The attached report summarizes the results of the Auditor General’s review of allegations of fraud. The case involved two BIAs resulting from the actions of a consultant who worked for each Business Improvement Area (BIA) at different times beginning in 2017. This investigation was initiated based on concerns raised by the City’s BIA office of the Economic Development and Culture Division.
After concluding our investigation but before our public report was issued, we were apprised by law enforcement that “the police conducted their investigation independently of the Auditor General. The suspect has been identified and arrested by police, and has been charged with fraud.”
The consultant was not interviewed as part of the Auditor General’s work in order to retain separation of the work conducted by the Auditor General’s Office and the criminal investigative process.
The Board members at BIA 1 should be commended for catching and pursuing this matter once it was detected.
The purpose of this report is to identify areas where BIAs in general can improve internal controls to prevent similar situations from occurring, and to identify opportunities for the City to support the BIAs in doing so. While we recognize that Boards are comprised of volunteers who already spend considerable personal time on these activities, information about key internal controls is relevant and critical to any enterprise that relies on volunteers, consultants and other professionals for support.
The Association of Certified Fraud Examiners (ACFE) in its 2020 Report to the Nations notes that:
“Non-profit organizations can be more susceptible to fraud due to having fewer resources available to help prevent and recover from a fraud loss. This sector is particularly vulnerable because of less oversight and lack of certain internal controls.”
The Auditor General has made three recommendations to lessen the risk to other BIAs. Note that although these recommendations relate specifically to either BIA 1 or BIA 2, the lessons learned should benefit all BIAs and all City organizations. Management has agreed to all three recommendations.