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Wednesday
Aug082018

"All The Queen's Horses"

All you Netflix subscribers who are interested in how local government (or any other!) fraud generally takes place should take the time to take a look at "All The Queen's Horses" - a recent documentary about a small (pop 8,500), ordinary, Illinois town called Dixon - that is until the Town Treasurer took them for $54m over a five year period (actually ten, but almost all over the last five) to fund her quarter horse empire outside of town - reportedly the largest and most successful in the entire US - all supposedly achieved with the benefit of inherited resources. 

Why I bring it to your attention is because of the manner in which the crime was perpetrated, and the various checks and balances circumvented while the townspeople and their elected representatives remained blissfully unaware. By the way, amongst the interesting statistics revealed at the end of the program is that 57% of all major embezzlements in the US are perpetrated by the fair sex. According to the female DI who investigated a major fraud by my finance manager that we detected in an organisation I ran in Australia, the percentage there is far higher. 

Interestingly, the method was almost identical in both cases (but involving only 5 figures in our case!) It also involved false bank accounts, phantom creditors, and forged signatures. But unwarranted  trust was the underlying cause in both cases, which in  my case left me with a life long unwillingness to accept any semblance of a lack of double checking of every single transaction. And no excuses for any lack of transparent audit oversight - a situation to which I have drawn attention here on countless occasions. 

What interested me about the program was the determination expressed in the aftermath to ensure that every incoming councillor (the previous lot were all 'dumped'!) had a modicum of accounting knowledge to ensure that they had some idea of what to expect from their accounting staff, and exercise great caution when the unexpected occurs - something that is almost impossible with the form of accounting and financial reporting currently adopted by our CEO. It is not that it is faulty - simply inadequate with the plethora of bar and pie-charts, and graphs that are currently presented as an alternative to actual figures, mixed in with council performance tables. 

I do not believe it appropriate for both the Finance Manager, and the Corporate Services Manager to whom she reports, to be absent from Council meetings - councillors may be considered too ignorant to understand a set of accounts, but there is no reason, or justification to make that assumption - education and direct contact is the key in my view!

I remain unconvinced as to the oversight of the derivative accounting, and in particular the general oversight of the Auditor-General. Internal auditing does not inspire confidence, and reports that are presumably provided to the Audit Committee are never put before the full Council - a major oversight. 

Dixon's audit was undertaken by a national (US) audit firm that broke every standard audit procedure in the book - only in this manner was the defalcation possible, and again, it was an accounting underling (whistle-blower) who nailed the perpetrator - completely separate from the audit process. Both the unintentionally complicit bank, and audit firm await likely substantial damages judgements. The perpetrator received 19 years in the Federal penitentiary, and some $20m was recovered from the sale of her many assets. 

I would strongly suggest that the entire upper echelon of the Council executive take the time to view this documentary. There are lessons in it for everyone. Councillors could certainly also benefit from watching it during one of their famous public excluded 'workshops.'

 

 

 

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Reader Comments (1)

Watched " All the Queen's Horses" as you suggested. A very thought provoking documentary and yes think this is a most useful documentary to watch and learn when we live in times of the EU Data Protection Act, .Anti Money Laundering Act NZ and misappropriation of funds by individuals across many walks of life. One of the things that struck me about the documentary is that while one individual was " living it up" this was at the expense of the many residents and ratepayers of Dixon who over the years missed out on essential things that a council is usually tasked with meeting - adequate storm water, sewerage lighting, footpaths. Many paid for one individual's life style - not fraud but theft.

August 12, 2018 | Unregistered CommenterAnne Stewart Ball

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