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CAS Uses Enron Accounting

February 23, 2006 permalink

When a private company fakes its books, shareholders are hurt, and management can be sued or prosecuted. But when a public agency fakes its books, no one really cares.



Accountants probe allegations of over-billing at N.S. Children's Aid Society

HALIFAX (CP) - The organization that represents Nova Scotia's chartered accountants is trying to determine whether provincial auditors conducted a proper investigation of alleged expense fraud at the Children's Aid Society in Cape Breton.

A spokeswoman for the Institute of Chartered Accountants of Nova Scotia refused to comment on the case, but the man who made the allegations says the initial audit was slipshod. Jim MacNeil, a former society supervisor, says he called the institute when he learned auditors with the provincial Finance Department had not conducted an in-depth, forensic review of the society's financial records.

Linda Laffin, a spokeswoman for the Community Services Department, said the government is aware of MacNeil's complaints, which came after he was fired for alleged incompetence in 2003.

However, she denied the initial audit was bungled and she insisted the department took MacNeil's allegations seriously.

"We're satisfied the Department of Finance did what we asked," she said. "They did the audit. We take their advice. In their opinion, they reviewed it and there's nothing further to look at."

Meanwhile, the chairman of the society's board of directors said the society conducted an internal investigation in 2003 before the provincial auditors were called in. That investigation determined there were errors in the society's records but they were not the result of wrongdoing.

"It would be very difficult to prove that (someone) cheated the agency," said Jack Coffin.

MacNeil's complaint dates back to 1999, when he was told to review the expense reports of a junior case worker in the society's mentoring program.

He concluded that the Cape Breton-Victoria Children's Aid Society had been over-billed by as much as $5,000 during a nine-month period. He urged his supervisors to launch a wider investigation.

"I was trying to get them to look into the whole mentoring program because I think what I found was the tip of the iceberg," MacNeil said.

He said the society's former executive director refused to pursue a further investigation and instead issued a written reprimand to the employee in question.

"I was threatened with dismissal if I pursued the matter, so I just backed off," MacNeil said.

"In my career, I've seen foster parents who were forced to repay overpayments. I just felt this wasn't right."

In 2003, MacNeil broke his silence after he was fired and lodged a complaint with the Community Services Department, which oversees children's aid societies throughout the province.

Since the children's organization receives all of its funding from the provincial government, an audit by the province's Finance Department was ordered. That investigation found the society's bookkeeping was sloppy, but noted some improvements had been made.

MacNeil said provincial auditors didn't speak with him during their investigation.

"I asked them to do a forensic audit to verify what I had found," he said. "That's not what happened. All they did was a paper audit of how management handled things. There's been no attempt to see what money may have been missing."