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County OKs new contract with current auditor Martin Starnes

They said they wanted to hire a new auditing firm to cast “new eyes” on at the county’s financial reports, but after a taffy-pull over the advantages of “new” and what “new” really meant, county commissioners voted 4-1 to rehire the firm they have been working with for the last 10 years.

The board approved a three-year contract with Martin Starnes and Associates at a rate of $69,000 for 2019 and $71,000 for 2020 and 2021. Commissioner William Lapsley was the lone no vote. The auditors are expected to get started in April.

Lapsley’s issue was that the board was contradicting itself – going against what they insisted they had wanted at a Feb. 4 board meeting.

“On Feb. 4, the minutes clearly state that I made the motion that this board hire a new auditor, not to retain the same auditor. The motion that this board approved (was) that staff be requested to collect information. We did not request that they make the decision. But the board would not select the same auditor that has been looking over our shoulder for 10 years. A new set of eyes would be placed on what is going on with our financial situation. So what is wrong with this picture?”

Commissioner Rebecca McCall, who led the review of the five firms that submitted responses to the request for proposals by the March 1 deadline, said that staff used 12 criteria to evaluate the proposals. Two proposals stood out – from Cherry Bekaert LLP in Charlotte and Martin Starnes and Associates. “Of those five, the scores came in at 95 for Martin Starnes and 88 for Cherry Bekaert,” she said. Interviews with the two firms took place on March 11, with the two firms making separate presentations for staff, McCall and Commissioner Michael Edney.

“Martin Starnes says it has looked at its processes and can provide the financial audit by Oct. 31,” McCall said. Missing deadlines has been an issue for commissioners because they want “true” numbers as they look at the budget in the fall.

McCall continued: “Cherry Bekaert would be a new team. Martin Starnes would change their team. Cherry Bekaert offered remote capability (as much as 80 percent of the work being done remotely). It would not encumber staff as much but (that work style) might miss something by not being present. Martin Starnes does not have that capability. But with remote capabilities come worries about cyber security.”

McCall said that Martin Starnes is a small company and that Cherry Bekaert is large, with multiple offices in several states and clients like large Mecklenburg County. The concern for much smaller Henderson County would be “that we would be low on the priority totem pole” for Cherry Bekaert, she said.

Cherry Bekaert also came in at a higher price - $89,000 a year for three years, with $30,000 in start-up costs distributed over those three years.

McCall said that at first she “was in full agreement that a new firm was needed. But different isn’t always better. I was concerned about the cost. If we went with a new auditor, I would only go for one year and see if they can provide what they say and provide good service. But the contract is for three years.”

She recommended staying with Martin Starnes, insisting that they use a new audit team and sign a contract for one year “to see if they can meet the requirement of the deadlines we asked. I would also consider setting up an audit committee of one or two commissioners, business people and a retired CPA.”

Edney said the issue “was a timing issue and then new eyes. The quality of (Martin Starnes’) work was not questioned when it was finally received. We have been with Martin Starnes for 10 years plus. We are on our third auditor with that firm because of turnover at the company. They do have experience with our books and how we do things. The current folks have done their job and done it extremely well. My biggest concern with the new folks is the size of the company. You lose the personal interaction. The remote aspect of it sounds good but when it comes to an audit, I think they need to be on the ground looking at it. Start up will take time and we are not sure how they would make deadline and the cost is more.”

Edney recommended staying with Martin Starnes with a one-year contract “to check compliance with deadlines” and insist that they “rotate personnel to keep fresh eyes on the ground.”

Lapsley responded that he had “voted for transparency and openness. That has not happened. The staff did not do what we asked and the review process that has been presented to us is fatally flawed. I’m not prepared to support either of the firms recommended and ask that we go back to square one and to put out a new request for proposals, set up a new process for screening and recommendations.”

Commissioner Grady Hawkins expressed concern that it was late in the process to start from scratch now. “What is the time frame?” he asked of County Manager Steve Wyatt.

Wyatt said it would take time to recruit members of an audit committee from the community and that auditors do their preliminary work in April. “The audit firm serves at the pleasure of the board so the board would create whatever requirements the board wants and the firms would need to meet them. There likely would be an increase in fees if the time was short” to complete the audit.

Messer said the “staff went through a process with Edney and McCall. I think we should follow the rules and it should be a three-year contract. I would support that motion.”

Lapsley said his comments were not intended to criticize staff but to remind the board of their commitment to a new auditor looking at the books. “A new set of eyes, that’s all I’m stating. … I don’t think we’ve done this right and would urge you not to select the same auditor again… The board agreed to hire a new auditor. I think we just changed what we did.”

“It’s all about timing,” Messer said. “A new firm can’t hit the ground running. To start over would not be good for Henderson County.”

With that, Chairman Grady Hawkins called for a vote on Edney’s motion to select Martin Starnes for the 2019 audit “with a new set of eyes on the audit team for Henderson County and have the contract reviewed by the county attorney” and, in a second motion, for the term of the contract to be three years.

Lapsley stuck to his guns and vote “no” on both.