Nobody from accounting firm Schoenfish & Company accepted the invitation to testify before the Government Operations and Audit Committee next week about its auditing of the scandal-sunk Mid-Central Educational Cooperative. But someone in the Schoenfish office (probably not accountant and legislator Kyle Schoenfish, who has distinguished himself with a defensive reticence and an inability to write coherently) did compose a series of concise and, where necessary for its purposes, evasive responses to the 31 questions GOAC sent to Kyle’s dad and firm chief Randy Schoenfish on August 4. The auditors undercut the Department of Education’s claim of diligent oversight of Mid-Central financial activities. And for good measure, the auditors also tell GOAC to jump in a creek.
Schoenfish & Company doesn’t tell us much new case-cracking information. Their response to GOAC tells us that “approximately eight different people” have worked on Mid-Central audits for the “approximately 20 years” that the firm reviewed Mid-Central’s finances. The last five audits Schoenfish & Company conducted of Mid-Central before ceding audit responsibility to the Department of Legislative Audit took from 145 hours on FY2010 to 172 hours on FY2014:
- Fiscal Year 2010: 145 hours
- FY2011: 149
- FY2012: 152
- FY2013: 147
- FY2014: 172
Schoenfish & Company notes that Mid-Central was one of “roughly 80 schools, cities, coopes, and other governmental entities around the state” that it has audited. The firm notes with pleasure that “even more governmental entities chose to hire the firm for 2017.”
The firm reminds GOAC that it issued several adverse opinions to Mid-Central (Schoenfish & Company identified material weaknesses for eight years) and says that “more than just cash was reported as a concern.” The auditing firm says the responses from Mid-Central’s board members, director Dan Guericke, and business manager Scott Westerhuis were typical of responses from other agencies to audits. Apparently there were no “heated” meetings like the one described by Secretary of Education Melody Schopp with Mid-Central staff circa 2012 amidst discussions weaknesses in bookkeeping.
If the Department of Education had concerns that could provoke a “heated” meeting with Mid-Central, one would think they might be interested in learning more from the auditors who were finding chronic material weaknesses in Mid-Central’s books. However, in its most noteworthy response, Schoenfish & Company says DOE called them once:
The Department of Education had only one brief conversation with one member of our firm. As we recall, they only asked a couple of simple questions. They never expressed any concerns to us during the many years we performed the audits [Schoenfish & Company, response to GOAC, 2017.08.17, p. 2, Response #7].
Here Schoenfish & Company makes it sound like the Department of Education didn’t want to let anyone know that it knew that something was amiss at Mid-Central. Bookmark that.
GOAC asked Schoenfish & Company about the $900,000 gym Mid-Central business manager Scott Westerhuis built at his home with money he stole from GEAR UP and other federal grant moneys handled by Mid-Central. The firm says the gym “was discussed” and was “never acknowledged to be a GEAR UP asset by anyone we spoke to.”
Schoenfish & Company explains that it asked the Department of Legislative Audit to take over auditing Mid-Central after the spectacular Westerhuis murder-arson-suicide in September 2015 because the investigation was too big for any private firm:
[DLA] had better access to DCI, Forensics, Fraud Division and the Attorney General’s office. They looked at many of our documents and visited with us. Because of the media attention and various other expectations, the time they spent (not exactly known to us) would have been prohibitive to a private business with regular clients to serve [S&C to GOAC, 2017.08.17, p. 5, Response #23].
Schoenfish & Company’s evasions include using professional standards to justify not telling us who specifically worked on the audits:
We use a team approach, with approximately 8 auditors. Profession standards require all auditors under the firm to be competent and unbiased; therefore, an auditor’s individual involvement is immaterial to the scope of an audit as a whole. It is very rare that any one auditor in our firm would do more than twenty five percent of any audit [S&C to GOAC, 2017.08.17, p. 4, Response #19].
Schoenfish & Company cites the AICPA Code of Professional Conduct to avoid a specific response to GOAC’s question about gifts auditors may have receive from Mid-Central, the DOE, or other state or federal officials. The firm parries questions about misused funds, illegal contracts, and criminal charges by citing pending court cases.
Despite its reticence on several questions, Schoenfish & Company concludes with some unsolicited advice to GOAC on how to do its job:
As explained to us by Tim Flannery, the GOAC has several basic purposes. One is to determine if some changes need to be made with any weaknesses with any department. Another is to suggest possible legislation to be brought before the House and Senate. In the future, perhaps the GOAC would better serve the citizens of South Dakota through a combined effort involving the Department of Legislative Audit and several firms that audit government entities in South Dakota in order to address potential weaknesses, legislation or other local government matters [S&C to GOAC, 2017.08.17, p. 7].
Such advice from a citizen in the witness chair might seem audacious, but hey—isn’t telling the Legislature what to do one of our fundamental rights?
Schoenfish & Company is sending no one to testify in person next week to avoid putting any individual face on its responses to this legislative inquiry. The firm has provided a corporate response, stating it met its professional obligations in auditing Mid-Central for around twenty years and has the vote of confidence of an increasing number of government customers. And for those of us trying to keep score, Schoenfish & Company has suggested that the Department of Education was not quite as concerned about financial problems at Mid-Central as the Secretary of Education has suggested.