The Truth About the 2014 Financial Review

Was This A Fishing Expedition
Or A Useful Review?

In the Town’s newsletter of August 15, 2014, the Mayor used BOLD FACE TYPE to announce “significant weakness in internal controls in a number of areas that need immediate attention.” As is typical with the Mayor’s reporting, readers got only a partial version of what’s really going on.

Just The Facts Ma’am 

FACT: Yes, there are significant, procedural deficiencies in the Finance Department that need to corrected, promptly, but there is no implication that any waste, fraud or abuse has taken place.

FACT: The Council’s initial discussions focused on a transitional audit, a typical procedure when a leadership change takes place in an organization and one which City Manager Lea Dunn endorsed. A finance committee was appointed to recommend a choice of consultants to the Council.  The Mayor asked Chris DeFrancisco, a banker, to serve with him and Blake Clemens  on a finance committee.  The committee changed the job description into a “risk based assessment,” quite a different analysis that focuses on policies and procedures rather than a transitional audit which determines appropriate use of funds.

FACT: The choice of a forensic accounting firm over one that specializes in assisting governmental entities with operational issues dictated the type of report produced. Chris strongly endorsed the consultant experienced in working with governmental agencies. The Mayor pushed  the Council to select Kanter Financial Forensics, LLC that describes itself as “a boutique consulting firm designed to assist attorneys with complex accounting issues . . . .  We perform all of our forensic accounting engagements with the assumption that the work will be used in a courtroom or other proceeding where a trier-of-fact is present.”

Litigation Support Firm Hired 

It seems a bit peculiar that, absent concerns that the Town might have suffered losses, a litigation oriented firm was chosen over a consultant familiar with governmental best practices, but that is what happened.  Chris DeFrancisco and Margie Gunther voted against hiring Kanter.

Here’s the back story, many readers may not know:

For 24 years, Randy Moravec was the Town’s Chief Financial Officer.  When he retired in September 2011 to pursue other opportunities, the department was staffed with competent, longtime employees. An interim director was in charge until June 2012 when the current CFO, Eric Cannon, CPA, took over.  The 2012-13 budget process had already begun when Eric arrived and required his immediate and constant attention. Implementation of that budget and preparation for the 2013-14 budget were priorities.

It is typical of many organizations under interim leadership that there are staff changes and lax, temporary supervision may result in procedures not being followed precisely.  Kanter described the current staff as “young, trying to do a good job, but inexperienced.”  The department has been without an accounting manager (CPA equivalent) for many months because the salary level does not attract qualified candidates. The department has been understaffed since long before Eric arrived.

Town Wins Transparency Reporting Awards

Despite limited staff, the Town has continued to win awards for its transparency in budget and financial reporting from the Government Financial Officers Association just as it has for more than 25 years. The same professional organization has presented the Town its Comprehensive Annual Financial Reporting Award for transparency for 37 consecutive years. Addison has also received the highest designation from the Texas State Comptroller for transparency in reporting. These awards, plus the annual audit by an outside CPA firm, would indicate that voters should have few concerns about fraud or misapplication of funds though some procedural safeguards need to be put in place.

The CFO and City Manager responded to the Council during the same meeting regarding the Kanter report and agreed with many of the recommendations. Many of the procedures and safeguards detailed in the report have already been put in place.

Additional Accounting Staff Approved 

At the same meeting (August 12) when the Kanter report was discussed, Council approved changing the accounting manager title to assistant financial director at a more appropriate salary level that should attract qualified candidates. A new position for a senior accountant was also established, also at an appropriate salary range. Both positions will be involved in supervising staff.

The sky is NOT falling as the Mayor’s boldface reporting seems to imply. Addison has always enjoyed the services of a competent staff which continues to do a good job with the sometimes limited resources Council chooses to provide. They deserve Council’s support, not constant harassment.

(If you want to watch the video of this discussion at the April 22 meeting, Items R-7 and R-8, here’s the link:  You can also download Kanter’s 14 page preliminary report by going to the Town’s website, Council Agendas , August 12, 2014, meeting item R-6.)