momentum.
Their allies also neutralized Cliff Dobler and discouraged Nolet. Some people in Incline appear to have a heavy stake in the continuing corruption.
Hi,
I’m resident CPA and CFO for 20 plus years. Let me know if I can help.
Best,
David Johnson
Thank you
This article is remarkably accurate in almost every regard. Contrary to the IVGID Audit Committee and BoT both characterizing the Davis Farr report and “audit opinion,” the audit report goes to great lengths (as the author herein notes) to make it clear that the audit was not completed and therefore they are NOT expressing an opinion on the Fiscal ’23 financial statements. Moreover, it is completely confounding that outside legal counsel tortuously concluded last night that a disclaimer of opinion is an opinion, and therefore the BoT can file the incomplete financial statements with the Nevada Department of Taxation today as “audited.” A very sad day for transparency and integrity in IVGID leadership.
Thank you for your comment, Chris, and serving as Chair of the Audit Committee. We have added your full 3 minute March 28 public comment below, as your words are quite clear.
It is disburbing that Trustee Michaela Tonking asked the lawyer from BB&K regarding Nevada law requirements. Apparently, Ms. Tonking is seeking a lawyer to say some action is acceptable – when she has been plainly told the opposite. Likewise it is disturbing GM Bobby Magee keeps using the words audited financials – and Board Chair Schmitz does not correct him. This borders – and perhaps crosses the line – on malfeasance. Legal counsel from BB&K appears incompetent and unable or unwilling to understand the facts of the matter.
IVGID is a disaster and not getting any better. Fraud, corruption, and malfeasance can be inferred from the Davis Farr letter. Then IVGID management (read Magee and Herron) have the audacity to lie and say, “the State accepted the IVGID’s audited financial statements”. This is an outright lie. The entirety of IVID upper management needs to be fired and replaced. But our board has no cajones, so nothing will happen. People like Mr. Johnson who said. “I can help.” do not know the first rule at IVGID. IVGID rule one: Never , never hire honest local people who actually want to make IVGID run like a clock. The only hope for IVGID is to elect a new board with folks that live here and actually care about the mess that is IVGID and make an effort to fix it. (Like firing the dead wood management and getting rid of BB&K law firm). Trustee Tonking works for a Denver based company and probably lives there and Dent is more invested in Watsonville, CA than he is in Incline Village. Board Chair Schmitz is a nice lady with kind heart, but lacks the backbone to do the heavy lifting. IVGID management and Trustees have marginalized bright people like Nolet and all but tarred and feathered CPA Dobler who have tried to set things right. Pray for a board with some cajones in 2025.