What is a forensic audit?
- A forensic audit is an independent financial investigation that is designed to look for concrete evidence of fraud or mishandling of funds. Simple financial audits only evaluate whether an organization’s financial statements fairly and transparently represent its financial standing. A forensic audit goes several steps further to trace the chain of funds and uncover possible fraud. This is similar to the purpose of a forensic criminal investigation. Because of the depth of a forensic audit investigation, its findings are admissible in civil court as evidence.
Why was a forensic audit started?
- There have long been questions about potential fiscal mismanagement and fraud regarding WCCUSD’s $1.6 billion bond program, leading to a grand jury investigation and an ongoing SEC and FBI investigation. In the spring of 2015, Dennis Clay, a project analyst with the District for 11 years who worked on the bond program, came forward as a whistleblower alleging tens of millions of dollars of mismanagement and providing documentation to support his claim. These allegations led the School Board to establish the Dennis Clay Subcommittee and to hire a forensic auditing firm.
Who is conducting the forensic audit?
- The school board hired the forensic auditing firm Vicenti, Lloyd & Stutzman (VLS) to conduct the audit. This firm was hired from among a few applicants — VLS received the recommendation of the Citizens Bond Oversight Committee.
What findings has the forensic audit had so far?
- An early “Phase 1” of the forensic audit was released in January 2016. This phase found 36 out of 51 areas of the bond program were at “high risk” for fraud. VLS stated that their early findings showed “disdain from the top for internal controls.” These findings did not, however, prove any fraud occurred. That determination can only be found through the “Phase 2” work, which is currently underway.
Was the decision to move forward with the forensic audit unanimous?
- This decision was not unanimous — some board members objected to the $1 million price tag for the audit, while the majority believed it was difficult for the district to move forward until all outstanding questions had been answered.
When is the final forensic audit expected to be released?
- A draft of the final report is expected on August 30th, 2016. However, this timeline is fluid depending on how cooperative the District and its vendors are with VLS. At the Clay Subcommittee meeting on June 23rd, 2016 it was reported that some vendors were being uncooperative and were “lawyering up.” (see Easy Bay Times article below)
Where can I find out more?
- An East Bay Times article about the allegations
- An East Bay Times article updating progress with the forensic audit
- The Phase 1 forensic audit risk assessment
- The Clay Subcommittee document repository
- Raw files that Clay submitted
- Clay’s own blog posts on his allegations
- Sign up for Action Alerts and we’ll let you know when there are continued updates on the audit.