[Lnc-business] Fwd: Fwd: Libertarian National Committee Audit Committee Engages Gelman, Rosenberg and Freedman

Thu Mar 19 05:42:58 EDT 2015

Forwarding a message by request...

---------- Forwarded message ----------
From: Aaron Starr <starrcpa at gmail.com>
Date: Thu, Mar 19, 2015 at 1:08 AM
Subject: RE: [Lnc-business] Fwd: Libertarian National Committee Audit
Committee Engages Gelman, Rosenberg and Freedman
To: Alicia Mattson <agmattson at gmail.com>

Madame Secretary, can you please post this to the LNC business list?

Tim,

Perhaps you’re not being provided with the right numbers or the right
context.  You might find it helpful to look at the books, instead of
relying on Robert for your data.  If you examine the QuickBooks file you
will find the following costs:

Audit of 2008 (conducted in 2009)              $13,700.00

Audit of 2009 (conducted in 2010)              $13,500.00

Audit of 2010 (conducted in 2011)              $15,000.00

Audit of 2011 (conducted in 2012)              $16,500.00

Audit of 2012 (conducted in 2013)              $12,687.13

Audit of 2013 (conducted in 2014)              $10,920.00

While I was Chair of the Audit Committee last term I had our committee seek
out bids for a new CPA firm.  The fees that our incumbent firm Frye &
Company was charging had been creeping up ($16,500 for 2011) and I felt
that by shopping around we could get a better fee from a better firm.  We
ultimately settled on Gelman, Rosenberg and Freedman (GRF), a much larger
firm for a lower price of $10,500, along with an agreement that the price
would go up by no more than 4% per year for the next two years.

I am not aware of the reasons why the fees charged for the 2012 audit were
more than the executed agreement.  While GRF did email me copies of
invoices as a courtesy most of the time, I was not overseeing their
payment, since that is handled by staff.  For the 2013 audit, I did happen
to notice that the June 30, 2014 invoice showed a balance due of
$16,750.52, which exceeded the amount of the agreement.  I pointed that out
to Robert and he only paid for the contracted amount ($10,500 + 4%).

You wrote, “the 2012 audit cost $10,500 plus $2187.13 in extra charges
related to issues found during the audit.”  I’m not sure how you would come
to that conclusion regarding the cause, since the invoices will typically
state nothing more than, say, “Audit of Financial Statements for the year
ended 12/31/2012.” I doubt that the 2012 overages were due to what you
likely mean when you say, “issues found during the audit.”  The Audit
Committee did the extra research regarding those serious problems, so that
the CPA firm was not investing their time on them.  We made the CPA firm
aware of what the Audit Committee had noticed and what the LNC had decided
to do about it so the CPA firm could propose the necessary changes in the
final documents.  Also, those issues found in the 2012 audit were not
present in the 2013 audit, so that would not explain why there was more
than the agreed upon amount billed for 2013, though we did not pay the
overage.

This term’s Audit Committee was appointed much later than the previous
term.  As a committee we decided that we were satisfied with GRF and would
not seek another firm, as it was unlikely that we would get such an
experienced firm at such a competitive price.  When we spoke with Jackie
Oneto, the managing partner at GRF, we were surprised to learn that her
firm did not want to do business with us anymore and the reasons why.  She
was candid and upset.

You will not have to rely on my account of what she said; Jackie Oneto
would like to address the full LNC in executive session.  She is making
herself available by telephone on Saturday, March 28 at 11:30 am Phoenix
time.

The Audit Committee has given Jackie Oneto assurance that we would take
steps to alleviate the matter she will want to speak with you about.  You
will get more details during the meeting.  She had mentioned the
possibility that they may need to revise their fee structure with us.  We
ultimately did get a new agreement for $15,500 for this year’s audit, the
amount of which is not out of line with the most recent two years with our
previous firm.  The Audit Committee agreed that we should continue with the
firm and execute the agreement.  It is our hope that if we can alleviate
Jackie Oneto’s concerns during this year’s audit, the Audit Committee will
be in a position to renegotiate the fee downward a bit for next year.

Aaron Starr

(805) 583-3308 Home

(805) 404-8693 Mobile

starrcpa at gmail.com

*From:* Tim Hagan [mailto:timhagan-tyr at yahoo.com]
*Sent:* Wednesday, March 18, 2015 9:05 PM
*To:* lnc-business at hq.lp.org; Aaron Starr; M Carling
*Subject:* Re: [Lnc-business] Fwd: Libertarian National Committee Audit
Committee Engages Gelman, Rosenberg and Freedman

Article 7 of the Bylaws state, "The Treasurer shall receive, expend and
account for the funds of the Party under the supervision and direction of
the Chair and the National Committee." Article 8 states, "The National
Committee shall have control and management of all the affairs, properties
and funds of the Party consistent with these Bylaws." Both of these tell me
that expenditure authority lies with the LNC. I could not find the Bylaws
giving spending authority to the Audit Committee.

The 2013 audit cost $10,920, and the 2012 audit cost $10,500 plus $2187.13
in extra charges related to issues found during the audit. Previous audit
have been $12,000 to $13,500. I'm curious as to why the accountants' quote
is for $15,000 plus $500 additional expenses. Have the auditors given an
explained the reason for the price increase? Has the auditor found our
audits call for more work than a normal audit or than they expected? Since
we have a meeting in less than two weeks, I ask that the audit cost and
contracting with the auditor be included in the agenda, and could be
covered during the Audit Committee Report. In my opinion, the budget should
be adjusted if the LNC wants to pay the higher cost.

Tim Hagan

------------------------------

*From:* Alicia Mattson <agmattson at gmail.com>
*To:* lnc-business at hq.lp.org; Aaron Starr <starrcpa at gmail.com>; M Carling <
mcarling at gmail.com>
*Sent:* Tuesday, March 17, 2015 4:46 PM
*Subject:* Re: [Lnc-business] Fwd: Libertarian National Committee Audit
Committee Engages Gelman, Rosenberg and Freedman

I believe the bylaws give the Audit Committee the power to engage an
auditor on their own.

Bylaws Article 10.2 states (underline added for emphasis):

"Audits shall be performed annually by an independent auditor. The
non-officer members of the National Committee shall appoint a standing
Audit Committee of three members *with power to select the independent
auditor*. One member shall be a non-officer member of the National
Committee and the other two shall not be members of the National Committee.
The Audit Committee shall clarify for the National Committee any
recommendations made by the auditor."

That provision in the bylaws trumps any LNC policies that otherwise might
conflict with it.

Even if the LNC could use budgets to effectively constrain the Audit
Committee from doing their job (imagine if the LNC were to set an audit
budget of $0), I don't see a budgetary problem here under current
circumstances.

We use a lot of line-item details to help us decide what the top-level
budget numbers should be, but when all the draft work is over, the LNC only
adopts the top-level, broad-category budget numbers, not the line-item
detail.

The audit, along with many other line items, are all rolled together into a
big budget category called "Administrative Costs", for which we
budgeted $274,617.
As long as the grand total of expenditures for all the items in that big
category are under the $274,617, we're within budget constraints.

If elsewhere in that category we had planned to spend $100 for electricity
and $900 for gas, but the actual bills came in at $500 electricity and $500
gas, we'd still be on budget for the top-level category.  The LNC doesn't
have to re-allocate $400 from gas to electricity because the net overage in
the Administrative Costs budget is $0.

As of the end of January, our actual expenses in the Administrative Costs
were running $8065.49 below budget.

The LNC could go ahead and increase the Administrative Costs budget figure
if there is concern that over the course of the year this one increase
would prevent us from staying under budget for that top-level category.  Or
the LNC can leave the top-level budget category as is with the expectation
that staff will work to keep other line items under budget to offset a cost
increase here.

As far as the specific price is concerned, even with the new price I
believe the arrangement is less expensive than the previous firm we used
for our audits.

-Alicia

On Tue, Mar 17, 2015 at 8:08 AM, Nicholas Sarwark <chair at lp.org> wrote:

Fellow Members of the LNC,

While I was aware of the selection of the audit firm prior to
receiving the forwarded message below, I had not received a written
engagement letter for the audit of the 2014 financials until seeing
the attachments to this message.

It had been suggested that an audit could proceed without a written
engagement letter, based on the same firm's written proposal for the
audit of the 2012 financials, since that had a provision that there
would be no more than a 4% maximum annual cost increase for auditing
the 2013 and 2014 financials (the proposed cost was $10,500 for 2012,
which calculates out to $10,920 for 2013, and $11,356 for 2014).

In response to that suggestion, I had previously informed the Audit
Committee that I needed a written engagement letter prior to
authorizing the contract, as the audit would cost over $7,500,
requiring approval of the contract by the Chair. (Policy Manual sec.
2.04(3)).

While there is a written engagement letter attached below, it
indicates an audit cost of $15,000.  That cost is in excess of the
$13,500 that was budgeted by the LNC for an audit, as well as
exceeding the 110% of the budgeted line item ($14,850) that could be
spent without further approval of the entire LNC.  It also exceeds the
annual cost increase ceiling from the written proposal for the audit
of the 2012 financials.

Had I been asked to sign (or for approval to sign) the engagement
letter below on behalf of the LNC, I would have declined due to the
cost being in excess of the budget.  I was not asked and did not
approve the signature on the attached.

If the LNC wishes to ratify the agreement, purported to have been made
on its behalf, at the meeting on March 28 in Phoenix, the audit can
proceed under the terms below.  In the interim, no funds will be
disbursed and no work will be done related to the audit unless or
until I receive an engagement letter for my signature that is within
the budget the LNC has approved.

Yours in liberty,
Nick

On Mon, Mar 16, 2015 at 2:47 PM, Alicia Mattson <agmattson at gmail.com> wrote:
> Below is a message with two attachments, forwarded to you upon request of
> the Audit Committee.
>
> Alicia Mattson
> LNC Secretary
>
>
>
> ---------- Forwarded message ----------
> From: Aaron Starr <starrcpa at gmail.com>
> Date: Sun, Mar 15, 2015 at 8:23 PM
> Subject: Libertarian National Committee Audit Committee Engages Gelman,
> Rosenberg and Freedman
> To: Alicia Mattson <agmattson at gmail.com>
> Cc: mcarling at gmail.com, Gary Johnson <sedition at aol.com>
>
>
> Secretary Mattson,
>
>
>
> Please forward this email to the members of the Libertarian National
> Committee.
>
>
>
> According to Bylaw Article 10.2:
>
>
>
> The National Committee shall cause an efficient double-entry system of
> accounts to be installed and maintained. Financial statements of the Party
> shall be prepared in accordance with Generally Accepted Accounting
> Principles (GAAP). Audits shall be performed annually by an independent
> auditor. The non-officer members of the National Committee shall appoint a
> standing Audit Committee of three members with power to select the
> independent auditor. One member shall be a non-officer member of the
> National Committee and the other two shall not be members of the National
> Committee. The Audit Committee shall clarify for the National Committee
any
> recommendations made by the auditor.
>
>
>
> We members of the Audit Committee have chosen to once again engage Gelman,
> Rosenberg and Freedman for the 2014 annual audit and have executed their
> standard engagement letter, which you will find attached along with a
letter
> from Gelman, Rosenberg and Freedman addressed to the Board.
>
>
>
> Field work for the audit is scheduled to take place during the week of
April
> 20, 2015.
>
>
>
> Respectfully submitted,
>
>
>
>
>
> Aaron Starr
>
> (805) 583-3308 Home
>
> (805) 404-8693 Mobile
>
> starrcpa at gmail.com
>
>
>
>
>

> _______________________________________________
> Lnc-business mailing list
> Lnc-business at hq.lp.org
> http://hq.lp.org/mailman/listinfo/lnc-business_hq.lp.org
>

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