Supervisors OK audit of County’s most-recent financials without EDA info

“I contend that you folks cannot approve the 2017-2018 audit as it’s currently written,” said Jim Bond during the public comment period at the start of the BOS October 15 meeting. Photo and video by Mike McCool, Royal Examiner.

The Warren County Board of Supervisors (BOS) on Tuesday unanimously approved the County’s fiscal year (FY) 2017-2018 financial audit, despite a public plea to hold off on action until an audit of the Front Royal-Warren County Economic Development Authority’s (EDA) financials also could be included.

But information on the EDA’s financials — which currently are at the center of a major fraud and embezzlement scandal — may not be available until the end of the year.

The audit is of the Comprehensive Annual Financial Report for the County of Warren for the Fiscal Year ended June 30, 2018, which was prepared by Warren County Administrator Doug Stanley and the County’s Finance Department. The audit of the report was conducted by Robinson, Farmer, Cox Associates, which is the County’s auditing firm.

Stanley, the entire BOS, and several other local individuals were indicted on September 20 by the Warren County Special Grand Jury that’s investigating potential criminality related to the EDA financial fraud investigation and civil litigation.

One Front Royal, Va., resident took issue with that fact.

“I contend that you folks cannot approve the 2017-2018 audit as it’s currently written,” said Jim Bond during the public comment period at the start of the BOS October 15 meeting. “I think that there is a well-known material witness in the internal controls of Warren County and that needs to be recognized in the audit report. In the unlikely event that you get a clean audit report on the EDA between now and the time you approve this audit, you might have an argument. Otherwise you can’t approve it.”

Stanley and members of the BOS attempted to provide some clarity.

“As you know, we had been holding off [audit approval] pending a receipt of the EDA’s audit for the same time period,” Stanley told BOS members during the unfinished business portion of their meeting. “The EDA audit is a component unit of our audit. I reject the assertion that the county’s controls aren’t in place. The county’s processes and controls that are under the finance director and the treasurer are in place.”

For instance, as preparers of the County’s annual financial report, the Finance Department has responsibility for establishing and maintaining an internal control structure to ensure that the County’s assets are protected, according to a Dec. 21 2018 letter written by Stanley and County Finance Director Andre Fletcher that’s included in the report.

County Finance Director Andre Fletcher explains that County has safeguards in place.

“In developing and evaluating the County’s accounting system, consideration is given to the adequacy of internal accounting controls, which are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statement and maintaining accountability for assets,” Stanley and Fletcher wrote.

Additionally, the County also has budgetary controls in place to ensure compliance with provisions in the annual appropriated budget that’s approved by the BOS, and “adequate controls” also exist to guarantee and document the County’s compliance with federal and state laws and regulations, according to their letter.

“Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the County,” Stanley and Fletcher wrote. “We believe the data, as presented, is accurate in all material respects.”

While BOS members received a copy of the audit just a few days prior to their Tuesday night meeting, Stanley said, “Hopefully, you’ve had time to digest it.”

“At the end of the day, the audit is what it is,” Stanley said. “It’s a statement of our finances as of June 30, 2018.”

Seemingly to support Stanley’s statement, BOS Chairman Daniel Murray read a portion of the audit known as a “disclaimer of opinion,” in which the auditing firm basically said that since it couldn’t obtain sufficient appropriate audit evidence from other auditors on the EDA, it didn’t provide an opinion on the authority’s financial statements in its audit of the County’s financials.

“So, I hope that clears up some concerns,” Murray told the audience.

Supervisor Tom Sayre, vice chairman of the BOS, pointed out that the independent auditors also reported the County’s financials to be “neutral, consistent and clear.” And he asked Stanley to explain in laymen’s terms how the EDA budget held up the audit of the County’s FY 2017-18 financials.

Stanley said the EDA isn’t technically part of the County’s budget operations, per se, “it is a separate discrete unit,” although the County does fund a portion of its operations.

Supervisor Tony Carter asked Stanley what happens when the EDA auditors come back with their report, and Stanley said that that information would be included in next year’s audit.

“We wouldn’t come back and amend this one,” said Stanley.

Sayre motioned to accept the audit and Supervisor Linda Glavis seconded it before the full board approved the audit as presented.

Watch the discussion on this exclusive Royal Examiner video: