The Clinton News Record, 1933-11-09, Page 3°THURS., NOV. 9, 1933
Report of Authorized Auditor Into
Huron County's Finances.
Over $11,000 Shortages. Not Known How
Much More as Vouchers Lost or Destroyed
The following is the report of F.
P. Gibbs, local chartered accountant,
into Msinveetigation into Huron
County finances. Mr. Gibbs' report
was :handed to Warden'Ballantyne of
Huron County last week. •
Introductory
cil it was decided to engage a 'Ohm -
tend Accountant to audit the books
from January 1st to May 31st, 1933
and to install a proper system of
bookkeeping for the County of Hu-
ron, •
The'; Warden and the Warden's
Committee instructed me •accordingly
and I commenced this work,
Isoon found that there was no
list of outstanding cheques available
as at December 31st, 1932, and yet
there appeared in the bank books
payments which did not appear to
an to be reasonably outstanding from
1932. The Cash Book for years
not been added and a cursory exam-
ination showed that salaries had
been entered monthly and again en-
tered
an:
teredin total at the end of they
As no auditor's check marks appear-
ed in the cash book I asked the War,
den's Committee for permission to
go back to and examine the 1932 re-
cords with a view to arriving at a
starting point, Another matter which
made me request this further power
was the evident reluctance of the
Treasurer and the Clerk to provide
the co-operation which I considered
reasonable
The Treasures; made no great ef-
fort to help and assured me that ha }the
e
missing cheques were simply
outstandings which had been handed
to the Caretaker and could not now
be produced, having been lost. The
Clerk handed me invoices in a mudd-
led condition, two or three years be-
ing contained in what purported to
be a year's payments. He made no
effort to have them sorted out ac-
cording to order number so that a
proper check could be made. These
invoices contained no mark indicating
the order number they had been paid
under or the number of the cheque
issued therefor. Moreover several
ea -
counts would be paid on one
que
and no statement presented.
I was informed that the County
bu11dm
's
chimney 'mne
y
bad
been
set
on
fire lust e heithat
Mr. Young had ben seen andi>
baskets
of white, yellow and pink
papers down to the cellar.
It was most evident that obstruc-
tive tactics were being employed to
defeat the object of the investigation.
The Warden's Committee authoriz-
ed me to go back over the accounts
of, 1932 and during this examination
IF became very evident that consider-
able shortages had occurred, mainly
in 1932 but others in 1933 also.
I deemed it advisable to firs
straighten out the matter of the beets
disbursements and this revealed n
large n?unber of missing cheques with
a recurrence of amounts $150.00
$125.00 and so on.
I then turned my attention to the
tracing of receipts to the bank and
this resulted in dicovering that s
large number of items had not reached
the bank, some of which were entered
in the cash book, while others appear-
ed in the receipt book only.
I also noted that none of the re-
ceipt books were numbered conse-
cutively and that receipts had been
abstracted. In the case of some of
the stub 'receipt books there were
blanks leaving no clue as to the use
made of the receipt form. I com-
municated these discoveries to the
Warden, Mr. Ballantyne and to Mr,
Goldthorpe, Chairman of the War-
dee's Committee informing them that
I intended to use the power of an
auditor conferred in the Municipal
Act "to administer an oath to any
person concerning ant account or
other matter to be audited"
I next consulted the County So,
licitor, Dir. R. C. Hays and' Mr. Young
was called for . examination and
sworn. Mr. Young admitted to hew-
ing appropriated approximately $600.
of receipts and to having duplicated
his salary on five or six occasions,
Ile signed a statement to that ef-
feet, Mr. Young admitted that he
did not issue receipts unless asked
for thoseut weresured all hes under defalcationsth hat•
.
Mr. Young further signed an or-
der on the bank authorizing me to
examine his bank account and then
signed his resignation. This occur-
red on August 16th, 1933. I took
possession of Mr. Young's office re-
fusing to allow him to take any pa-
pers therefrom and padlocked the
office so that no one having a dupla'
eate key could gain entrance.
On August 18th, the Friday fol-
lowing, on being called for re-exam.
ination 'Mr. Young appeared accom-
panied by his solicitor, the latter of
whom advised me that the further it-
ems i had discpvered in the meantime
including the cashing of a bond were
admitted by his client "without pre-
judice" further stating that his client
was anxious to assist me in every
way but.would make no incriminating
statements.
As Mr. Young could give very little
information that would be of assis-
tance without incriminating himself
be was excused. Eater in the day
Mr. Young was arrested.
I next called Mr. G. W. Holman.
the Clerk, who to my surprise ap-
peared also accompanied by the same
solicitor who demanded protection
for his client under the Canada Eva-
dence Act although no charge had
been made against Mr. Holman.
It is one of the defects of the
powers given to Auditors under the
Municipal Act that there is no pro-
vision for the auditor to extract evi-
dence from a reluctant person, but
this matter I understand is being
considered and: may appear before
the Legislature at the next session
for amendment.
At the June meeting of the Cairn; Mr, Holman stated that he had no
knowledge of any shortage and prom-
ised to produce the invoices for the
payments made in proper order. I
may say. that I have not yet received
invoices and vouchers in such a con-
dition that they can be audited.
No Corti is a Fixture with
Buckley's (Mixture
No, sir. No matter how bard and deep-seated
Your cough or cold may be, BUCK¢EY'S
MIXTURE will conquer it in next to no time.
The very first dose gets down to business ,—
you zap feel 0 doing yon good.
*fie lightning -fast action amazes everybody
when they take it for the first time.
If you, or any member of your family, has
a cough, cold, 'fiu or bronchitis, try Buckley's
and be, convinced. Refuse substitutes. Buck•
teY'e ie told evorywbere.
Mr.' Holman admitted that orders
had been signed in blank by Mr.
Louis Rader and the Wardens pre-
ceding him, the names and amounts
being inserted afterwards and that
Mr. Ballantyne had been the only
Warden who had refused to do,this.
When asked if he had noticed any
irregularity in any of the County of-
fices within the last three years the
Solicitor said, "I would not think
this man would be in a position to
judge and do not think he could ans-
wer that" and then Mr. Holman stat-
ed, "Any irregularity? No." An ad-
mission was also made that salary
cheques were issued before the end
of the month and that both he and
Mr. Young had. received their August
salary before August 18th. It had
also been the practice to pay $150.00
to both Mr. 'Holman and Mr. Young
for each of the first two months of
the year and the balance of the an-
nual salary monthly.
After the arrest of Mr. Young the
Warden's Committee decided to ex-
tend the inquiry to the year 1930 and
1931. On September 2nd a detailed
statement of the shortage then dis,
covered amounting to $10,046.71 con-
sisting of receipts not accounted for
S3,512.75, and cheques traced to Mr.
Young's account amounting to $G,-
533.96 was presented in Court whet
the prisoner's Counsel asked for a
week's remand that he might study
the particulars therein contained. Or
September 9th NIr. Young pleaded
guilty to three charges, that of theft.
of bribery and conspiracy, and of
mutilation and destruction of records.
and was sentenced by Magistrate
Reid to one year deterdinate and six
months indeterminate at Guelph Re-
formatory the sen
ten -
co
each ,
instar
fo Y oncount,'
ties to run concurrently.
On October 10th, 1933, Mr. W. B.
Common, K:C., appearing for the At-
torney -General of Ontario
grant,
ed leave to appealtarby
Mr. Justice W. E. Middleton at Os-
goode Hall.
I was instructed by the Warden's
Committee to investigate the account;'
of 1928 and 1929 and further short -
eget were discovered in 1929 amount-
ing to $1,798.58 of which $708.58 was
for receipts unaccounted for and
u090.00 cheues traced to the bank
c cunt of Mr. Young including $550.
of cheques exi+lained later on,
It must be mentioned that the in-
vestigation of 1928 was abortive for
the following reasons:
(a) Mr. Young's account was then
in the Standard Bank (now defunct)
and only the Ledger street was avail-
able, while none of his deposit slips
could be produced.
(11) That no deposit slips for the
County to show the details of what
had been deposited, could be pro-
duced for the same reason.
(c) That the cheques of the Coun-
ty's General account of that year had
been destroyed.
It will be understood that because
of the condition of the books and of
the lack of invoices and other vouch-
ers no complete audit has been made
of any period mentioned herein, anti
that this report must be considered
in the light of an ineestivation with
insufficient material. No General
Ledger existed and no continuity
could be traced from year to year.
On 'Sept 9th, 1933, Mr. John Hun-
ter Taylor, Manager of the Canadian
Bank of Commerce at Goderich was
examined and stated that he warned
the then Warden of the County Mr,
Louis Rader of two cheques in par
tieular and of the practice in gener-
al of Mr. Young putting into his ac-
count more cheques of the County
than appeared to be proper.
On Sept. llth, 1933, about 2.30
pan, I mailed a letter to Mr. Louis
Rader from a hotel in Clinton ask-
ing him t., attend on the following
Wednesday the. 13th, to assist me cn
clearing up certain matters. Ott
Wednesday, Sept. 13th I telephoned
Mr. Rader who cleimed that he had
not revived the letter and an order
wits iss aid ft r him ro .e t11 ta.l for ex-
amination `^ sett 18th. •1t this in'
quire Mr. Rader produced my letter
which he said was delivered after 1
had talked to him an the lath, and
the envslope was foi•nd to have bean
stamped Das.1w;ad, Seo' lath. Mr.
Rader's memory entirely left him
him during this examination andhe
could hot remember Mr. Taylor's
warning, but thought it might have
referred to an overdraft of the Coun-
ty. He was informed that there had
been no overdraft on County funds
during the year 1932 and that had
there been the Treasurer ytoold have
bhfeen r. Rader
a called
a and however notthe
hWarden,
to
recollect anything which would be of
value to the County and prefixed ail
his answers with t`I. do not remem-
ber." or words to that effect. He
could not recollect the object of a
visit to, the home of Mr. Kenn about
this time and Mr. Goldthorpe who
accompanied him says he was not in-
formed of the object of the visit,
Another conference I understand took
place with Mr. Kemp later, with oth-
ers present, but I have been unable
to discover what took place at that
time. Mr. Roy Patterson, the Coun-
ty r1aga-mew swore that he had warn-
ed 'Mr. Rader of irregularities.'
1My instructions were again amend,
ed to prepare financial statements
as at August, 16th, the date of Mt.
Young's resignation.
Auditors and Accounts I
As a reedit of confessions made
by Mr. Gordon Young and by •Mr,
Robert Higgins, the auditors of the
County for the year 1932, namely
Robert Higgins and W. T. Booth were
arrested on charges of conspiracy
alommnesiamammnase maw
THE cir1NTON NEWS-RE(".ORDJ
and bribery, and at the time of writ-
ing are still awaiting trial.
I have already mentioned the fact
that it was not customary to 'total
the main cash book ov to make check
marks in it although an audit stamp
with the signatures of the auditor;
was affixed at the end of each year
with the .exception of 1982. The fol-
lowing are the signatures in the
main cash book accompanyipg . the
"audited" stamp.
1927-A. Porterfield, Robert, Hig-
gins,
1928—A. E. Erwin, A. Porterfield
1929—A. E. Erwin, John Cameron.
1930—John 'Cameron, . A. E. Erwin.
1931— Hobert Higgins, John Cam-
eron.
1932-1No stamp or signature
Auditors were:. Robert Higgins, W.
T. ,Booth.
I, would call your attention to the
fact that although these shortages
have been continuing year after year
and tato auditors have been appoint-
ed each year, in the six 'years only
five different men have been ap.
pointed.
It is very evident that a compari-
son of the receipt book with the'cash
book and deposits would have at once
brought to light "the fact that the
Treasurer was not depositing all re-
ceipts, or entering all of them in
the cash book. The Treasurer's pol-
icy of not giving a receipt unless re-
quested to do so left proof of anre-
ceipted payment in the hands of the
payor only. There was however a-
bundant proof where receipts had
been issued, since I have been ably
to discover $4,221.33 in the four and
a fraction years I have investigated.
In the General Cash Book the bank
eolunnis were not used.
The Auctioneer's license Receipt
book shows narks of stubs torn out
about March, 1930, and January, 1931
There were also blanks in 1930.
The Tax Receipt books are fasten-
ed together very loosely one of then
with string and. when I examined Mr.
Young's desk after his resignation I
found a number of these stubs con-
taining details of receipts which hall
been extracted from the book and
for which no entries appeared else-
where.
The General Receipt book is a
bound book but receipts have been
torn out with 310 eapianation of the
use of the receipt.
A number of cheques in 1932 seem
to have been stamped with the audit
stamp though what then were com-
pared with to merit that stamp I
have been unable to discover. A
considerable number of cheques were
destroyed just before I conllnenced
the audit and I cannot say whether
they were audited or not. They
should have been checked however
against the cash book, the cheque
stubs or the vouchers. The cheque
1
b arks which
man
y
u contained
st bs
we now know correspond to the cheq-
ues found in Gordon Young's account
and surely there would have been an
inquiry as to what these blanks
Meant. The vouchers do not appear
to have been examined and are in
such a state of disorder that I have
been cable to do anythino with them,
Of course they may have been pur-
posely mixed before I started my
audit or they have have been in the
same condition before. The latter, I
feel, is the correct solution, yet atten-
tion apparently was never drawn in
this most important failure to account
not only for monies paid, but also as
to the propriety of payments.
In the absence of check marks in
the cash book I am at a loss to se.
count for the auditing of the cheques
The General account Debit slips
slimy some marks which may have
been made by the bankers. ,
Two cheques appear to have been
issued to Mr. L. H. Rader, No. 4860
and No. 4861 both for 813.50 on Feb-
ruary 26th, 1932, one of these was not
entered in the cash book.
The County auditors appear to have
checked the eheaues in the Highways
account against the vouchers since
both are stamped but it is evident
their verification was not thorough
as they would have found those
cheques which have been issued with-
out a voucher and which are missing
at the present time.
None of the audit procedure seems
to have been complete.
An examination of the auditor's
reports as printed in the County,
Reports of various years shows that
in 1922 a total of $210,000.00 was
shown as owing on debentures. This
was substantiated by alist giving full
information of the debentures out-
standing. In 1923 the debentures
were reported at ,$168,000.00, certain
debentures amounting to $33,000.00
having been paid. In 1924 the same
total is given and no debentures
were due in that year. In 1926 the
auditors made the remark "the deben-
ture debt remains the same as last
year." This was obviously incorrect
as in the year 1925 $22,000.00 was
due and payable. .one of the auditors
that year was Gordon Young. In
1926 Gordon Young still being an
auditor, the outstanding debentures
were shown as $143,00000 notwith-
standing the fact that a further $23,-
500.00 had been paid and the deben-
tures should have bean shown at
$122,500.00. In 1927 the debenture
debt was shown as $76,000.00 thougl"
as $44,500.00 had been paid, the total
should have been $78,000.00. In 1928
no total is given but as $39,500.00 had
been paid the balanec should have
been stated at $38,500.00. In the year
1929 $2.0,000,00 was due and payable
showing a balance of $18.500.00 as
owing on the Patriotic Debentures.
In July 1933 the remaining Patriotic
to be
debentures
$19.6 0 were aid 00 end .it (would there-
fore
ere
fore appear that the Debenture state-
ments b have lthe""A"n
incor-
rect by a 8100000 Band of
.series 1918 issued for 16 years and
due in 1933.
Ai very strange point in connection
with this is that while the liability
for these debentures has been stated
for some time at $18,500.00, interest
has been paid on $19,500.00 annually,
It was found that for several years
the envelopes containing the paid
coupons received from the bank had
not been opened.
The 1982 envelope was however op-
ened but no audit stamp :or cancella-
tion mark had been placed upon the
coupons.
Among the papers found in Gor-
don Young's residence under the
search warrant there were carbon
copies of the auditor's report for pre,
vious years which might indicate that
the reports were made by Gordon
Young, even, to ' the complimentary
remarks regarding the ,Treasurer.
It would appear that the accounts
payable were not properly stated in
1982. They showed $220.98, whereas
from such information ea has been
available to ane I "show 'a total of
$2,762.88 at December 318ii, 1932.
The condition of the tax arrears
booklis such that no one can tell ex-
actly what has happened and the
Township Treasurers have been 'eon1.-
hnunieated with in an effort to find
out exactly what taxes were in the
county's hands for collection, what
were collected by the county treasur-
er and what were paid oyer by the
county to the ;townships. The book
has not been written up filly. There
has apparently been no check made
biy the auditors and some of the it-
ems marked "remitted" were found
not to have been remitted at all.
These latter remarks refer particul-
arly tc the 1932 audit.
A further point I -would lace to
make is that apparently since 1930
no bank reconciliation was • made,
The auditors' reports did not agree
either in receipts or disbursements
with the actual deposits and disburse-
ments as discovered by me through
an examination of the bank transac,
tions I alp informed that after a
statement had been built up by the
treasurer the difference between the
the balance shown and the balance in
the bank book was called "outstand-
ing cheques" though there was no list
to justify this statement. As a re -
Year.
1928
1928
1930
1931
1932
1928
1929
1930
1951
1932
PAGE S
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atleaSeliter
tccur aa®,
sult I found the outstanding cheques
shown at the end of a year in dis.
agreement with the amount of out-
standing cheques paid during the
next year, as the following table
shows:
Outstandings shown as
Outstandings per paid next year in
Auditor's report Auditor s report
County General Account
$778,53
5,270.64 5,270.64
12,223.29 12,396.99
3,808:02 5,232.63
11,230.16
County Highways Account
$ 97,315.67
4,899.85 4,899.85
6,642.07 5,642.07
11,190.27 8,531.71
' 3,637.43
The auditors in the past were evi-
dently ignorant of the use of the
Sinking Fund for when the balance
of the Patriotic Debentures matured
in July, 1933, there was practically
no provision for the repayment of
the $19,500.00. There was a bank
account for the purpose but it con-
tained only a small amount and the
method of its operation makes it
evident that it was an interest ac,
count only.
I ani glad to state that the exis-
ting debenture for 8100,000.00 is an
instalment debenture and therefore
requires no Sinking Fund.
It is not my purpose to judge the
actions of the auditors. They are
I understand to appear before the
courts and the facts of the case will
then be laid before thein for their
decision.
ision.
Financial Statements
The financial statements attached
which are listed on the first page of
Outstanding as shown
by my report
Cheques missing
not ascertained,
92,175.92 cheques
12,140.54 missing
No information
Not ascertained
ft
$7,447.14
• 3,768.35
this 'report are now discussed. Twc
Balance Sheets are presented, one as
at August 16th, 1933, and the other
as at December 31st, 1932, and are
to be found on Exhibits A and •C
respectKely. These are drawn tip In
three sections showing Genital Reven-
ue and Trust sections separated.
The Capital section deals with the
properties owned by the county as
against the bonded indebtedness. The
Revenue section is the most impor-
tant one since it shows the current
assets and liabilities and indicates
the Surplus or Deficit due to the op-
erations of the county apart from all
consideration of Capital or Revenue.
The Capital Sections in each case
contain the properties at valuations
shown in the 1932 auditor's report,
Furthermore, I have added as an as- SEAFORPH: Alvin McDonald of day horning, as he was rounding a
set the amount of the Provincial Brussels, a student in the Seaforth curve at Greeves Bridge, two miles,
Highways debentures outstanding as Collegiate eceived bad shakingupnorth of Seaforth he hit the ditch•
to 1 g r a ,
e the county's rn Lest in
it 1•e les pts
n
the Provincial Highways at the a-
mount
had his car badly damaged Mon -and smashed off a hydro pole.
m
vgatilingninCIRENESSOXINISMISUNIMMIMINIIRIMINIBMISUP
mount paid therefor, less the amounts
repaid. At December 31st, 1932, I
show the Patriotic Debenture liability
at $19,500.00 and as a sinking fund,
should have been provided for this
debbnture it is stated without the
usual asset. This is the debenture
which has been shown at $18400.00
since 1924 but on which interest has
been paid for $19.500.00. The deben-
tures were actually redeemed in July,
1933, at the larger figure.
The Revenue section in each bal-
ance sheet is by far the most impara
tent of the three sections for reasons
already stated.
All bank accounts' have keen recon
oiled as at the dates of the Balance
Sheets and such other verifications.
made as were possible.
Other liabilities or changes in as-
sets may come to light later on and'
certification is -therefore withheld.
The Trust sections are, of course,
self-explanatory. ,
I would now like to make a atm-
parision of my report with that of
the county auditors of 1982:
Currant Assets
Current Liabilities
Current Deficit
Per County Auditors. per this Report
$151,665.48 $150,099,64
i 193,726.36 195,572.41
42,060.88 45,472.77
The difference in net current de- The following is a comparison of
the cash transactions shown by the
auditors of 1932 and by this report.
County General Account
Balance at Balance at
Per county audit -
beginning. Receipts. , Disbursements. end
ors . 05,941.40 O'D $349 683.70 9351.289.89 7.497.09 O'D
Ex. E. I. .... 2,753.61 O'D 348 910.85 355,253.77 9,101.53 O'D
ficit is $3,411.89,
Discrepancies . $3,187.79 O'D 772.85 4,019.38 1,604.44
It will be recalled that the gen-
eral cash book had not been totaled
for the year until my audit was made
and that it showed salaries by the
month and by the year also. I there-
fore cannot tell how the nrevious au-
ditors arrived at their figures.
This comparison shows that the on -
ening balance, i.e., the balance in the
bank less the outstanding cheques dif-
fers from my balance, which was ob.
tained by an analysis of the bank
transactions. The county auditors
showed greater receipts than appear-
ed in the bank by $772.85.
The following is a statement of
the differences discovered in the re-
ceipts:
(Continued on page 6)
d•u � w
I �
1� . vt;� 1 A, , '�.'�.,
Them Owe You
Sales Assistance
You know thoroughly well that you have
power, in your store, to influence the decision
of your customers in regard to what they buy
from you. Your customers rely 011 you to give
them products which, in use or consumption,
will .give them complete satisfaction.
You know and your customers know that, in
regard to nearly every class of product, there
are several brands of equal merit. Thus, A's
soup is the equal of B's or C's Soup; D's shoes
are the equal of E's or F's shoes; G's radio sets
are the equal of Ws or I's sets; J's hosiery is
the equal of K's or L's hosiery; M's electric
washing machine or refrigerator is the equal of
N's or O's 'washing machine or refrigerator; and
so on and so on.
Makers of advertised products recognize that
you have aceess to the attention and favor of
several hundred buyers—your regular and irre-
gular customers, and they want to use your dis-
tribution facilites for their advantage. But
are they willing, in every instance, to assist you
to sell their product if you stock it—assist you
with afseries of local advertisements, to be pub-
lished in this newspaper?
They say that they will provide you with
plenty of window and counter display material,
and printed matter; 'but quite often they de-
cline to use local advertising, in this newspaper,
over your name,
They tell ,you that they are spending a whale
of a lot of money in big -,city dailies and in na-
tionally -circulated magazies;but you know —
or can get to know -,that in the territory served
by this newspaper upwards of 90 per cent of the
families living in it do not subscribe to national
magazines and big city dailies. This means that
the job of promoting local sales ss to be put on
your shoulders.
If it is right to use big city dailies and nation-
ally -circulated magazines then, by the same tok-
en, it is right to use, local weekly newspapersl
It is 110 compliment to you as a retailer or to
the buyers of this town and territory for a na-
tional advertiser to decline to advertise his pro-
duct in this newspaper.
You can get much more advertising for your
store and stockk-than you are now getting, if
you insist, as a condition of stocking a parti-
culer product, that it be locally advertised in
this newspaper.
N.B.: Show this advertisement to men who
urge you to stock and push the sale- of their
goods, yet who tell you that their firm cannos
assist their local sale by advertising.
The Clinton NewsKecord
$1.50 a year. Worth More