Saturday, May 15, 2010

Rotation of a local government agency's auditor

Following is a letter I sent to my local Board of Fire Commissioners after learning that it has had the same firm auditing its books for at least seventeen years. My thought is that readers might like to write a similar letter to other municipal government bodies, school boards, fire districts, etc. that have "permanent" auditors.

The Comptroller's report, referenced in and enclosed with my letter below, is on-line here.

John Paff
Somerset, New Jersey

Dear Chairman Hajdu-Nemeth and Members of the Board:

On September 25, 2009, I participated in the New Jersey Foundation for Open Government’s Open Government Symposium in Trenton. The Symposium's keynote speaker was New Jersey Comptroller Matthew Boxer.

During his presentation, Mr. Boxer spoke about how some public bodies keep using the same firms to audit their books year after year. He said that this is not a good practice because "permanent" auditors become complacent when they realize that nobody—other than themselves—are going to review their work the following year. He also said that there's a tendency for "permanent" auditors to not ask too many hard questions out of fear of not being hired for the following year.

When I visited your office yesterday to pick up a CD that I had requested, I asked Administrative Aide Debi Nelson how many years that the Hodulik & Morrison accounting firm has been doing the Fire District's audit. Her response was "ever since I began working here--17 years ago."

Enclosed is a copy of Mr. Boxer's August 2008 report entitled "Selection and Use of Audit Firms by New Jersey Government Units." As you can see, the New Jersey Comptroller's Office has recommended that "[i]n no event should a government unit use the same audit form for more than ten consecutive years."

Mr. Boxer's office also recommends that government units "should procure their auditor using a competitive selection process at a minimum of every five years." My understanding is that the District presently engages in a non-competitive process and simply passes a resolution, year after year, appointing the Hodulik & Morrison firm.

I believe that the Board of Fire Commissioners ought to pass a resolution that would formally adopt the New Jersey Comptroller's recommendations starting next year. Would the Board list this proposal as a discussion item on its May 24, 2010 meeting agenda?

Thank you for your attention to this matter.

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