Killeen’s residents deserve a full-scale investigation of the city’s finances. Period.
That means a forensic audit — something residents started clamoring for last summer as the city struggled to deal with a projected multimillion-dollar shortfall.
Taxpayers packed two city budget hearings, demanding to know why expenditures had exceeded revenues for three consecutive years, and why the city had suddenly found itself in an $8 million budget hole that forced council members to consider severe cuts to programs and services.
At the time, the council did the responsible thing — agreeing to a thorough, in-depth analysis of Killeen’s financial transactions, policies and procedures from 2011 to 2016. The proposed audit would uncover any potential fraud, misuse or misappropriation of funds.
But six months later, council members are on the verge of signing off on a more limited investigation, going all the way back to 2002, that has strayed far from the initial concept.
The new plan does have some pluses — seven targeted “areas of concern” ranging from interfund transfers and pay increases to capital outlays and use of bond money. All these areas are well worth investigating. The plan also opens the door to looking into potential criminal actions and provides for a future expansion of its scope, as warranted.
But even if this style of audit provides some valuable answers, it is bound to miss some problem areas as well. And the city simply can’t afford to waste the opportunity to create a completely clean slate that a full audit would bring.
Several factors have played into the council’s decision to head down a different path.
First, several members bought into a pair of fallacies about a forensic audit. One was that there must be suspicion of criminal actions to warrant a forensic audit. The other was that the cost of such an audit would be prohibitive.
Neither assertion is true.
While a forensic audit is often used to uncover illegal financial activities, it is also routinely used as a definitive tool for tracking the flow of money — something keenly needed in Killeen’s case.
As far as cost, a tightly focused forensic audit covering a limited time frame would not cost significantly more than the price of the hybrid plan currently on the table.
But even the modest $400,000 price tag on the latest audit proposal — just a small fraction of last year’s shortfall — has some council members balking, leading to discussion of having City Auditor Matthew Grady conduct the financial investigation.
This would be a huge mistake.
While Grady may have the qualifications to look into Killeen’s finances, he lacks the objectivity to do so. As an employee of the city, he would be charged with looking into areas he oversees and would report to officials who could be affected by the audit’s findings. Such a lack of independence and autonomy would cast serious doubt on the integrity of the investigation.
While the council continues to pursue options that fall short of the original audit’s scope, its members are not entirely to blame.
The audit initiative first went off course when former internal auditor Amanda Wallace, under the direction of then-interim City Manager Ann Farris, drew up a vaguely worded request for qualifications and sent it out to prospective bidders before the full council had a chance to review the text.
Consequently, the firms that responded failed to offer concrete proposals for a forensic audit. And of the three firms invited to Killeen to make presentations, the one that was selected to conduct an investigation was the one firm that stated up front it didn’t want to perform a forensic audit.
Instead, representatives of McConnell & Jones, a Houston-based firm — and the least experienced of the three at conducting a forensic audit — used a flashy presentation to sell the council on a “management audit” that would look at selected departments and review their procedures over a five-year span dating back to 2011.
Several council members reasoned that the city didn’t need a full forensic audit, because no one suspected any criminal activity. But just because none is suspected doesn’t mean none occurred — and the best way to definitively rule out illegal actions is to conduct a full-fledged forensic audit.
No doubt, there are some in the community who believe an audit would be a waste of time. Others don’t want to see an investigation because they potentially could be affected by a forensic audit’s findings — especially those who served in previous city administrations or those who have significant business ties to the city.
Others may believe an audit is no longer a priority because the city seems to be on sound financial footing again.
But just the opposite is true. Uncovering the factors that ultimately led to Killeen’s budget crisis make a full-fledged audit much more urgent.
In the past few months, council members worked with former interim City Manager Dennis Baldwin to identify $5 million in savings, through deferred spending and adjusted budget projections. Baldwin even went so far as to predict the fiscal year 2018 budget would be a few million dollars in the black — this less than a year after the city was scrambling to patch an $8 million budget hole. Yet no one seems to be able to explain the $13 million swing with any specificity.
These wide disparities in budget projections, along with the frequent moving of money among various funds in the municipal budget, are more justification for a full forensic audit — as a means to identifying flawed or inappropriate financial practices and laying the groundwork for sound, verifiable procedures moving forward.
For the time being, the council seems to have adopted the philosophy that half a loaf is better than none — that moving forward with any kind of audit should be viewed as the right decision.
Indeed, the council has kicked the can down the road for more than six months on this issue, and it’s imperative an audit be conducted sooner, rather than later. With a municipal election coming up in early May, some council members expressed concern the new council may not follow through on an audit initiative, so the time to act is now.
That’s a reasonable concern, but the overall logic is flawed.
Yes, getting the ball rolling is imperative. But rolling it toward the wrong target has the potential to be counterproductive.
This is perhaps the council’s best chance to get it right.
Council members still have time to reconsider the scope of the audit before signing off on a plan. While the seven areas of concern added to the hybrid proposal have real value, the only way for the city to achieve a true picture of its financial workings is to commit to a full-scale audit.
Residents, if you still demand a full-scale forensic audit, now is the time to speak up. Call your council members; call their challengers running in the upcoming election.
Let them know that, while it’s good to have some of the big questions answered, it’s not good enough. The city simply can’t run the risk of leaving some important stones unturned.
A highly targeted audit that returns to its original five-year scope will be the only way Killeen can get out from under the financial cloud that has hung over the city for far too long.
It’s also the only way council members can fully restore the residents’ trust.
And that’s something that goes far beyond a price tag.