A fraud examiner Tuesday told Durango City Council the average fraud is discovered within 24 months and the average amount stolen from government bodies is $75,000.
By comparison, former finance director Julie Brown is suspected of stealing more than $700,000 over the course of 17 years from the city of Durango.
The scale of the alleged theft and the amount of time it lasted has city councilors questioning what more can be done to better protect taxpayer dollars.
Councilors heard Tuesday from Doug Cash, a fraud examiner with Eide Bailly LLP, during a City Council study session. He walked councilors through the options for implementing better controls, including conducting an internal forensic audit. But he cautioned, nothing is foolproof.
“If someone really wants to steal from you, they’re going to steal from you,” Cash said. “What you’re hoping your internal controls do is identify that quickly so it doesn’t go on for very long.”
A forensic audit could cost up to $250,000. But it would provide assurance that city staff members, already working to repair any financial reporting weakness, have not missed anything.
Durango began reviewing its practices in response to the allegations against Brown, who is charged with four felonies related to an investigation by the Colorado Bureau of Investigation. City staff has already taken action to update financial control systems. The Colorado Department of Local Affairs has reviewed Durango’s procedures, and the city changed auditing firms.
“While I hope this is an isolated incident, hope is not a strategy,” said Councilor Barbara Noseworthy. “Are there ways we can look at other departments? No allegations here, I just want to make certain we’ve done our due diligence.”
During a forensic audit, investigators examine what document manipulation took place. They look for abnormal numbers and repetitive issues, like repeated issues with billing. They examine irregularities in documents, for example spotting when PDFs are used instead of original documents (PDF files are easier to manipulate). Even an irregular font on a check can tip off an investigator.
“There are all different types of red flags,” Cash said.
The audit is flexible. The city can extend it to the entire city government over as many years as possible. If the city chooses to do a forensic audit, it could wrap up by mid-November if it starts mid-August.
Councilors also considered another option, an internal control examination. The ICE process doesn’t examine the city as deeply as a forensic audit, but it can easily look at multiple departments. It has a fixed timeline and price, an estimated $30,000, and focuses on current policies and procedures, particularly to evaluate checks and balances within those procedures.
“This is quite traumatic for us, for our community,” said Councilor Melissa Youssef during the discussion. She asked how often a forensic audit should be done in the future.
Once, Cash said. “They are something I hope you never have to go through again.”
smullane@durangoherald.com
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