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Directors approve forensic audit

By Josh Davis, Associate Editor

(March 1, 2018) Following allegations of theft and funds gone missing throughout Ocean Pines Association operations, the board of directors will release a request for proposals for a forensic audit this month and likely vote on bids during the March 29 board meeting.

The board on Sunday voted 6-1 to approve a motion by Director Slobodan Trendic to issue a request for proposals for a forensic audit with responses due by March 16.

To pay for the audit, the directors unanimously agreed to suspend a budgeted charge to fund road depreciation of $26.50 per homeowner and instead use the $225,000 it would generate for the audit.

The audit is expect to begin by April 16 and its first stage would focus on food and beverage operations.

Director Tom Herrick, who voted against the motion, agreed an audit needed to be done, but said it should not be limited to just food and beverage.

“The last 14 months, we’ve gone through some alarming revelations with what’s happening with our accounting department — it’s not just food and beverage,” Herrick said.

He said Ocean Pines Police investigated accounting procedures and cash management at the yacht club and beach club about 14 months ago, and alarming information about public works invoicing was brought up in May.

“John Viola [the former finance director] and the acting GM [Brett Hill] tried to bring in professional accounting services to try to right the ship – we never got there,” Herrick said. “We find out in the summer 27 … receipts to a bank possibly were improper [and] that cash was not there from the administrative building.

“This proposed motion is really just putting a Band-Aid on a severed leg,” Herrick continued. “We’ve had major issues here the whole year [in] all departments. It’s not just food and beverage, and I think we owe it to the membership and need to send a message … that we’re addressing concerns.”

Association President Doug Parks said the language of the motion initially focused on food and beverage, but did not limit it to just that department.

“I’m in absolutely support of doing whatever it takes,” Parks said. “There’s been suggestions out in public that this has been going on for many, many years. Whether that’s true or not I don’t know, but if there’s a perception out there … I think it warrants the spend.”

Parks said the cost could be significant, at one point throwing our figures ranging from $75,000 to $300,000.

“Addressing it now hopefully would set the focus for the future, so that future boards … wouldn’t have to worry about it, because we as a board did our due diligence to bring this forward, to get it done, to stop the speculation.

“This could cost a lot of money, but we think that there’s benefit there, not only now, but for the future,” Parks continued.

Trendic echoed the audit would not stop at one department and compared it to a treasure hunt.

“You start with a focused area and then, as you discover things, you follow those leads,” he said. “To embark on doing every department in the association, I think we need a reason.”

Director Ted Moroney said for the audit to have value it needed to include actionable items. He also underscored the cost would likely be well over six figures.

“If we have the protections in place for ourselves now, we’re doing this primarily to make sure that we don’t have long-term systematic, systemic issues,” he said. “You may spend $400,000 or $500,000 to do it – and I’m not opposed to that – but I want everybody to know that’s sitting in the audience that nobody else is paying for that [but] you.”

Association Vice President Cheryl Jacobs took issue with the notion that, for months, Trendic was the only one calling for a forensic audit. She said the so-called “deep dive” audit ordered last year was a first step to that end.

Jacobs went onto say certain people were creating hysteria “with outrageous pronunciations of what’s really going on behind the scenes,” adding those claims were “making me so angry and it needs to be addressed.

“I’m not saying that there weren’t problems – we know that there were problems, because that’s what our deep dive uncovered,” she said. “We have an ongoing investigation with [the county bureau of investigations], so don’t say that we’re sitting on our hands, we’re not doing anything, we’re covering up – we’re not doing that. That’s the whole point of what we have done and what we will now do.

“It’s going to cost us to make the community feel more comfortable, based on the hysteria created by one person, and I am very angry about that,” Jacobs continued. “We will do the forensic audit. It’s a good thing to do. It will make everybody feel comfortable that we’ve gone as far as we needed to go.”

Director Pat Supik cautioned an audit would not reveal millions in fraud or cover estimated losses for the current fiscal year.

“I’ve seen numbers flying around in the papers or other areas, that I think people have the impression the $1.8 million lost this year somehow could be associated with fraud. I do not want the community to think we’re going to find $1 million in fraud,” she said, adding the extreme losses this year were because of “money going out the door legitimately.

“If we do this, we may find $50,000 in fraud and may spend … a couple hundred thousand dollars on a significant forensic audit,” Supik added. “I do think we need to do it for the community. [I’m] totally supportive of the motion – whatever we have to do to get it moving forward.”