After 6-month process, West Linn picks outside auditor

The city is still reeling from alleged embezzlement by former finance director

There was plenty of frustration Monday night at the regular meeting of the West Linn City Council.

Both councilors and city staff expressed frustration at the length of time it has taken forensic auditors to search for information related to the alleged theft by former finance director Elma Magkamit of $1.4 million of city funds, the largest embezzlement of public funds in Oregon history. Magkamit is scheduled to go to criminal trial Friday.

Local residents also showed their frustration and accused councilors of dragging their feet and delaying the completion of annual audits that have been past due for some time.

The question before the group Monday was whether to authorize the city manager to enter into a contract with the auditing firm of Talbot Karbola and Warwick (TKW) which was recommended to the council for approval.

The recommendation came from an audit subcommittee comprised of the city manager, finance director and two city councilors: Michele Eberle and Jody Carson. The committee has been meeting with the auditors every other week since May.

Even though TKW would not yet propose the fees it would charge for its services, the council voted 4-1 to appoint TKW as the city's independent auditor and gave City Manager Chris Jordan the authority to enter into a contract with TKW.

Once the fee proposal is determined, the contract would come back to the council for final approval, Jordan said.

Councilor Mike Gates objected to the absence of a fee proposal, and he was the lone negative vote.

A fee schedule was not presented, according to Jordan, because information has not yet been made public about the types of problems the forensic auditors have discovered and the types of internal controls that might be recommended or changed.

'Because (TKW) has not met with the forensic auditors and because they are not fully aware of the city's record keeping, TKW did not provide a fee proposal,' Jordan said.

The forensic audit is complete, the city manager said, but there is no written copy available.

Local resident Charles Roberts challenged that fact.

'I don't understand how an audit can be complete and not be put in writing,' he told the council. 'That doesn't make any sense to me.

'The city manager said that the (independent) auditor would not be chosen or hired until a week after the forensic audit was complete. The audit is not complete until it's issued. It's not complete until it's written down. … If the audit is complete, they only have to press a button on their printing machine and print it out. So why is it that we don't see it?'

Not all of the information that the forensic auditors have discovered is available for public view, according to Mayor Norm King, because a criminal prosecution is ongoing. Very little will be available, he said, at least until after it is presented in court.

'This isn't something that we can just discuss what's in the report,' said Council President Scott Burgess. 'This is something that is being done as part of a criminal case, and that's not something that we can air to the public.'

Roberts also complained about what he described as a delay in completing the required annual audits.

'When this council took office, you knew that the audits were late,' Roberts said. 'That was 21 months ago. Nonetheless, I suppose that 20 months into the administration the fact that the council is finally acting has some merit. Not a day late and a dollar short, but 21 months late and $1.5 million short. When are we going to see this forensic audit? After Nov. 7?'

Jordan said he expected a draft of the forensic audit 'in the next several days.'

Councilor Mike Gates said each councilor had been briefed with a summary of the report that is still being prepared. Jordan added that staff and council are trying to be cautious and deliberate in how information is given to the public.

'We need to be very careful on what we disclose and how we disclose it,' Jordan said, 'in order to protect the city's interests so that we can potentially recover the maximum possible of the $1.4 million that was stolen.'

Jordan expects to receive a draft report soon so city staff can review the internal controls to be sure the auditors have assessed them correctly.

'They have been waiting for final information that they needed through bank statements and other items to ensure that their conclusions were, in fact, accurate,' he said. 'They were 95 percent done with this a while ago; they've just been waiting for this last information so they could complete the report and send it to us.'

To assemble all the information needed, the forensic auditors have been working with the city's police and finance departments and the state department of justice.

The bottom-line question, Burgess said, is how the city can recover from this incident.

'The primary goal here is to make sure that the city recovers as much money as possible so that the taxpayers can get their money back,' Jordan said.