The action plan created by me and senior management to quickly begin anindependent investigation headed by a former federal prosecutor and a respectednational law firm was based on the
best advice available and is the “industrystandard” for such events. Equally important, senior management’s actionscalmed the financial markets and resulted in the Finance Authority’s credit
ratings not being lowered immediately.
After senior management cooperatively developed the original plan to conduct anindependent investigation headed by a former federal prosecutor, the Board wasprovided a quick overview of the action plan and no objections were initiallyexpressed.
The independent investigation, utilizing the services of the national law firm of
Steptoe and Johnson and KPMG’s
nationally recognized forensic team, was inplace and ready to start work on July 17.
From various staff discussions, I was informed in mid-December 2011 that theFiscal
Year 2011 audit had been filed with the State Auditor’s Office and in mid
March I was informed the State Auditor’
s Office had approved the Fiscal Year2011 audit without any adverse findings. In good faith, I reported thisinformation to the Board on March 22, 2012. At that time, Mr. Campbell, the
Finance Authority’s Controller,
in response to my question, verified to the Boardat the March 22 meeting that the State Auditor
’s Office had approved our Fiscal
Year 2011 audit prior to the release of the Preliminary Official Statement (POS)for the March 2012 bond sale.
I was never notified by the external auditor (Clifton Gunderson, LLC) that theFiscal Year 2011 was not completed on time. In fact, it was not until seniormanagement inquired on July 10, 2012 with Clifton Gunderson that the auditfirm acknowledged the Fiscal Year 2011 audit was never submitted to the State
Auditor’s Office. No explanation was ever given as to why the audit firm failed
to tell senior management prior to that time no audit was filed. It should also benoted that during the July 10, 2012 inquiry the Clifton Gunderson staff stated that
“they may have fumbled the ball” regarding the audit. In addition, under the audit
rules of the State Auditor, it is the responsibility of the external auditor toschedule an exit conference.
During the week of June 25, 2012, Finance Authority staff conducted aconference call with the auditors from Clifton Gunderson regarding the FiscalYear 2012 audit, and at no time during this conversation did Clifton Gundersonmention that the Fiscal Year 2011 audit was not completed.
The Audit Committee was misled by Mr. Campbell on April 23, 2012 and the
full Board accepted on April 27, 2012 the Audit Committee’s report on the Fiscal
Year 2011 audit based on the misleading information provided by Mr. Campbell.
I was not informed until around May 23, 2012 by the State Auditor’s Office that
there may be an issue with the Fiscal Year 2011 audit and it was at that time Mr.Campbell informed senior management
that the State Auditor’s Office was
Under the organizational structure of the Finance Authority, the accounting andfinancial management functions were the responsibility of the Chief OperatingOfficer and the Controller. Further, this organizational structure or system was