By Josh Davis, Associate Editor
(Aug. 30, 2018) Work on a forensic audit of Ocean Pines Association financials recently included discussions with the Worcester County Bureau of Investigations and has cost about $87,000 so far, according to Finance Director Steve Phillips.
Phillips, providing an overview of the Gross, Mendelsohn & Associates forensic audit during a board orientation meeting Friday, said the investigation began in late April and auditors started working in Ocean Pines in May.
He said auditors were in Ocean Pines “for two-to-three solid weeks” in May and have since “done some work in the office and then some work here in the field.”
Phillips said two years of data from food and beverage operations were examined, “including comparisons of income and expense to budget.” He said a detailed review was conducted of sales receipts and deposits from summer 2017, and auditors also inspected point-of-sales systems.
In part, auditors were looking into about $26,000 in deposits that allegedly went missing last summer, which “really started this whole forensic audit,” Phillips said.
“They did a detailed analysis of the payroll for both the yacht club and beach club during a period selected of the summer 2017, looking at hours paid to hours reported in our [point of sales] systems, verifying wages for payroll registers to our general ledger postings,” he said. “They analyzed overtimes, examined selected employees’ personnel files, and did financial analysis comparing payroll for years 2017 versus 2016.”
Phillips said four Ocean Pines employees were interviewed at the time and about 15 current and former workers have been interviewed to date. He said billing for the service in April and May totaled about $46,000.
Auditors in June reviewed bank deposits from July and August 2017, looked at communication logs within the Ocean Pines Police Department, and “developed a timeline of missing deposits,” Phillips said. He said seven more employees were interviewed at the time, as was Chris Hall of Salisbury accounting firm TGM Group.
“They also started looking at some vendor activities – they did a detailed review and analysis of that,” Phillips said, adding the association paid the forensic auditors about $21,000 in June.
In July, he said, auditors met with a detective from the Worcester County Bureau of Investigations.
“They reached out to him. He actually was handed off the case [in] September of last year, after TGM did their limited procedures,” Phillips said. “They looked at a memorandum prepared by an OPA employee, who viewed a portion of the videos from the cameras in the administration building after discovering the missing deposits.”
Phillips added, “Jim Kern, from Gross and Mendelsohn, viewed portions of the video himself from the cameras in the OPA building.” Additionally, Phillips said three more employees were interviewed and auditors looked at AMEX corporate credit card statements “for three months selected in 2017.”
July fees were about $29,000, bringing the total to about $87,000 for the year, Phillips said. The association budgeted about $220,000 for the audit.
More recently, according to Phillips, “the work has really shifted to the [Worcester County Bureau of Investigations], working with that detective to actually try to gain some information from … Bank of Ocean City and work with them to understand what type of records they have and what we can get access to, as well as interviewing their chief security officer, as well as their CEO and president.”
He said the other priority in August was the scrutiny of information technology systems within the association.
“They’re running penetration tests on our network,” Phillips said. “And they’re also in the process of [conducting] a survey to our end users, as well as our IT department and other staff.”
Phillips said a “phase one” report from Gross, Mendelsohn to the Ocean Pines Board was likely in September. Board members present during the orientation indicated the initial report would be given during a closed session.
Whether additional phases of the forensic audit will follow is not yet known.
“They’re going to tell us whether we really need to look at anything or not,” General Manager John Bailey said. “Then, it’s a directive from the board to say, ‘Yeah, we want you to pick that up and now look at this.’”
Director Frank Daly added, “At the end of the day, you [get] one of two things – you get a clean bill of health, or you get indictments.”
For a list of official updates from Ocean Pines on the forensic audit, visit www.oceanpines.org/forms-docs-cat/audits.