Monday, January 10, 2005

Kiryas Joel auditors accused of impropriety by the state Comptroller's Office

4 Comments:

At 3:52 PM, Blogger jewishwhistleblower said...

http://www.thejournalnews.com/newsroom/010705/b0107sotownaudit.html

CPA firm accused of impropriety
By RANDI WEINER
THE JOURNAL NEWS
(Original publication: January 7, 2005)

A Long Island CPA firm that conducted audits of several local school districts yesterday was accused of gross incompetence by the state Comptroller's Office.

The Comptroller's Office said Miller, Lilly & Pearce of East Setauket, which has audited the South Orangetown and Chappaqua public school districts, performed work so questionable that the state referred its audit findings to the state Board for Public Accountancy for ethics violations and the Nassau County District Attorney's Office for a criminal investigation. The firm also audited Kiryas Joel, a district for special-needs children in an Orange County Hasidic Jewish village.

"There are 55 school districts that have used this firm. Obviously, we would advise those school districts to take a very careful look at whether this firm was doing their job for them," said David Neustadt, a spokesman for the Comptroller's Office. Calls made to the CPA firm yesterday for comment were not returned.

Neustadt said the state was asked to look into the finances of the Roslyn School District on Long Island several months ago after district personnel were accused of millions of dollars worth of fraud and theft. Among their first actions was to look at the district's independent auditing firm. They found ethical, professional and possibly criminal malfeasance, according to a report from the comptroller.

"The work of Miller, Lilly & Pearce was so appallingly inadequate that it would shock anyone associated with the auditing profession and certainly the taxpayers who depend on the firm to safeguard their money," Comptroller Alan G. Hevesi said in a press release. School districts are required to have their books audited every year and send a report to the state Education Department.

Chappaqua is completing a three-year agreement with Miller, Lilly & Pearce. In December, district officials informed the firm that they would send requests for proposals from other firms.

South Orangetown Schools Superintendent Joseph Zambito said the district contracted with Miller, Lilly & Pearce for the 2003-04 school audit, presented in November, and paid the firm $28,800.

"I think we need a little time and some advice," Zambito said yesterday, when told about the accusations. "We might not have been hurt at all. But I have to review this."

The New York State Council of School Superintendents, the School Boards Association and the Association of School Business Officials are planning a workshop to advise the affected districts.

 
At 3:53 PM, Blogger jewishwhistleblower said...

http://www.osc.state.ny.us/press/releases/jan05/010605.htm

CONTACT: Press Office
(518) 474-4015 FOR RELEASE:
Immediately
January 6, 2005

Audit Finds Extensive Impropriety By Firm That Audited Roslyn School District & 54 Other School Districts
Findings Referred to the Nassau County District Attorney and State Board for Public Accountancy

Miller, Lilly & Pearce, the CPA firm that audited the Roslyn School District, performed work so flawed and so far below professional standards that it failed to identify millions of dollars apparently stolen by District personnel even after the firm was aware that fraud had occurred, according to an audit issued today by New York State Comptroller Alan G. Hevesi.

The Comptroller’s audit examined the audit procurement procedures for the Roslyn School District and the District’s contracts with the CPA firm. State auditors found:

The CPA firm did not meet nine mandatory professional standards for conducting audits. Non-compliance with any one standard is grounds for referral to the State Board for Public Accountancy. (See “Violations of Mandatory Professional Standards for Conducting Audits” attachment.)
When a whistleblower first exposed the fraud in 2002, the CPA firm investigated and found only $223,136 in inappropriate payments. Using the same methodology, State auditors found $1.6 million in questionable payments.
In its testing of District spending, the CPA firm did not look at cancelled checks, which is a standard practice for audits. Even a cursory review would have revealed instances where the actual payee on the check was different than the payee listed in the firm’s workpapers.
The CPA firm’s workpapers, supposedly created in 2002 and 2003, contained payment information that was put in the District’s records by District officials in 2004 to cover up fraud.
The CPA partners sold financial and other software to the District — transactions which create a conflict of interest and violate professional standards requiring auditors to be independent.
The CPA firm performs audits for 55 school districts on Long Island and in the lower Hudson Valley. Approximately 250 school districts statewide use the accounting software developed and sold by the firm’s partners. The audit findings have been referred to the State Board for Public Accountancy for further investigation and disciplinary action and to the Nassau County District Attorney’s Office.

“The work of Miller, Lilly & Pearce was so appallingly inadequate that it would shock anyone associated with the auditing profession and certainly the taxpayers who depend on the firm to safeguard their money. Our auditors found fraud so pervasive that it would have taken significant effort not to uncover it. Even a rudimentary review of disbursements and cancelled checks would have revealed many instances of wrongdoing,” Hevesi said. “I am extremely troubled by our findings, and I urge the State Board for Public Accountancy and the Nassau County District Attorney’s Office to pursue this matter aggressively.

“I have referred the audit findings to the other school districts now audited by Miller, Lilly & Pearce, as well as all school districts statewide,” Hevesi said. “Additionally, the 250 school districts that use the partners’ accounting software program must make sure that the software controls have been activated to prevent fraud.”

District officials have already been charged with defrauding the District of more than $2.3 million. Former Assistant Superintendent for Business and Finance Pamela Gluckin and former Superintendent Frank Tassone have been both been charged with first-degree grand larceny for allegedly embezzling more than $1 million each from the District, and the former Accounting Clerk Debra Rigano was charged with second-degree larceny for allegedly stealing more than $300,000.

State auditors discovered fundamental problems with every step of the audit process, including the CPA firm’s independence, its audit planning and efforts to test financial records, as well as other questionable behavior. State auditors found:

Questionable Behavior

In early 2004, someone changed vendor names in the District’s computerized system for 2002-03 payments in an apparent attempt to cover up fraudulent activity. However, the firm’s workpapers supposedly prepared in 2002 and 2003 contain these fake vendor names, which raises questions about when the workpapers were actually prepared. State auditors also questioned the adequacy of the firm’s audit work which included supposedly reviewing what are actually fraudulent payments, but were never identified as such.
When Miller, Lilly & Pearce was informed by a whistleblower of questionable disbursements, all three partners and staff from the firm reviewed the District’s records in October 2002 and found a total of $223,136 in inappropriate payments. District officials later accepted the firm’s determination and had Gluckin make restitution based on that amount. When State auditors tested the same records, using the CPA firm’s criteria, they found $1.6 million in questionable payments.
Auditor Independence

One of the fundamental principles of auditing is that auditors are free of any conflict of interest. Miller, Lilly & Pearce does not meet this standard. Two of the three partners of the firm had 55 percent ownership in the company that sold the District its financial management software, “Finance Manager.” The partners’ role as a vendor violates the General Standard of Independence under Generally Accepted Government Auditing Standards (GAGAS §3.11).
In addition, two of the three partners received a commission from the sale of a second software package to the District, called “Student Manager.” Receiving commissions is prohibited by the American Institute of Certified Public Accountants’ Rules on Commissions and Referral Fees (ET §503.01).
Planning the Audit

The CPA firm’s planning efforts were substantially below professional standards and did not address significant risks which would have led it to detect illegal acts. These risks include the lack of oversight by the Board of Education and others, significant or unusual transactions especially close to year-end, and a lack of appropriate systems for approving or authorizing transactions.
When planning the 2002-03 audit, the firm did not take any steps to increase testing even though it had first-hand knowledge that fraud had occurred the previous year. In fact, in the audit form that contained the standardized conclusion: “Our overall procedures indicate no indications of possible illegal actions and there is no need to follow-up in accordance with professional standards,” the CPA firm checked “N/A” (not applicable). Under the circumstances, such a conclusion is absurd.
The CPA firm failed to test the District’s computerized accounting system, which the firm sold to the District, to ensure that the controls built into the software were operating as intended. Such controls are needed to prevent inappropriate transactions. In fact, the controls had not even been activated. As a result, many employees had access to and were able to manipulate the District’s financial system.
Reviewing the Evidence

In its testing of disbursements, the CPA firm did not look at cancelled checks. Even a cursory review would have revealed instances where the actual payee on the check was different than the payee in the firm’s workpapers. For example, auditors reviewed 16 of 240 disbursements that the firm purportedly tested in 2002-03. Five of these 16 payments were paid to vendors different than those listed in the firm’s workpapers — a fact instantly identified if the firm had reviewed the cancelled checks.
The District routinely spent much more than was appropriated for specific budget items and executed an unusually large number of budget changes, primarily due to the alleged theft occurring in the District. The firm never looked at these transactions, which were obvious red flags.
While the firm’s audit program called for a review of expenditures over $25,000, the audit manager said that none of these expenditures were actually reviewed. Rather the firm “eye-balled” bills for reasonableness.
The CPA’s workpapers identified instances of weak internal controls over assets that warranted further investigation, including lack of supporting documentation for purchases, blank checks kept in an unlocked cabinet, access by central office staff to approximately 20 gas credit cards, and instances where the superintendent loaned out his corporate credit card. There is no evidence that the firm ever investigated these weaknesses that it knew about.
There was a lack of documentation and evidence to support the CPA firm’s audit conclusions. In the 2001-02 audit, State auditors discovered 128 instances where the CPA firm did not have adequate information to support conclusions, and another 77 similar deficiencies in the 2002-03 audit.
“This is a total failure of one of the key safeguards to protect public monies,” Hevesi said. “The system of districts’ hiring independent auditors must be strengthened and augmented by review from the Office of the State Comptroller in order to ensure that adequate financial controls are in place. That’s why I have asked the Governor and Legislature for $5.4 million to hire 89 auditors to look at every school district around the State on a routine basis.”

Findings of the audit were discussed with the new Interim Roslyn Superintendent David Helme, who indicated that the District will take the necessary steps to address the State auditors’ recommendations.

While State auditors found that the District’s written policies and procedures to procure audit services were adequate, the District did not actually follow these policies by seeking competitive offers from other firms.

State auditors recommended that the District and the Board of Education:

Improve the quality of its acquired audit services by implementing a competitive process; change audit firms or personnel, where appropriate, when contracts expire or at least every five years; better define the scope of the service in the engagement letter and consider expanding the audit as necessary.
Work with its recently established Citizens’ Advisory Audit Committee to ensure that audit work and findings receive adequate oversight.
Clearly define the responsibilities of the Audit Committee, including providing timely oversight of external and internal audit work, involvement in selecting external and internal auditors, reviewing the District’s financial statements, and monitoring corrective action plans.
Require the CPA firm to report directly to the Board and Audit Committee, and the Board to prepare a formal response and corrective action plan.
A separate audit of the finances of the Roslyn School District will be completed soon.

 
At 4:01 PM, Blogger jewishwhistleblower said...

1)
http://www.nytimes.com/2005/01/07/nyregion/07roslyn.html?8br

Audit Faults Accountant in Roslyn School Scandal
By BRUCE LAMBERT
Published: January 7, 2005

GARDEN CITY, N.Y., Jan. 6 - A new state audit concludes that the accounting firm chosen by the Roslyn school district as its fiscal watchdog was hired without competitive bidding, had a blatant conflict of interest in the sale of financial software to the district, grossly neglected basic duties like reviewing canceled checks and failed to catch rampant multimillion-dollar corruption - even after a whistleblower's tip on thefts of $223,000.

The withering critique could have implications far beyond Roslyn. The accounting firm, Miller, Lilly & Pearce of East Setauket, has also been the independent auditor for 54 other school systems in New York State, including more than a third of Long Island's districts and three upstate, and for several local governments and nonprofit groups.

State Comptroller Alan G. Hevesi, who released his staff's report at a news conference here Thursday, said he had no evidence of major problems in other schools but was alerting all 701 districts across the state.

So far in Roslyn's growing scandal, three people have been arrested and charged with defrauding the district of more than $2.3 million, though investigators predict the ultimate amount could be several times that. Those arrested are the fired school superintendent, Frank Tassone; the former business manager, Pamela Gluckin; and her niece, a former accounting clerk, Debra Rigano.

The accountants hired to detect and prevent fraud utterly failed, Comptroller Hevesi said.

"The work of Miller, Lilly & Pearce was so appallingly inadequate that it would shock anyone associated with the auditing profession and certainly the taxpayers who depend on the firm to safeguard their money," he said. "This is just an awful performance by this auditor. They are unprofessional.

"The fraud was so pervasive that it would have taken significant effort not to uncover it. Even a rudimentary review of disbursements and canceled checks would have revealed many instances of wrongdoing."

Mr. Hevesi declined to say whether he thought the accountants had committed any crimes. But he said he was turning over the findings to the Nassau district attorney to investigate.

The comptroller also referred the case to a branch of the State Education Department that punishes public accountants for misconduct. An agency spokesman said it had already been investigating the firm in cooperation with Nassau prosecutors.

In addition, Mr. Hevesi notified the New York State Society for Certified Public Accountants for a disciplinary review.

In Roslyn, which has new school leadership in the aftermath of the scandal, officials welcomed the report and said it bolstered their effort to sue the accountants.

Mr. Hevesi said the state's review found that two of the firm's partners, Andrew Miller and William Lilly, owned a controlling share of another company, Finance Manager, that sold financial software to Roslyn and 251 other districts statewide. That software seemed to be adequate, though its internal controls on who was allowed to change fiscal entries were not activated in Roslyn, and the accountants failed to check that, he said.

"They failed to test their own computerized accounting," Mr. Hevesi said.

In another apparent conflict, the same partners also collected commissions as brokers on the sales of additional school management software to Roslyn from yet another company, Mr. Hevesi said.

Four calls seeking comment from the firm and its partners were not returned. In the past, Mr. Miller has said crooked school officials misled the accountants.

Mr. Hevesi said he did not yet have a complete list of the districts that bought the software but added, "I presume there's a substantial overlap" with those for whom the firm was auditor.

The report cited many failures by Miller, Lilly & Pearce, including violating nine of 22 basic auditing principles, Mr. Hevesi said.

The firm never examined canceled checks to compare actual payees to those listed, the report said. In a sample of 16 such payments the firm had supposedly reviewed, the state found five recipients' names were changed.

In one case, a payment listed as going to a school vendor actually went to pay an American Express bill. No further details were provided.

The comptroller found that the firm never checked frequent budget changes, overspending in various accounts and large expenditures. The firm also ignored other red flags like blank checks kept in an unlocked cabinet and Mr. Tassone's lending his school credit card to others.

A review of 205 transactions the firm claimed to have checked found no supporting documentation to confirm the review the firm claimed to have done. The firm's files for 2002 and 2003 were also found to include fictitious data that was actually entered into the records in 2004 to cover up the fraud, the report said.

"Very suspicious, questionable behavior," Mr. Hevesi said. "Is there a good explanation? I can't think of any."

Worst of all, Mr. Hevesi said, was that after an informant told the firm about spending abuses at the district, it found only $223,000 of unauthorized expenditures by Ms. Gluckin, the former business manager, who then repaid the money.

But the firm looked no further, the report said. "They never pursued it," Mr. Hevesi said.

Using the firm's purported accounting procedure, state auditors said they found $1.6 million more of highly questionable items, Mr. Hevesi said.

Since the Roslyn scandal erupted last year, other school officials have scurried to review their practices and many have been attending seminars on safeguarding their financial systems.

"The Roslyn situation cast a pall over all school districts," said Lorraine Deller, executive director of the Nassau-Suffolk School Boards Association. "We are all dealing with the fallout."

After the scandal broke, Miller, Lilly & Pearce worked with the district attorney for a time and identified some $7.8 million in dubious expenses. Frustrated at the belated discoveries, the school board replaced the firm.

2)
http://www.wnbc.com/education/4055392/detail.html
Comptroller: Accounting Firm Failed To Catch Theft In Roslyn Schools

POSTED: 1:05 pm EST January 6, 2005
UPDATED: 1:58 pm EST January 6, 2005

NEW YORK -- The accounting firm that audited the Roslyn School District did "appallingly inadequate" work that didn't catch the embezzlement of at least $2.3 million from the district, State Comptroller Alan Hevesi charged Thursday.

The firm, Miller, Lilly & Pearce, LLP, audited the affluent Long Island district from the 1992-93 school year until May 2004. The district's superintendent, Frank Tassone, was charged in July with stealing more than $1 million from the schools.

In a report released Thursday, Hevesi charged that the firm did not meet nine Government Auditing Standards in its yearly audits for the district.

"The work of Miller, Lilly & Pearce was so appallingly inadequate that it would shock anyone associated with the auditing profession and certainly the taxpayers who depend on the firm to safeguard their money," Hevesi said in a statement.

"The fraud was so pervasive that it would have taken a significant effort not to uncover it," he added in a telephone interview.

Hevesi's findings were referred to the State Board for Public Accountancy and the Nassau County District Attorney's Office, which said the information contained in the report would be incorporated into an ongoing investigation into the Roslyn district.

A message left at the offices of Miller, Lilly & Pearce on Thursday was not immediately returned.

Hevesi said that his office would release a complete audit of the Roslyn School District's finances in about a month "that will review every transaction for several years and will determine the extent of the fraud and mismanagement."

The report released Thursday, he said, looked only at Lilly & Pearce, which he said was the auditor for 55 Long Island and upstate school districts, including Roslyn.

The comptroller's report said the firm did not inspect Roslyn's canceled checks or investigate in detail expenses of more than $25,000 as part of its audits.

It also charged that the firm had a possible conflict of interest because two partners had a stake in Finance Manager, a company that sold the Roslyn district a financial software package.

The partners said they would put their stake in Finance Manager in a blind trust by May 22, 2004, to eliminate a conflict of interest, according to the report. But the report said the agreements weren't executed by Oct. 28, 2004, and that a blind trust might not remedy the conflict of interest even if they had.

The report also said Finance Manager received a commission or referral fee for the district's use of another software program, the SchoolMAX Student Information System. Hevesi said the software was sold to 252 school districts throughout the state and eight other entities for four other towns.

Tassone and two other employees in the district have been indicted in the thefts.

Pamela Gluckin, the former assistant superintendent for business, was charged with stealing more than $1 million; her niece, Debra Rigano, was charged with stealing more than $307,000.

Hevesi said his office currently was auditing 21 Long Island school districts in response to the scandals in Roslyn and also the William Floyd school system, where the former treasurer was charged in June with allegedly stealing more than $750,000.

3)
http://www.newsday.com/news/local/longisland/ny-lirosl0107,0,1840951.story?coll=ny-li-span-headlines

ROSLYN DISTRICT
Report: Roslyn schools auditor ignored, missed fraud evidence
BY THERESA VARGAS, KARLA SCHUSTER AND EDEN LAIKIN
STAFF WRITERS
January 7, 2005

Calling their work "appallingly inadequate," a state report Thursday blasted the accounting firm most widely used by Long Island school districts for ignoring glaring signs of impropriety in Roslyn that would have revealed the alleged theft of millions of dollars.

The report describes a pattern of work by Roslyn's former independent auditor, Miller, Lilly & Pearce of East Setauket, that routinely violated basic accounting practices and professional standards.

"Their work was so appallingly inadequate as to be shocking to anyone associated with the auditing business," State Comptroller Alan Hevesi said at a news conference in Mineola. "The fraud was so pervasive that it would have taken significant effort not to uncover it."

For example, the report said that when a whistleblower questioned spending in October 2002, the firm found $223,136 in inappropriate payments. "When state auditors tested the same records, using the CPA firm's criteria, they found $1.6 million in questionable payments," the report said.

Hevesi said he turned over the findings to prosecutors, noting, "We will let somebody else make the determination whether that crosses the line into corruption or criminality."

A spokeswoman for the Nassau County District Attorney's office said Thursday that Roslyn's accounting procedures already were under scrutiny, and that prosecutors would now incorporate the report into their investigation.

The firm's managing partner, Andrew Miller, couldn't be reached for comment. But he has said in the past that no firm could have caught the alleged fraud in Roslyn.

His attorney, William Petrillo of Rockville Centre, said Thursday, "The only thing appalling regarding their work is the absurd suggestion that the actions were criminal. This witch-hunt has gotten out of control."

The state Department of Education, which licenses certified public accountants, has launched an investigation into the firm, and Thursday notified every school district that uses Miller, Lilly & Pearce, or a software program provided by a company affiliated with the firm, of the comptroller's audit.

"This will set off alarm bells from Great Neck to Montauk," said Tom Rogers, executive director of the New York State Council of School Superintendents.

Louis Grumet, executive director of the New York State Society of Certified Public Accountants, said, "As bad as the whole Enron-type situation is, Enron at its essence affected stockholders who took chances," he said. "That's not what you have in a school district. You have taxpayers."

In Roslyn, three school officials, including former chief financial officer Pamela Gluckin, have been charged with grand larceny for allegedly using school funds for personal expenses. Authorities say at least $8 million may have been stolen over several years.

Roslyn, which paid Miller, Lilly & Pearce $271,328 over the past 12 years, stopped using the firm in May of last year.

State auditors found that Miller, Lilly & Pearce failed to investigate obvious clues of financial irregularities -- from unusually large budget transfers to not examining canceled checks to the practice of keeping blank checks in an unlocked cabinet.

At the same time, the state report says, the firm misrepresented how closely it scrutinized Roslyn's spending, often cutting corners by "eyeballing" certain large expenditures while telling the district it had reviewed them in detail.

Hevesi's report pointed out discrepancies in the firm's records that raise questions about one of the key methods used to conceal the alleged theft: changing the vendor names on computerized financial records to make it appear as if checks were written to school-related companies, when they were actually being used to pay for personal expenses.

In at least seven instances, state auditors found that the vendor name changes were made not when the checks were written, but in February and March 2004, after the whistleblower accused school officials of fraud.

Yet work papers from the accounting firm, which were supposed to reflect what was in the computerized records at the time of the annual audits in 2001-02 and 2002-03, showed the bogus vendor names -- even though the changes were not made until years after the audits were performed.

The auditing firm told state officials they got the bogus vendor information from Gluckin in October 2002 -- long before the 2002-03 year-end audit was performed.

"This raises serious questions as to the validity of the audit work done, and the CPA firm's explanation for the discrepancy," the report said.

Nassau Comptroller Howard Weitzman added in a statement that the discrepancy "suggests the possibility of intentional misdeeds."

Hevesi's report focused on the firm's work in Roslyn during the 2001-02 and 2002-03 school years, but its impact may reach far beyond the borders of a single district. The firm has served as independent auditor for more than 50 Long Island school districts as of last June, including contracts with Nassau and Suffolk BOCES.

About 250 school districts statewide, including Roslyn, also subscribe to a software program, Finance Manager. Two of the accounting firm's partners own more than half of the company that produces the software. These partners, Miller and Bill Lilly, also acted as "sales agents," receiving a commission when Roslyn bought a second software package, Student Manager.

Hevesi blasted this dual position of both auditor and vendor as a clear violation of professional regulations. "Those are conflicts of interest," he said.

"It's a devastating report," David Helme, Roslyn's interim superintendent, said. "Here was a respected auditing firm that – not in my words, but in the words of the comptroller – did not do their job competently, to say the least."

4)
http://www.newsday.com/news/local/longisland/ny-lireac074106604jan07,0,1040572.story?coll=ny-li-span-headlines

Officials: It could take years to recover from scandal
BY KARLA SCHUSTER AND EDEN LAIKIN
STAFF WRITERS
January 7, 2005

With public confidence in schools already shaken by the Roslyn embezzlement scandal, the state comptroller's harsh censure of the most widely used school accounting firm on Long Island is a blow from which it could take years to recover, local school officials say.

"Roslyn was just so absolutely incredible - there is no equivalent and I pray there never will be again, but this is another blow to our credibility," said Jericho Superintendent Henry Grishman, also chairman of the state Council of School Superintendents, of the scathing report about the accounting firm, Miller, Lilly & Pearce of East Setauket.

The report described the firm's work in Roslyn as "an awful performance" that contributed to the alleged theft of millions of dollars in school funds.

Grishman said that given the findings, he expected many districts that use, or have used, Miller, Lilly & Pearce may consider having other auditors review the firm's work.

The East Setauket firm has over the past several years served as independent auditor for more than 50 Long Island school districts. A related company, Finance Manager, supplies financial management software to 250 districts across the state, including about 60 on Long Island.

Yesterday, state officials urged school districts to re-examine their auditing procedures, regardless of whether they used Miller, Lilly & Pearce or Finance Manager software.

"Every district ought to double check that their independent auditor has done the job they were supposed to do," said state Comptroller Alan G. Hevesi. "If this firm is your auditor, you should really take a look at it."

Hevesi said the findings show the need for the $5.5 million he has requested from the state to hire more auditors to review school district finances.

Officials in some districts that still use Miller, Lilly & Pearce said yesterday that its work has been good. But they also said they would follow a recommendation from Hevesi's office that districts rotate auditing firms at least every five years.

Historically, local school districts have used the same independent auditor for years. Before firing the firm in May, Roslyn used Miller, Lilly & Pearce for more than 10 years.

"Our experience has been very different than what was reported in Roslyn," said Herman Sirois, superintendent in Levittown, which has used both the accounting firm and the financial software for years. The district is seeking proposals from other auditing firms this year.

Garden City officials said that they have no plans to switch from Miller, Lilly & Pearce. The responsibility for the fiscal health of a school system "rests with management and administration, not the auditing firm," said John Powell, assistant superintendent for business.

Herricks Superintendent Jack Bierwirth said the district decided last year to switch from Miller, Lilly & Pearce but will continue to use Finance Manager.

"It didn't take two bells going off to get us worried," he said. "One was enough."

What the report found

The following are excerpts from the comptroller’s report on the audit work done by Miller, Lilly & Pearce, which failed to identify millions of dollars apparently stolen from the Roslyn School District:

"When Miller, Lilly and Pearce was informed by a whistleblower of questionable disbursements, all three partners and staff from the firm reviewed the district’s records in October 2002 and found a total of $223,136 in inappropriate payments ... When state auditors tested the same records, using the CPA firm’s criteria, they found $1.6 million in question-able payments."

"Someone changed vendor names in the district’s computerized system for 2002-2003 in an apparent attempt to cover up fraudulant activity. However, the firm’s workpapers supposedly prepared in 2002 and 2003 contain these fake vendor names, which raises questions about when the workpapers were actually prepared."

"In testing of disbursements, the CPA firm did not look at canceled checks. Even a cursory review would have revealed instances where the actual payee on the check was different than the payee in the firm’s workpapers."

"The district routinely spent much more than was appropriated for specific budget items and executed an unusually number of budget changes, primarily due to the alleged theft occurring in the district. The firm never looked at these transactions."

"The annual audit of the district did not meet nine of 22 required professional standards for such an audit. The audit was significantly deficient in planning and execution."

5)
http://www.newsday.com/news/local/longisland/ny-limill074106605jan07,0,4373726.story?coll=ny-li-span-headlines

Affability helped auditor deflect blame
BY MICHAEL ROTHFELD
STAFF WRITER

January 7, 2005

Known for his affability and charm, Andrew Miller built Miller, Lilly & Pearce LLP, the Setauket-based accounting firm where he is managing partner, into the dominant player in the niche market of school district auditing on Long Island.

It performed the required annual audits for more than 50 districts, along with three in upstate New York.

The firm has existed in some form since 1938, and Miller, 55, began working there in the 1970s.

He was joined later by two other partners, William J. Lilly, 48, and Donald G. Pearce, 44. It has an audit staff of 12, according to the firm's Web site.

Until yesterday, when State Comptroller Alan Hevesi's audit accused Miller's firm of failing dismally in its responsibilities at Roslyn, he had worked with some success to fend off blame by insisting that he was duped by the district's former business manager and superintendent.

Miller could not be reached for comment yesterday.

In an August interview, he called them "absolute criminals" and said, "I don't think I could have found anything because there were so many people working against us. They were dead set on beating us."

In 1991, Miller created Finance Manager, a popular accounting program purchased by 250 New York school districts, including Roslyn, where investigators say it was used to manipulate records. However, Hevesi's audit said the financial stake held by Miller and Lilly in the software company compromised their independence as auditors.

The Roslyn timeline

October 2002: School officials discover Assistant Superintendent for Business and Finance Pamela Gluckin's alleged embezzlement, but do not report it to authorities. Instead, they allow the former chief financial officer to retire quietly after repaying the money - believed at that time to be $250,000.

February 2004: An anonymous letter circulated around Roslyn discloses the 2002 theft and refers to more money being stolen. The district attorney's office begins its investigation of the district's finances.

May 2004: The board fires the independent auditing firm of Miller, Lilly & Pearce.

June 1: Gluckin, 58, is arrested on charges of first-degree grand larceny for allegedly embezzling more than $1 million from the district. Also, State Comptroller Alan G. Hevesi announces an audit of the district.

June 4: Superintendent Frank Tassone, 57, and Debra Rigano, 46, an accounts payable clerk and Gluckin's niece, are suspended with pay. They both resign soon after.

July 6: Tassone is arrested on charges of first-degree grand larceny, accused of stealing more than $1 million from the district between 2000 and 2002 by using credit cards for personal expenses and conspiring with others to falsify the accounting records of the district to camouflage the payments. The board undergoes a reorganization and election of new officers.

October 2004: Rigano is charged with one count of second-degree grand larceny for using $307,193.23 in school funds to pay credit card debt for herself and several family members.

The Roslyn timeline

October 2002: School officials discover Assistant Superintendent for Business and Finance Pamela Gluckin's alleged embezzlement, but do not report it to authorities. Instead, they allow the former chief financial officer to retire quietly after repaying the money - believed at that time to be $250,000.

February 2004: An anonymous letter circulated around Roslyn discloses the 2002 theft and refers to more money being stolen. The district attorney's office begins its investigation of the district's finances.

May 2004: The board fires the independent auditing firm of Miller, Lilly & Pearce.

June 1: Gluckin, 58, is arrested on charges of first-degree grand larceny for allegedly embezzling more than $1 million from the district. Also, State Comptroller Alan G. Hevesi announces an audit of the district.

June 4: Superintendent Frank Tassone, 57, and Debra Rigano, 46, an accounts payable clerk and Gluckin's niece, are suspended with pay. They both resign soon after.

July 6: Tassone is arrested on charges of first-degree grand larceny, accused of stealing more than $1 million from the district between 2000 and 2002 by using credit cards for personal expenses and conspiring with others to falsify the accounting records of the district to camouflage the payments. The board undergoes a reorganization and election of new officers.

October 2004: Rigano is charged with one count of second-degree grand larceny for using $307,193.23 in school funds to pay credit card debt for herself and several family members.

 
At 11:23 AM, Anonymous Anonymous said...

Why don't you investigate and wrote about the sexual abuse that goes on in Kiryas Joel. I can steer you to at least one victim.

Suffice it to say that sexual abuse and other improprieties are as common there as a rainy day in britian.

 

Post a Comment

<< Home