HomeMy WebLinkAboutThe Seaforth News, 1933-11-09, Page 3THURSDAY, NOVEMB'ER' 9, 1933.
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COMPLETE TEXT OF FINAL
OF HURON
NAU DIT
REPORT U 0 U
0
REPORT OF INVESTIGATIONS
OF F. P. GDBBS, CHARTERED
ACCOUNTANT, INTO -HUR-
ON COUNTY. 'FINANC,EES.
At tiro June meeting of the Council
ut was decided to engage a Chartered
Accountant to audit the books from
January '1st to May 31151, ;1933, and to
,install a proper system of bookkeep-
ing for the County of IHurori.
The Warden and the Warden's
Coinntittee instructed me according-
ly and
ccordingly'an'd -I commenced this work.
'ail I soon .found that there was no list
ofoutstanding cheques available as at
'Dec. 311st, 11932, and yet there appear-
ed in the bank books payments which
did not,appear to me to be reasonably
outstanding front 11932 The,'Cash
:Book for years had -r not been. added
and a cursory examination showed
that salaries had been,entered, month-
ly and again entered in total, at the
end Of the year. A's:no auditor's check
marks appeared in .tile cash book I
'asked the Warden's Committee for
(permission'=to go black' to atichexamine
the 1932records with a view to arriv-
ing at ra starting ;,point, Andtiher mat-
ter which, made me request this furth-
er power was •the';evident 'reluctance.
of the treasurer and; the clerk to 'pro-
vide the co-operation which I consid-
ered reasonable, •
The treasurer made no great effort
to help and assured me that'the miss-
ing chegiieswere s'imp'ly the 119313 .out-
standings which had been banded to
the Ca'retaker and could not now be
'produced, having been lost. The clerk
ihanded one invoices in a muddled con-
-diltion two -,or• three years being 'coli-
'•taiited in what purp.onted to be a year's
ip•ayments„'I31e made no effort, to have
then] sorted out according to order
Iniufiaber they had teen paid; under or
th c ' uum'bert of the cheque !issued
therefor, ,Moreover several accounts'
b aid ou one cite ' and no
would e ue
p q
statement presented,'
f was inforuted that t'he' county
"'rad keens" set : on.
building's chimney' 1.
dire just before rarriverl and ,that Mr.
Young had been sect. carrying, bask-
ets ' iii'k sa ers
. of evhr'te, yellow P 1 P,
'clown to the cellar -
It was, moat evident blit obstrue-
tive tactics `' were being en•f_o'ioyecl to
defeat 'the object of 'the dnvcstigation,
The Warden's Committee authoriz-
ed me
uthorized`me to ,bei back .over the accounts of
:1191312 andduring this exIatnination it
tbeocamevery euideat.that con iciera de
tocettred mainly b1i ac r aiinil Y nj
,+,,1 o,'_
h 1,'�.• 'ii `119313 as
1�9,3� tilt others t
;•tP
deemed it aclvtsable 'to } first
straighten out the matter of the bank
a
djsburscme9ts and this ',revealed
large number of :'iinissin cheques
g g
of , amounts a0
w�ilth'alecurrencc of ac o a $
fi1L25,00 .anti -'so on,
If then turned my ati
ention.' to the
tracing of r000ip(5 (0 the ,bank and
, , etc i '.. 1:. -.
this 'rc'su.ltcd in dtscou5riag' that :a
:large number of ;tents had no't reach-
ed sr -fine f licit were en -t-
•ell the bank, st1 t o rot
er d i. dire cash. tool whole others
� ie nt
a•`. eared. to ,the receipt 'bodies
Pp
I a'Itso noted that'•ti;one off ,the receipt
hook were numbered 'souseuttvei
y
and that receipts had 'been abstracted.
in the case of some of the stub re-
ceipt books there were 'blanks leaving
no clue as to the use ncade of the re-
ceipt form. I communicated these dis-
coveries to the Warden, Mr. Ballan-
tyne, and to Mr, 'Goldthorpe,' Chair-
man of the W'arden's Committee, ia1-
foraning them that 'I intended to use
the power of an auditor conferred in
the, Municipal :Act "to administer: an
oath to any person concerning any ac-
count or other ,.natter to 'be audited."
I next ; consulted the 'County Solic-
itor, Mr, R, C. Ilays and Mr. Young
was tealled ,for examination and sworn,
?[r. Young admitted to .having appro-
priated approximately
1ppropriated'approximately $$600,00 of re-
ceipts and to having duplicated his
salary on five or six occasions. He
signed a statement to that effect. Mr,
Young admitted that he did not issue
receipts' unless asked for but assured
us under oath that those were all the
defalcations.
Mr, Young further signed an order
nn the bank authorizing me to exam-
ine his bank account and then signed
his resignation.' 'This occurred ` on
.August ]'6th, 1191313. I took'possession
of htr. Young's office refusing to al-
low him to take any papers therefrom
and padlocked the :office ?so that '1.0
Cite havitilg a duplicate key could gain
On August '18th, the Briclay follow-
ing, on being called for re-examina-
tion Mr.: Young appeared accom'pal-
lcd shy this solicitor, the 'tatter of '.whom
advised me that the further items I
hacl discovered in the meantime, in.
the cashing °IF a bond were
aclntitted' by his. client "•`without •p'reju- ceipts uulaccounted for and '•$1090.00 eel on charges of conspiracy and hrib-
dice" further, stating that his client cheques traced bo the bank account of ery;,and at the time of writing are still
+vas anxious to assist me in every way Mr, Young includiing $550,00 of elle- awaiting trial,
but would make 60 is'criminatimg quer explained later on,, I"have- already mentione'd ,the fact
statements. It nest be inenitionecl that the it.- that it was not custoniary ,10 total the
As Mr. Young could, give'. very little vestigattou 'of ,139128 was abortive for main cash book or to make check
inforntatilon that wp-uld be of assist- the folllowing reasons: marks in it 'although ,an audit stamp
i a
ince without tnv
%crtnartnlg Inutself. l) Mt- Young's acpouitt was then was affixed •each year with the, execp
lie was excused 'L:atter in lite day Mr,: in the -Standlard 1B•antic (how defunct) tion of '19312, The foll'owin'g are the
Youngwas arrested., Iand only the Ledger sleet was avail-
slgtiiatut_es the main
n
cash book ac
-
next
neat5x11cd M rGWIIotlan !able, ane of has c1mtitt slips ,nattg the 'audited"
stamp.
the Clerk who to Any surprise appear- coultI be Produced. • 192,7_, \ } i .t
Y 1� )' t. ,1 crtei'ht,d, Robert
the County officeswithinthe last from a,hotel in Clinton. asking ;him :to
three years the .Solicitor said, "I would attend on the following 'Wednesday.
not, think this man would be in a-po- 13th, t0 assist me in clearing up cer-
sition to judge, and do not think he tain matters, On Wednesday, Sept,
could answer that," and;.11r. Holman 113th' I telephone,d Mr. Rader who
stated, "Any irregularity? No." An claimed that he had not received the
admission was also made that isaiary letter and tan ander was issued for him
cheques were issued' before the end of to attend for examination asi ;Sept:
the month and that both 'he land Mr. •18th. At this', inquiry ,ler. Rader pro-
Y'oupg:had received their August sal- duced my letter which he said was de-
cry 'before ,August 10oh. ht had also livered after I had talked .•to 'him 011
been the practice to pay $150.00 to the 113th, and the envelope was found
both 'Mr. Holman and Mr, Young for to have been stamped Dashwoocl
each of the (first ttvo, months of the Sept, 113th, Mr. Rader's mennory left
year .and the balance of the annual sa- hini entirely `during tint exitmmation
lary monthly: and he could not remember Mr. Tay -
After the arrest Of Mr. Young': the lor's wanting, but thought it -might
'Warden's Cotiiuiittec decided to ex- hat -e referred to an overdraft of 'tic'
tend the inquiry to the years '1930 and County. I -le was informed that there
119311. 'On September 2nt1 a detailed had been no overdraft on County.
statement of the shortage then iliscov- flims during the ,year 19312 and that
erect amounting to $10,046,71, consist- had, there been the Treasurer would
mg of receipts not accounted for have been called and not the Warden,
$3;51112,35, and eheques traced to lIr, \'lr. Rader however, was unable to re -
Young's account amounting to $6,- collect ,anything which would be of
53!3.96: was presented in Court ,v'io'l value to the County 51111 prefixed all
the 'prisoner's Counsel asked for a his answers with "I do not remember"'
week's: remand ' that he ;night study or words to that effect. He could not
the particulars• therein contained..' On recollect the object of a visit to the
September 9th Mr. Young pleaded home of Mr. ' Pemp about this time
guilty to three charges 'that of theft, and Mr, Goldthorpe who acceunpan-
nf briltel•y and conspiracy, and of mu- led him says 'he evtts not informed of
tilabiati and destruction of records, and the object of. ,the visit. Another con -
was sentenced by liagis'trate Reid to fcrence I understand took place ,.vita
one year determinate .and six months Mr. I{ellp later, with others present.
indetetintinate at ,Guelph Reformatory
on each count, the sentences to run
concurrently.
On October 10th, '1913:3, Mr, W. B.
Common, IK!C.,;:aplpeariitg for the .At-
torney -]General :of Ontario was graut-
ed.leave to appeal the sentetic,e by Mr.
Justice W. E. Middleton at Osgoode
S was instructed .by the Warden's
Committee to investiga',te'the accounts
of :119138 incl :19129 and ,further shortages
were 'discovered in 19129 ]amounting to
$1;798:56 of which $70181515 was for re-
11ut 'I have been unable to discover
w11at took place at that time, Mr. Roy
Patterson, the Coun'ty Engineer swore
that he had warned 'Mr. Rader of ir-
regularities,.
My instructions were again amend-
ed to prepare financial) statements as
at August 116111, the date of Mr,
Young's resignation.
As a result of confessions made by
Mr. Gordon Young and by Mr. ,Rob-
ert Higgins, the auditors of the Coun-
ty for the year 11931, namely Robert
[Iiggins and W. T. Booth were arrest -
er1 also dccontby p ps for ,the girls,-
• panted the s'oJ'- ) T taE no deposit � all s fa
rc t who ,• Count to..show the' dotal E I
itn tt o demta�nxled pl•ohectnon tot y. Is o what ,(19138-+.�: E. Erwin, A. Porterfield,
. 1. l
his cheat •nattier the Catiacla Evidence 'hadbeets deposited, coulee be Produc- 131929—A. ,E. Erwin. tn, Jahn L,tntttnn,
:Act although tto 'charge,''had,'been ed far the,, seine team), 1930 --.John Carncroti, A. 13. Irwin.
i e), 'That. the ' ,
made, against Mr. TTohvan.. f) �• t to ;cheques or Lie, :colli- ...11931 12oiei,t Higgins, Juttii-Cantcr-
11t is otio of, the defects of the pow•- ty's General account ofy
lbaC •e'ar had on,
ors given to fui[Itors undet' the manbeen'destro ed. Iqt2--, to. :
stamp or signature.
ici Pal i
.ludi-
act''ihat ,there no piovisioi, for ar I rstood,: hal because torstirere: Rol1ent r.
the auditor to extract evidence frons a of the lack of, invoices` and other Bootli
,
Ieluctant nerson„'ma,t
but this tet I s no cotn1pleke audit has Veen I. would cell your attention to the
being, considered and'macle,of anv Pe rod men'tion'ed herein l • +
understand is t5t cons tlerec 1 act '.'that al.houglt these s}fortages,
t
]esti ap'peat beaior�e' the Landtth Legislature at a t lti s ree 00.11,51 C1,,. have` been continuing ' ear aTtei- ,year
the 10101 session for amend'ntent, ed ,t0 the tight of an invtesltigation with 'and two auditors have bean appointed
Mr.' ,Holm,ant stated that
; ;he had no lnsufficietl. , material. No Gener,al eael year itt the six years only five
e dii-
ktowledgeof anyshortage,'andpron.': Ledger existed. an
d continuity ferent hien have been appointed.
i:ed to pr,oduce the invoices for #ctout] tcnce,d&ant year to year. It is 'Very- .evident .
Y . t t that a Conipartst?tt
paytvents., made tet ,proper' order, ,I lOti SapL 9th, 1936, 1Tr, Tohtt Iiun of the receipt boots'with 'the cash
111 'say that a hla enof yet r cciwc'd ter Taylor, Manager f the Cafarlian'hbok
and'deposits wortlld have a•t once
at. ''
invoices sled v'eucifers in such a coil Malik of Cotnnier ce Goderich was brotighi to ,'light' the 'Fact that flit
clition that they ,can be audited, examined and stated that he waved] Tretstu'er Was, not `diepo ttutg ;ail
the.
re-
Ih�and,. Ilrolman ad,nnttethat o� e.fere
then Warden of ''Gouttt , .ht tcenpIts
or entering all of then;;ln the
been'sinod lu<.blankbvMr, Louts Louis Rader of' two cheques inliar- cash
book. TheTreastner's pollicy of,
,Rader ,and the Wardens 'pr'e,ceclii g hint hicular 'and et the practice 3111 getleral not giving a "receipt unless: rereeststI
tile relieves and amounts b,eisg insert- of Mr, Young putting into'his ,account to do, so left ;proof of ttatreceiptecd 'pay -
been..
ed aFterwf ods am�dthat,lvGr..:; i lllan't'i, lore„ehelques oE„ the C.ottlhty thani,a - metiP it ,h .': ,,
t. e', �a 3., • P t the hands of ,the payor,only,
hi1ld°'the tiny IWtardien'who.'had''peared fe he;ptiopet, There,was•however- abundant orocf
this. , On Sept, '1111th, 3 n
refused to do ,this, W1hen' asked i8 he 1 19I r3, Nb;out 2.30 port where receipts. 'had been issued, since
.,
;head noticed any irregularity in any of,iI 'marled a letter to Mr. T,ouis Etla�dei'I dtave been able to discover $'I;�11,33
in the four and a fraction years I have
investigated,
'In the 'General Cash ,Back the banlc
columns were not used,
The Auctioneer's license Receipt
bo it bears no marls of previon; audit
ttnd there are several blank stubs,
' The 'Pedlar's license Receipt book
t•£a w s marks of stubs torn out about
]larch, 1930, and Jaltuary, 1931 There
were also 'blanks in 19130.
The Tax Receipt Books are fasten-
ed together very loosely, one of them
;with siring and when I examined ;Mr.
Young's desk after his resignation I
found a number of these stubs con
taming details of receipts which mad
been extracted froth. the book and for
which ,no entries appeared elsewhere.
The (General ,Receipt book is a
hound book but receipts have been
to,rn out no"lexplanatioh of the
use of the receipt.
A number of .cheques .in 1932 seem
to have been stamped with the audit
stump' though What they were com-
pared with to merit that stamp I have
been unable to, discover, A:consider-
able number of cheques were destroy
ed just sbefore I commenced the audit
and I cannot say 'whether they were
audited or not. They shotild have been
checked however against the cash
book, the cheque stubs or the vouch-
ers. The cheque stubs contained many
blanks' which we .:now know corres-
pond to the cheques retold in Gordon
Young's account and surely there
would have been an dnquiry' as to
what these: blanks meant, The vouch-
ers do not appear to have been ex-
amined and are iii such a state of dis-
order that I have been unable to du
'anything with, them. Of course they
may have been purposely 'mixed be-
fore I started my audit or they may
have been in the .sante condition be-
fore. The latter, T feel, is the correct
solution,' y'et attention apparently was
never drawn to this most important
failure to accot3nt not only for monies
paid, but aiso as to the propriety of
payments,
b.1 the absence 'f check ,.narks in
the cashbook I amat a loss to ac-
count for the auditing of the cheques.
The (General account Debit slips
show some marks which niay have
been made by the bankers.
obviously incorrect as in tis: year 1925
33,)Y00,01 was disc and payable. One
of the .auditors that year 05 'Gordon
P'ottng, lit 110'23 Gordon. You 1 sti11.;
being tett 10,10i'toit, the 0Itts'tari Mg deb-
entures were shame as $11.13,011f1 ,tot---
,vitlistanc'ing the fact that a further
ti23,50000 had been Paid and Inco- dub -
on tures should have been slm von at
$1122,50.0,00, In 11937 the debenture deli:
was shown as :$$716,000,00 though as
$44,500.00 had been pair], the tota.1
should have been $78,000.00, 1n 1928
110 total4sgiven: ihhut as $39,540.00 ,had.
been paid the 1)0151ce should have
been seated at $318;'500:00. 'In the yairr
1C39 830;000.01) war due and payable
showing;a balance or $18,500,00 as ow-_
ing 00' the Patriotic debentures. En
July .1933 the trent atning'Patriotic ' d --
licit tures were pair] off'and, found to
be $19,50.0,00 and '�'it•would : therefore'
appear that the Debenture statements<
have been continuously incorrect by a
$1,000:00 13ond of the "A series 1915
issued for 1.3 years and due in 1033.
A very strange' point in l connection
with this is that while the'liability for
these debentures has been 'stated for
aonte tithe at $118500,00 interest has
been paid 011 $19,500.-00 '.annually. It
was found that for several years tht
envelopes containing the paid coupons
received from the 'bank had not bees.
opened,
The 1119312 envelope was however op-
ened but no audit stamp 'or cancella-
tion nark had been placed uponthe.
coupons:
Among the papers found `£n (Gordon”
Young's residence wider the search
warrent there Were carbon copies' :of
-the auditors' report for previous years,
which might indicate that the reports,
were made by Gordon Young, even
to the complimentary remark- regard-
ing the Treasurer.
It would appear that the accounts,
payable were not properly stated in
19312. They showed $320.98, whereas
from such information as has been av-
ailable to me I show a total of $2,762,-
88 at December 31st, 1932.
The condition of the tax arrears
book is such that no otic can tell ex-
actly what has happened and the
Township Treasurers have been cool-
municated with in an effort to find out
Two cheques appear to have been exactly what taxes were in the coon-
issued to Mr. L. I -I, Rader, Aro, 48001 t'y's hands for collection what evert
and No, 41861 both fc' $13,50 00 ,.Feb collected by the county- treasurer and
ruary 20th, 19312, one or these was not what were paid over by the county to
entered in the cash book i the townships. The book has not 'been
!:rhe County auditors .appear to written up fuily. There has app'aren'tly
have checked the cheques in the high -,'been no check made by the autl•itors
ways account 'against the vouchers and ;note of the .items marked "reatit-
since bath are stamped but it is e1i- 'ted” were found not to have been re -
dent their verification was not tltor-. mitted at all. These latter remarks re-
ough as they would have found th1sc for particularly to the 1932 audit:
cheques w•hicit have been issued with-; .-v further point T would like to make•
out a voucher and which are missing- is that apparently since 1930 no bans:
at, the present time.
,reconciliation was maele_'
The auditors rep
None of the audit procedure seemreportsdidnot agret
to have been complete• i either inreceipts or disbursement:
An examination of the auditors' re' kith the 001.051 deposits and disburse -
An t a
,p'orts as Printed in the ,County R''',omen's as discovered by me through
ports of the various years shows that all examination of the bank ttahsae-
in 1932 tr total of 20'1.000.,00 was; shown
,.toils, 1 -'am informed that after a state -
es owing on debentures, This war er
had been built it1 1 b the treasur-
es
by a listgiving full in -t
er the difference between the balance
,formation of 'tete debentures autstand in -
shown and the balance in the banking. In d1192i3 the debentures were re- book was called "outstanding che-
ported at .$11380000.00 certain debed- ques" although there was no list tt,
tures amounting to .$33,000.00 Ravin justify this statement. As a result I
been paid. In 1924 .the sante total is found the outstanding cheques shown
,given and no debentures were cite in at'the clef of a year £n disagreement
that year, In 19.25 the auditors mads w h the amount of autstandin chn-
the remark "the debenture debt rc- goes paid during the next year, as the
mains the' same as last year." This w^as0 following table s'hows:
Outstandings shown as
1O'utstandings per paid nes year in
Year. Auditor's report. Audito'r's (Report.
County General Account— %,
111938 13 it 71718.50
111929 5;2170.64 5,270.64
'1930 1112,212129 112,39169
1193'1' 3,808.012 5133313,03
1131 111',1213011!6
County Highways Account -
1938 $ 7311(5.67
11929 4,899.815 14,899,85
111930 5;642:07 5,6412.017
19,301 10,190,217 8,531,.711)
11032 3;607.43
Tltr auditors ,its the past w crit 5\ 11-0
enti • of . t.
y ig tmovant GI e use of 'a sinking
fund for when the balance of the fait-
rsottc Debentures matured July, ,1933,
there IN as practically no provision for
the rep'ayittettt of the $19.500,00. Titer::
bank
W18 a neeo nut for the purpose
but it contained only a small ttnl,1;1att
and the tnethort or its operation mattes
it evident that it was an interest ae-
count only.
1 ant gfa3 to state that the txi til
debenture fa: $100,000.00 is an instal -
1110111 debctttnre and therefore: reciitirt.t,
no Sinking (Ftoid.
It is not any pnrpnse to judge the
actions ,of the attciitors, 'They are, I
understand, to appear before the
courts land the facts of the case will
thien he laid beforeh
t. ew For licit' de-
cision.
Financial Statements,
The financial
statements attache:l
wlticit are listed on the 'fids: page of
this report are t0ww> discussed, Two
,B:a,lance !Sheets are presented one as
at;August 1116t1,, ,193;3, anld the other as
at,Decenvber 31st, 119102, andareto be
found on tExitibits '.0 and •C; respect-
ively. These are drawn up in :three sea-
tions showingCrap ita1 'R e
P e1 cone and
Tr`
ust section, separated.
Tlt e
CaAi.fall sectiout dealswith the
pi'.openties,,owned by the county ns
against the Banded ;i,debtedaiess, The
Outstandings as shown*-:
by my report
Cheques missing
not ascertained
1$ 231715.92 ehequct
1123140.54 missing.
No information
Not ascertained
$ 7,447.1H
3,768,35
Revenue section is the tnost import-
ant 0115 since it sliewS the. Cllt'retnt as-
sets and liabilities and indicate: the.
Surplus 00 'Deficit iclue to tilt opeia-
tions of 1he comity apart from all cnai-
slder•rti'ons of Capital or Revenue
7'he Capital !Sections in each case
contain •the pa'oper'(ic:5 at valtiat•oars
shown f., the 11!132 auditor's reipori-
;I'atrtiternrore, 1 have added as1.
a1 asset
the amount of the iritovinci.il 111 -11 -
ways de',>entures o,ltat'stncliug as 11 t -o.
pre'enrs the coun'ty'; interest ih 111
1?not£nda': ITighwttys 11 4110 111101111'
paid therefor,'less tie a'titnunts ,rc:
paid. At December 31st, 1932 1 s'Ifmm
the (Patriotic Debenture diability a1
819,500,00 and ' 1
�, h sinking
s lioul t
].have been provided for this c'c=
bentote it is stated 'withouit rho usul_:
asset. This is the debenture which h;zr
;'been shown at $118,1500,00 Mitre ;19124 tb:ttt
on which `
c , interest Inas; been paid 'fir
$19,500.00. The debeittutes were tctn-
4
ally ,redeemed in T'uiy, 1033, at the lar-
ger 'figure.
T'be (Revenue
section in each isaf-
ance sheet 3 by ;far the lnost'
II Ctatr-
"int ori the three sections for r;asiotrs
'already stated.
1A111
1Al'1 'bank ascott1 r
t, have 4pecn voce -
tiled a; at tete-,&rites of the (Bilinet.s
$heels,acid sulci 'other'verifica'(iols.'
t at,
1 mlatle as were possible,