A Private Auditing Of County Auditors
Firm to Determine Needs of Internal Unit

By Timothy Dwyer
Washington Post Staff Writer
Thursday, May 3, 2007

The Prince William Board of County Supervisors agreed Tuesday to hire a private accounting firm to review the county's internal auditing unit to determine whether it has enough staff members and resources to perform its duties.

The internal auditing unit's duties, according to a resolution approved by the board, include "ensuring the integrity and completeness of its financial data."

The accounting firm is McGladrey & Pullen, which is based in Minnesota and has offices in Alexandria and Richmond. The contract is for $30,525, and the report is due to the board in two months.

The decision to seek the assistance of an outside auditor went against the recommendation of County Executive Craig S. Gerhart, who recommended that the county do the study itself. Gerhart told the board that the county needs more internal auditors to keep pace with the growth of the county and its budget.

The board voted 7 to 1 to seek an outside study, with Hilda M. Barg (D-Woodbridge) voting against the measure. Barg questioned why the county should spend money to answer a question that Gerhart had already answered.

"So we are going to pay $30,000 to someone to tell us that we need additional resources when the county executive is telling us that they need additional resources?" Barg said.

In addition to studying whether the county should use outside accountants to conduct internal audits or keep its current system, McGladrey & Pullen may also make recommendations about whether the auditors, be they county employees or outside accountants, should continue to report to the county executive or, instead, report to the Board of County Supervisors or its audit subcommittee, which is made up of three members.

The board asked for a review of the internal auditing system after a discovery last year that the U.S. Department of Housing and Urban Development had changed its formula for reimbursing local governments on affordable housing programs and, as a result, the county faced a shortfall of about $1 million. The county's internal auditors caught the shortfall, but the issue stirred a debate about staffing and procedures.

"Let's make it clear that no one is suggesting that any of the internal auditors did anything wrong. They are the ones who caught the mistake," Supervisor Martin E. Nohe (R-Coles) said Tuesday.

In a report to the board, county staff members reviewed what occurred in Prince William's Office of Housing and Community Development.

"During the past year, the county experienced a troubling financial failure in the Office of Housing and Community Development's Section 8 choice Voucher Program," the report said. "The county reacted quickly to the finding, identifying the root cause and making the necessary personnel changes. Because of the county's quick reaction and remediation plan, the county was also able to maintain a positive working relations with the U.S. Department of Housing and Urban Development. Nonetheless, the event has raised awareness of the need to monitor and assess internal controls on an ongoing basis to an even higher level."

The employee who was responsible for monitoring the voucher program left the county after the discovery by internal auditors that the reimbursement formula had changed and resulted in a revenue shortfall.

Chairman Corey A. Stewart (R) said the board should consider using an outside firm to conduct internal audits so that if a similar situation ever occurred again, there would be no appearance of impropriety.

Debate bogged down, and Stewart suggested that the issue was complicated and perhaps the board should take another week or two to consider the matter.

But Supervisor W.S. Covington III (R-Brentsville) asked for a vote. "I think spending $30,000 to hire an outside auditor is a cheap price to pay to get the answers we are looking for," he said.

When Stewart said he would support the motion, Barg challenged him, asking why he had changed his mind about the issue being so complex that it needed more discussion and analysis.

"I am going with the will of the board," Stewart said.

The board also discussed a proposal for a 36 percent increase in the proffer amounts for new houses, townhouses and multi-unit residences that would go into effect July 2. The proffer, or money a developer has to pay the county to build a single-family home, would jump from $37,719 per unit to $51,113. The board is scheduled to vote on the proposal next month.

Mark Granville-Smith, president of the Prince William chapter of the Northern Virginia Building Industry Association, urged the board to delay action on the proffer increase.

"A proffer amount of $51,000 would now exceed 10 percent of the average cost of a new home in Prince William," he said. "This is not the time to kick an industry when it is down."