After years of residents’ complaining, the Board of the Incline Village General Improvement District (IVGID) authorized a forensic audit in November, 2023.

This seemed a step in the right direction. Especially since, in October, 2023, we wrote how expenses had been hidden by IVGID for decades. This is financial statement fraud – like WorldCom in 2002.   link 1   link 2   link 3

We have also written about the financial systems meltdown after a failed accounting and payroll implementation and no fixed asset inventory for a decade or longer. link 1  link 2

Original Forensic Audit Scope

In September, 2023 IVGID posted a Forensic Audit Services “Request For Proposal” (RFP) on PlanetBids, a procurement portal. The Scope of Services sounded serious: 

In addition to PlanetBids, the RFP was sent to several audit firms directly, including Moss Adams, Baker Tilly, RubinBrown, and Grassi. [1]

In a meeting November 8, the Board reviewed responses, and directed staff to negotiate with low bidder RubinBrown.  

Three months went by. In the Jan 31, 2024 Board meeting, the proposed budget for the forensic audit was now $350,000 – ALMOST THREE TIMES RubinBrown’s original bid of $117,450.

And the scope of services was watered down, compared to the original RFP Scope of Services language.

Watered-down Scope

These statements from the original RFP are GONE: 2. The auditor will examine the following questions in relation to all funds and departments:
a. Is there any suspected evidence that fraud, theft, waste, abuse or collusion occurred in relation to any aspect of the financials?
b. Were all applicable local, state and federal policies, regulations and laws adhered to?

The scope items appear design to avoid finding issues. [right]

The scope does not address many of the 30 points that were given to Trustee Tulloch and Chair Nolet in November 2023. There are other issues with the scope – but you get the idea.

Contract Language Appears Deficient

The contract form was deficient as it does use the clauses expected in a forensic audit engagement.

1.     Language requiring IVGID to promptly provide the information, resources and assistance (including access to records, systems, premises and people) is not in the contract.

2.     Language requiring the auditor to contact law enforcement if it spotted potential crimes — generally a  standard practice in forensic audit contracts. – is not included.

3.     There is no mention of an opinion – often part of the report delivered in a forensic audit, and part of the original RFP. 

The contract form is the same as used by Public Works for a engineering consulting contract with Farr West. The services of a forensic audit are entirely different from an engineer consulting contract. Contrast that with 2020, when IVGID used the CPA firm Moss Adams contract form. Likely legal firm BB&K recommended this, once again demonstrating their lack of knowledge regarding procurement and contracts.

Are the Board of Trustees, Audit chair Nolet, and Temporary Finance Director Bobby Magee are trying to do a white-wash of the fraud at IVGID?    Like this fraud in Mississippi.

Why the Budget Increase?

It is not clear why the budget has increased to $350,000, when RubinBrown bid $117,450. But paying extra consulting fees to Arthur Anderson was how Enron kept the auditor compliant – and even willing to shred documents. Is that why the fees have been nearly tripled from the original bid? Maybe Temporary Finance Director Bobby Magee wanted to have more friends in the accounting industry to refer him for future positions?

Some Irregularities Observed

In addition to the financial statement fraud and procurement red flags discussed above, some of the irregularities observed so far:

1.     The General Ledger is out of balance by $5.3 million after implementation of new financial and payroll software, Tyler MUNIS,  costing over a million dollars. No return on investment (ROI) study was provided, and the prior systems were working. Was the purpose of the implementation   to reduce/eliminate access to old accounting records?

2.     In 2023, IVGID had 947 employees, meaning it employs more people than the Hyatt Regency Lake Tahoe.  According to the U.S. Census 2020,  Incline Village/Crystal Bay has only 9,499 residents. Prior years IVGID’s employees: 838 (2022), 834 (2021), 902 (2020), 1,012 (2019)

3.    IVGID won’t provide timecard records. A fleet department employee has regularly billed over 20 hours a day for work on golf equipment.  The billing records appear suspect. Residents have complained for years about full-time staff with benefits appearing to work less than full-time and “bloat”: “IVGID is an overstaffed and bloated Bureaucracy that is becoming just like California”  and  “IVGID is too big, too bloated and finds endless ways to spend money.” and “Internal audit [needed]. Time/management consultant [needed] to demonstrate our staff is bloated, over compensated and over benefited.”

 

Link to list of 30 issues given to Audit Chair Chris Nolet and Trustee Ray Tulloch.

Board has not requested Law Enforcement to Investigate

Normally, fraud investigations are hush-hush affairs. The lawyers work to keep them that way.  But since residents have dug deep to find the fraud, the cat is out of the bag.  The Board’s unwillingness to bring in law enforcement makes no sense. Of course the Board would prefer to put the question of fraud behind them IF THEY CAN.  And if they have to pay $350K to RubinBrown for a worthless report – well, it would not be the first time IVGID paid taxpayer money and did not get what the services it should have received.

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