I mean, >> all right. Good evening everybody. This is a special um presentation I guess you call it from our gentleman from Ed Batty regarding the forensic study that was um approved last February when it started
February March. So they have a presentation. Jason Olsen is here and um go ahead. It's mine. All right. Uh, let me share my screen quick. >> All right. So, I'll just Can everyone hear me? Okay. >> All right.
>> Um, so just by way of background, I work for ID Bailey, a CPA firm. Um, top 20 in the country. I'm a forensic accounting partner within the firm. Uh, we have a team of about 25 professionals. Uh, I usually get involved in situations where there's some sort of financial dispute
or concern. Uh, and so I know there are some concerns here with respect to charitable contributions and goodwill donations. And so we were engaged by the city to look into those contributions, donations and how they were used uh back in I think February 2025.
Uh, and now we sit here, it's December 2025, so it's been several months. And uh, it's been a little bit of a a give and take on the information that we need to to trace funds and so forth. And I want to thank Kent. I know you gave me information uh from the fire relief
association. Uh Jason Baker and Mel here gave us information from the city and Jim I think you might have even provided some information at one point in time. Um and so uh I've been providing forensic accounting services for about 23 plus years uh for a whole host of
reasons. Uh sometimes it's uh you know it's just resolving financial concerns. Sometimes it's conducting financial investigations for civil or criminal purposes. Um, and often times it's to provide peace of mind over what's happened with finances.
Okay? And, uh, what I'm going to walk you through today is a summary of where we're at today with this forensic accounting engagement. Uh, I'm going to walk through what the original scope was. I'm going to walk through the information that we considered, the procedures we performed, observations,
and recommendations. Okay. Um I'll I'll even walk through some engagement challenges because um as I talk about the scope when you're whenever you're dealing with historical information right going back more than just a few years but you know 10 10 plus
years right um you know there's always going to be some challenges and it's not unique to your city but in many of the clients that we serve there's usually turnover with employees there's potentially accounting records or supporting records that may not exist after several years, right? And so
sometimes that presents a challenge, right? Uh but that's not unique to the city. Uh but we'll cover that in detail, too. So I'll get started here. Uh hopefully you can see a lot of this, but if not, I'll just regurgitate some of this information. Like I said, we're engaged on February of 2025.
uh you know our main task at hand was review a or perform a forensic accounting of the funds the 10% contributions and goodwill donations provided by the bar relief association to the city and how those funds were used primarily for 2013 through 2024 and the reason why that is is um Kent if you
recall you provided me with a spreadsheet that that identified all the 10% contributions that were provided by the fire relief association as well as the goodwill donations during that time period right so we had a starting point from the fire relief association as to what they provided along with certain copies of cancel checks and so forth.
Okay? And as part of that process, we're here to report to you as to our observations and the process we went through. And so to kind of give you an idea, uh this summary table is a a summarization of that spreadsheet provided by the fire relief association as to the 10% contributions they
provided over that time period as well as the goodwill donations with a total being about $300,000 during that time frame. Okay. And so as part of that process, our our goal was, okay, this is what the fire relief association pro the city. How can
we identify those being accounted for within the city's financial records? And we'll we'll go through that. Um, as part of that process, some of the information that we looked at, the primary information we looked at, uh, there's audited financial statements. Of course, as you know, the city goes
through an annual financial statement audit. And so, we didn't recreate what the annual financial statement auditors do, right? because they're testing financial statements to detect any sort of material misstatements, errors, emissions, and that kind of thing, right? So, we're not going to recreate what they do, but we certainly look at
what they put together on an annual basis and what they certify. Uh we looked at general ledgers for uh fun and 425 uh primarily for the scope period that we talked about. Uh certain city council meeting minutes, more importantly, looking for resolutions. uh also the annual report that's submitted
to uh uh the state regarding the uh 10% contributions and how those funds are used. Uh and then other supporting documentation such as invoices and payment stubs and so forth. Uh from the fire relief association as I mentioned earlier you know primarily the information we looked at was the spreadsheet containing all the
contributions and goodwill donations and copies of certain checks. Uh we also received some bylaws too. Um as I mentioned a little bit earlier some of the challenges right there's certainly been turnover at the employee level. Uh
there's availability of certain historical records. So for example the annual report that's submit to the state uh on the on the gambling charitable side. Uh we don't have records that go back to 20 or go past or predate 2019. Okay. from an annual report perspective
and I'll talk a little bit as to why that was relevant or why it's relevant. Uh there certain board resolutions that we couldn't identify for some of the donations which typically a board resolution would identify and document what the intended purpose of that donation is. Okay. Certain accounting
reports uh that may have provided more detail uh we couldn't necessarily get for historical time period. So like 2013, 14, 15, we were get able to get other accounting reports back to that time period, but some reports like exports could provide a little additional detail that might have
helped, right? Um part of the observation, we saw some erroneous accounting recordations. So for example, there might have been a 10% charitable contribution that was characterized as a gathering permit or a park activity fee. We could see that in there. But then the good news is what we also see is
correcting journal entries at your end. And I'm not surprised by that because it tells me probably auditors working with whomever is here at the point in time correcting some of the the erroneous entries that were made. Okay. And that's not unusual either. That that does take place. That happens. Uh and so that's a
good sign that we saw those uh corrected journal entries. Uh as part of this process, everyone that I've dealt with, I've mentioned the folks uh from from all parties have been helpful to give me the information that I need to to take a look at for for this purpose. So that's been great and really appreciate the uh
the access access to information and and everyone's help. So I want to first start on the 10% gambling contributions. Okay. And so let me let me show you what um the time period in which we have the annual reports that are submitted to the
state the Minnesota Gambling Control Board. Um on the let me just show on the left is a totality of from the fire relief association the spreadsheet from the 10% contributions for 2019 through 2024 roughly $52,232.
Okay. Um we can we can tie that basically to all the reports for that same year showing how those funds were used uh and and uh who signed it. And so we have we have that being submitted to the state. We have those for 2019 through
2024. They reconcile. We have a slight a slight discrepancy between the fire relief spreadsheet which it shows actually 51,610. So $622 discrepancy. It could be an aggregation of that time period. Um you
know what I didn't want to do is further investigate that because every hour of our time might potentially exceed the benefit of us investigating a $6.2 discrepancy. But overall, the funds that are reflected on that spreadsheet from the fire relief association appears to be accounted for
within the uh reports that are going to the Minnesota Gambling Control Board. That provides some indication as to how those funds are used, at least related to 10% charitable uh contributions. As you can see, you know, some of the expenditures relate to jackets for firemen, uh fire engine inspection
updates, um breathing apparatuses, those type of things. Okay? And so, uh, the one and just to kind of give you an idea of what those reports look like if you're not familiar, this is submitted on an annual basis. And so, it
shows the funds that came in or contributed to that 10% contribution. And then it will also show how those funds were used. And then at the end, what you can see is is it signed off by who prepared it. In
this case, in 24 is Jason Baker. And then just to kind of show you uh if I showed you earlier uh you know the contribution was $10,47 for 204. You can see that reconciles to what's reflected within the accounting right and I will say that you know for the time for the
more recent time period 2019 through 204 it's easier to trace through the accounting. It's like this is a great example where it's pretty clearcut. You can reconcile it. um you know prior to 2019 where we don't have these reports it's it's a little more challenging because we it's historical information
right and some of that is tougher to tie out okay I'll explain that a little bit but here you can see there's attachment of um of of the information that ties back to that particular expense which this one here relates to the breathing
apparatus where $10,47 were used to support part of this $36,000 expense that was incurred. So for the time period 2013 through 2018 that predates that annual report there's about $24,669 that is contributed during that time
period according to the fire leaf association spreadsheet road traced at least 70% of that so to the general fund 100 ledger dollar for dollar we have exper we we have a little bit of a difficulty uh in tracing
dollar for dollar for 2013 2014 contributions. Uh and I think this is primarily due to the fact that there's historical information that we just we just can't really tie it dollar for dollar. So if something was aggregated, we can't necessarily reconcile it. Okay.
But I do believe that it's mostly due to the passage of time. I don't have any other reason to believe that there's anything else. I haven't seen anything else that caused me to believe that aren't accounted for. It's just when you're talking about 2013 14, it's a challenge going back that far. Okay. Uh what I will say
uh in a positive light when I look at was reported the audited financial statement for this time period compared to what was reflected in the fire relief association spreadsheet. It reconciles within $400. So I think that's a good sign that it's accounted for. It was accounted for within the audited financial statement. I just can't
necessarily reconcile it to the detailed general ledger. Okay. So that's that is a a good sign uh from that perspective and gives gives me confidence in the fact that those funds were collected and accounted for within the accounting goodwill donations. Um what this
spreadsheet reflects are the donations made uh according to the fire relief association from 2013 through 2024 $224,200. And the reason why there's blank spaces here is because we didn't have copies of checks and we couldn't find a board
resolution. Okay. Uh but we have the dates uh and when they're provided because that's within the fire association spreadsheet. There's certain transactions that we do have copies of checks. There's certain ones that we have board resolutions for. Okay. And so part of this process is to look to see
can we can we account for these funds being deposited into the city's accounting well bank accounting and and how are they recorded? Okay. And what I can tell you, we could readily trace 220,000 or 98.1% of these donations to
general fund 425. Um there there was uh uh we traced 2,800 the $2,800 donation to general fund 100 donations account. Uh we weren't able to trace the $1,000 or the $4,000
uh goodwill donation by dollar amount. It doesn't mean it wasn't account for. It just we couldn't readily trace it. Okay? Okay. So, we could trace the vast majority of all these donations into the accounting as as we'd expect to. Okay. And so, how were those funds used? Uh,
you know, we have evidence to show that there was payments related to engine one, two payments, and I rounded the numbers of course, but 74,000 there. There was engine outfitting for engine number one of 60,000, 22,000 for brush one skid pack. Uh
there's $5,000 related to uh gold rush t-shirts and then there's this unpaid gambling related tax that occurred in 2021 which the city was reimbured with $60,000 from those goodwill donations. Okay? And so these expenditures alone
add up to about 226,000, right? And this does not include engine number two and any outfitting that would have been supported from those funds. Okay? So that my my point of showing this is that already exceeds what was contributed through those goodwill donations if that makes sense.
And what I wanted to just briefly show is some of the support that is available for some of these things. So for example, engine number one, year one and year two are the two payments which uh were supported by the goodwill donations. Uh engine one uh tools and
equipment outfitting. So, we got copies of payment stubs and invoices. Um, the brush one skid pack copy of the invoice and the related check payment uh stub. That's for this invoice plus a few others. The gold rush t-shirts, the invoice, the
check payment stub, the $65,000 unpaid gambling tax. There was an issue apparently back in 2021. This letter outlines what that issue was and that uh this that they had to make a payment to the state department of revenue.
And so uh we have a copy of that letter. And then just by frame of reference for engine number two upgrading that wasn't included that that table you know this is you know at a quick glance when you look at the you look at the general detail there's at least 69 I know there's more than this but there's at
least 69,000 you can really discern that were related to engine 2 outfitting that were supported uh with goodwill donations okay and those appear towards my border so where we're at today again we're able to trace the vast majority of the funds
going into the accounting I'm comforted by the annual financial statement audits and lack of any deficiencies identified around any of the funds. Um, we see corrective journal entries where there's errors made. Um, I don't have any evidence suggests funds were used for
nonfire equipment related purposes, but for that $165,000 unpaid gambling tax that was paid. I will say with that particular payment, there was a board resolution that said that those funds were to be used for fire equipment and they were used to pay for uh that they're reimbursing for that unpaid
gambling uh tax issue. Okay. So obviously um I don't know I don't know the why there's that discrepancy right as far as what the border resolution said versus how those funds were used but that is one that is one thing that was observed through the course of this
uh investigation. Uh, what I would say looking at this matter and kind of how it came to be and probably some of the concerns that were raised as it relates to how these funds were accounted for, I think there's some good practices going forward if everything were to stay the same as it
is today, which maybe things will change because I understand that maybe there's some consideration of changing how maybe the 10% contributions are managed or handled, right? But uh I think a couple things uh that those annual reports that
I showed or shared uh they should be maintained within the city but also provided to the fire department for their own file retention. All those documents should be stored within the doc the city's document retention and destruction policy. Okay. Uh board resolution should exist for all these
donations. Um I know I happen to see the 2024 financial state audit for the city this year. I see that's a finding there and I saw that after the fact, right? So, we already had that as a recommendation and that a board resolution really should exist because that's good for everyone to be trans, you know, from an auditability
perspective. We can identify what what the intended purpose of that donation was for, right? And it's going to be maintained and retained within uh the city's possession for um in accordance with it retention destruction policy. Uh I would also say that to the extent that goodwill donations are used for fire
equipment um there should be copies of support provided to the fire department and the fire relief association for their own file. So that way again from audibility perspective everyone has the same documentation as to how these funds were used whether it's related to 10% charitable contributions or uh related
to the goodwill donations. Okay. um on our end, just to kind of let you know how we go about our services, right? We we're we're pro consulting services by the hour, okay? And there's always something we could potentially further investigate, but I'm also I'm also
conscious of being fiscally responsible for our clients. And I haven't seen anything that suggests that it warrants further investigation based on what we've observed to date. So, does anyone has any questions about what I said? I know I kind of went through that fairly quickly, but I would
like to address any questions that anyone has. The $65,000 discrepancy that was unpaid tax. There was a resolution. I I guess I'm not following so that that section of it. >> Yep. So, there's a board resolution. The
question was related to $65,000 uh unpaid gambling tax that related to some issue with gaming and a former employee. It sounds like right. There was a board resolution when goodwill that $60,000 goodwill donation was made
by the fire relief association association in December of 2021. It said that those funds were to be used for fire equipment. Those funds were used to reimburse the city for paying that unpaid gambling tax. >> Does that make sense? city paid the gambling tax, fire relief reimburseed,
but the resolution doesn't match. >> It does not match. And now I certainly wasn't there to to know if it was if the resolution was recorded correctly, right? I can just tell you what the resolution says compared to how the funds were used. >> Okay, that clears it up. Thanks.
>> So my understanding right, did you say that you don't have data prior to 2019? it was 2019 forward that this is based on. >> So no uh let me clarify that we have data prior to 2019. It's just we have
better data from 2019 forward. Right? So for example I let me just go back. If you look at um you know I showed this example of this annual report submitted to the Minnesota Gambling Control Board. We have that
from 2019 to 204. Okay. We don't have those prior to 2019 and know you tried to get those records from the gambling board and they don't have them. >> They didn't have them either. >> And and why is that important? It's important because it's one more piece of information for us to consider when
we're looking at the accounting of these funds and how they're used. Okay? It doesn't mean that we still don't we still had uh general fund detailed ledgers going back to 2013. We absolutely do. It's just it would have been nice to have these going back to 2013, right? It's just one more piece of
information for us to consider. >> Is that something that the that the state decided they don't no longer retain those those reports? >> It it could be based on their own uh document retention destruction policy. I just know they don't have them based on a response you got back from the state.
I saw it firsthand. >> So if we so going forward, if we were to make sure resolutions written each time, we'll better better retain that information longer term. Well, yep. So, typically
typically most organizations will have a document destruction or retention policy, whatever you want to refer to it as, and that could be seven, eight years or it could be in in line with some sort of state statute, then you abide by that policy, right? And my point is that same record should be provided to the fire relief
association. If you continue to go down the same path of working together, that way they have it for their file, you have it for your file, but that should be not only these reports, but the board resolutions as well, right? And and a support of how these funds were used. So that way all parties are have complete
knowledge of how Goodwill donations were used, contributions were used, and so forth. >> Those those forms were submitted in 2023. >> That from 2019 to 2023. Yes. The state requested. >> Yep. I know they weren't filed time. Yep. No, I know. I know that piece. Yeah, that they weren't filed timely,
right? >> Yeah, Shirley did that stuff, I think, when she was here. You get that stuff. So, >> yeah, I think Sunny started it. I think Shirley >> and Shirley finished. Yeah. >> And then bank records only go back seven years. >> Yep. And that's that's another issue,
too, right? Like, so so I know the the city changed banks, right? So that's but this is not uncommon across any organization I help that wants to go back past seven years because you made a great point there. You can only get you can only get bankers going back seven
years, right? And that's the best source information, right? Because then we can say, "Yep, it was deposited right here. We see the back of the check like you provide me back of certain checks. We can see it getting deposited in the pilot in the bank. We know exactly what account." We can trace it to the county, right? That's your best source information.
seven years you're limited to that from today's date going back seven years. But I mean we again we we go okay well that's best source what else do we have okay well we have certain general ledger reports that we can run and so forth and so we use that okay and that's what we had to rely on for some of the older
dates uh outside of outside of some of the things that I just mentioned but I will say this you know again comforted with the fact that the auditors they're there to look at the accounting too right and make sure balances are appropriate year end
and I do see corrective entries and that's a positive sign because like I said I saw erroneous recordations of certain uh contributions made but you can see the corrective entries right so that's a good thing uh and I know that there's been what three different CPA firms I think that have come and did the
financial statement audit uh so you have had not just one set of eyes but you've had three set of eyes looking at the financial records as well so u that gives me a little bit of level of comfort as well >> a question about the donations so whether the donation is coming to the fire department, first responders or
fire relief, they all need resolutions. >> So, >> for any amount $50. >> So, here's what I would say that >> one um I would I would always encourage you to ask that question of your legal counsel, right? Whoever the city works
with from a legal perspective to to follow state statute. Sure. What I would say is um it's a good practice to have a board resolution in place for any donations made because that way it's completely accounted for as to what the intended purpose was. So so I would lean on the side of having docation for all
donations but again I'll encourage you to speak to uh city's legal council to verify what the requirement is >> and that's just not that's not only monetary donations but like the fact of fire relief got the six wheeler on
Yeah. So bringing that in like a vehicle coming into the city that's donated to the fire which is a city. So that has to be put in there the same >> all donations. Yeah. >> Technically whether it's money or equipment it's a donation.
Well, since banks did destroy generally destroy information in seven years would be w it would probably be wise each year to download the banking information the end of each year for paper record >> it's uh I would say only again in the
accord it has to be has to be maintained in the uh in abidance with the document retention destruction policy right I We don't we don't recommend clients hold on to records for 20 30 years. That I mean that's probably not practical.
Although it sounds like maybe the city has retained some older records. >> Um but but like but I would say like you want to have a very clearly defined document transfer destruction policy and you maintain it for that that length of time, right? So I'm not going to advise you that you should hold on to it for 10
15 20 years. But what I am advising you is for this situation here, it's being transparent and make sure that all parties have the same documentation. So that way there's no question as to the funds that were received and how this fund were used and what the intended purpose was.
>> So the 2013 2014 donations not really identifying where they went. So did I I'm assuming you looked at revenue and expenditure reports of where the dollars could have gone into the parks or something like that because that's was was a designated
uh distribution for the 10% at one time about that time frame. So >> yeah, so I could I could I could trace and reconcile those numbers to the gambling tax uh and the audited financial statement. So I could see I could see it reconcile, but I can't necessarily what I was trying to do is
go dollar for dollar, right? So every line item that Ken's spreadsheet or I'll say Ken spreadsheet, but it might not be yours, but the one that you gave me, I tried every single contribution. What if it's for $10510, can I find that particular deposit into
the 2013 ledger? Okay. And what it looked like to me is sometimes I think there's certain contributions that might have been aggregated. So it might have been two contributions entered in as one, right? So I can't readily discern that and I don't have anyone here from 2013 that can tell me exactly how they
entered into the accounting. But so then I go, okay, let's back up. If I look at it from a holistic perspective for that year, can I get it to reconcile back to what the audit financial statements say? And I can. So in a perfect world, what I'd be able to do, I'd be able to tie
each single line item for that older time period back to the accounting without question. But this is in a perfect world scenario and we're talking about 2013 and we're sitting in 2025. But again, the audit financial statements tie back to basically the
same amount that's reflected in that spreadsheet for that time period. So I'm not really I'm not really all that concerned about because it it's within $400 for that. It's >> your time and our money. Yeah. >> Well, yeah. I mean, to spend $450 an hour to investigate a $400 discrepy and if I spend five hours doing it now, is
that a good use of the city's money? >> Maybe, maybe not, right? Uh but but is it there's enough level of comfort where it seems reasonable? That's all account for based on what do the financial statements say versus that spreadsheet. >> Thanks.
Did you say that the Goodwill donations expenditures exceeded what was donated? >> Yeah. So, so I was just showing you example engine too where uh so that would be well actually if I just show you
so this total here is roughly 226,000. This did not include engine 2. So that exceeded the 224,000 right there. not including engine two, right? Because I just want to I separated it because a lot of these occurred prior to 2024. The
last donation, last large donation, I think it was 2021. I think it was a $60,000 donation was the last large one. Unless there's one in 2025. I didn't look at that. Right. So, yeah. So, I wanted to just show like, hey, your spreadsheet shows $224,000. We're seeing
226,000 just with these alone, not even including anything on engine 2 that would have been covered with some of the prior donations. And um so I'll just briefly mention um if the city would like a copy of this PowerPoint, more than happy to provide it. Uh we did not write a written
report. Uh the reason being is again trying to be fiscally responsible. If there would have been significant findings, we would have drafted a report. But I think the recommendations speak for themselves. I think they're fairly clear. And again, they're in alignment also with what your financial statement auditors are saying with
respect to board resolutions. >> Yeah, I'd like to have a copy of that. That'd be great. >> Sure, I can do that. >> No questions. >> Somebody's in the way. >> That's the one we don't want to let in. Oh, that's the one that messes up the
screen and makes it black. >> Good. >> Very good. >> Good job. Thanks. >> Any other? >> Very good job. >> Any questions from online? Switch back. Marie, you're still with us?
>> I'm here. No questions. Thank you for your time and um diligence and helping us figure out um how we move forward. >> Thank you. >> And that you just had the one recommendation of taking all more
recommendations that uh so I'll go back to that. So there's actually uh three separate recommendations. Um there >> oh you can't see my screen, can you? >> Sorry. So again retaining those annual reports like I mentioned and also providing
those to the fire relief association board resolutions should exist and pro and retain within the city's documentation policy and then providing the support used to support the the use of goodwill donations that should be provided to the fire association as
well. That way, everyone has a copy of how funds were used and receeded in. And I'll just mention this third bullet point. If you look at your It sounds like you just received the copy of the financial statement off for 2024.
That's in linement with what the recommendation is. And we I didn't I didn't see the report today and this was created before then, right? So, we're on the same page as to what should happen with respect to border resolution. So, I'd highly encourage implementation of that. >> I just got those copies in the mail today, so they'll be in your boxes
tomorrow. So, if you want to swing by to city hall at some point, pick them up. >> You just did a whole group of resolutions, like a whole block of them, right? >> Yeah. To get caught up >> recently to catch up on these. >> Yeah. since Mel has come in and we've looked at this, you know, taking those
resolutions and putting them in and accepting those has been good for the last maybe four months, five months where we've done that every month by pulling them in. So I I mean >> Andrew had suggested to us No, I think that was great at least right away.
>> Yeah. So >> you guys have to be doing this. >> So that's what when we started doing that which was giving more of those and we'll continue to do them that way each month. have any donation resolutions come through and then I mean this is easy. This is an end of year report. We can
make sure they get all the documentation and get it to them at the end of the year because we'll have the end of the year forms that have to be submitted at the same time. And I mean it's all easy just to do all that. So >> So can you show the slide with the
donations and the expenditures and the $666 difference? I guess it was >> uh whi which slide >> that would be as she >> talking about uh >> 10% >> was it 10% this one right here?
>> No, it's the one it's a little bit further. >> That was it right there. >> 620. Yeah, but keep my >> the difference here is >> the spreadsheet from the fire association shows 51,610
from 2019 through 2024. Okay, >> the report shows actually more by $622. >> Okay, >> so they're reporting more is being received than what the fire relief association to me that might be related to timing over the course of time.
I don't it'd be you know if it was flipped and it was actually less being reported and it was something more significant it might be worth investigating but it's actually the opposite of what you'd expect right >> and it could be a December versus January on how >> more questions. Thank you. Very good
job, Jason. >> Okay, the questions. >> You're gonna send that to me. >> So, I'll send that I'll send the PowerPoint to Mel. I'll send it to you by tomorrow. >> Then you're going to send that out, Mel, to the rest of us. Okay. >> We're going to post it online as well.
And so, it'll be publicly available. >> We good? Everybody good? All right, thank you everybody online. Good job.