Seneca Public Library District

Why are we discussing a forensic audit?

After the departure of the former library director, some members of the Seneca community have been asking the Library Board of Trustees to conduct a forensic audit of the library.  

What is a forensic audit?

A forensic audit examines and evaluates a firm's or individual's financial records to derive evidence used in a court of law or legal proceeding. Forensic audit covers a wide range of investigative activities. It is often conducted to prosecute a party for financial crimes. Forensic audits could also involve situations that do not include financial fraud, such as disputes related to bankruptcy filings, business closures, and divorces.

What necessitates a forensic audit? 

• Corruption: conflict of interest, bribery, extortion.

• Asset misappropriation: misappropriating cash, submitting falsified invoices, making payments to non-existent suppliers or employees, misusing assets (like company equipment), stealing company inventory.

• Financial statement fraud: To show that company’s financial performance is better than it is.

 What professional skillset is required to perform forensic audit?

Forensic audits are performed by certified public accountants.

Has the Board of Trustees considered conducting a forensic audit? 

Yes. The trustees invested hours in studying a forensic audit process, providing information about the library to potential auditors, and interviewing auditing firms. 

What is an outcome of trustees’ engagement with potential auditors?

After evaluating the library’s needs, a number of potential auditors have recommended moving in a slightly different direction. They suggest engaging in an agreed upon procedure (AUP). Thus far no evidence of fraud or misappropriation of money has been found and that is the foundational reason that a forensic audit isn't being advised.

What information was made available to potential auditors?

•Voluminous information made public as a result of FOIA requests.    

•Existence of the grand jury subpoena served by the State of Illinois, County of LaSalle.

•Findings of the independent accounting firm which has been conducting library annual audits.

What is a cost of forensic audit?

The library could not locate an accounting firm willing to do a forensic audit. Forensic audits are more expensive than an AUP and could exceed $20,000.00. 

What is an AUP engagement?

An AUP engagement uses procedures similar to an audit, but on a smaller and limited scale. An AUP is a standard a company outlines when it hires an external party to perform an audit on a specific business process. The procedures, which are called audit standards, are designed and agreed upon by the entity conducting the audit. The auditor's report presents the facts, with the audit facilitators drawing their own conclusions from the findings.

What professional skillset is required to perform AUP?

AUPs are performed by certified public accountants. The auditor is bound to notify proper authorities if any fraud or other illegal activities are found. 

How is the Board of Trustees going to move forward?

The Board plans to follow professional recommendations that a forensic audit would not be appropriate in our case and to instead consider an AUP audit.

What is a cost of AUP?

The Board estimates an amount of $7,000.00. It could be less or it could be more.

What would be the AUP timeline?

An AUP audit is very fluid in nature. It could last several weeks. There may be areas that do not need as much time as anticipated but then other areas may require more time. Once the board chooses a course of action, they will want to act expeditiously.

Sources:

investopedia.com

howmuchisit.org

searchcompliance.techtarget.com

There will be a meeting of the Library Board Personnel Committee on Thursday, October 21st at 4:00 pm in the Cultural Center. The agenda can be found here. All are welcome to attend.

There will be a meeting of the Library Board Policy Committee on Friday, October 22nd at 9:30 am in the Cultural Center. The agenda can be found here. All are welcome to attend. 

Join us for a monthly movie and light lunch.

Check out our current newsletter!

September/October 21 Newsletter by Seneca Public Library