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Last week when agents from the State Auditor’s office made six arrests in our Mississippi Department of Human Services (DHS) investigation, we put a stop to a multimillion-dollar public embezzlement scheme. We worked quickly and quietly over the last eight months to uncover this fraud. When we had proven the case against those six people, we brought the case to light immediately and put a stop to it before any additional money flowed to those individuals.
But now that this is done, it is time to marshal more resources to get to the bottom of any additional fraud that remains hidden. The Auditor’s office will be continuing our investigation, but we are also bringing in our partners at the FBI to review all our evidence and to help us uncover any additional schemes or losses.
In addition to that, we will be completing our routine audit of DHS in coming months. The work on that audit is not done, but I can tell you that the findings will be alarming.
We audit DHS regularly, including last year. That audit revealed serious potential problems, like the fact that DHS was not adequately monitoring the entities that were receiving big grants. As it turns out, those entities were at the very heart of the scheme we later uncovered.
These routine audits are limited in scope, though. We perform these audits under guidelines from the federal government. When we do so, we are required to focus on failures in the agency’s processes. For example, if an agency we are auditing has a monitoring process that fails, we would point that out. While we can also focus on their finances, we mainly look to see that their financial statements are reasonably accurate. Traditional audits like these do not trace the path of every dollar spent.
As a result of those limitations, these standard audits are not ideal for catching fraud. I am a Certified Fraud Examiner, and the Association of Certified Fraud Examiners will tell you that routine audits are responsible for catching just 15% of fraud cases around the world. Tips and whistleblowers, on the other hand, are responsible for revealing 40% of fraud cases.
Given the limitations of those routine audits, and given the massive amount of money at issue in the case, we need an additional dose of transparency here.
So here is the important next step: the state needs to hire a competent private CPA firm to do a full forensic audit of DHS. The audit should review every year that former DHS Director John Davis was in office.
By “forensic audit,” I mean an audit that will not merely look at processes, as we do, and not merely sample DHS’s expenditures. I mean an audit that will trace how each and every dollar was spent. This kind of audit often reveals evidence that is later used in court.
My office cannot perform a project of that magnitude any time soon and still perform all our normal audits. A full forensic audit will be a huge undertaking. My office needs to focus on finishing its current DHS audit and its investigation in coordination with the FBI.
When the private CPA firm finishes that forensic audit, the audit results—along with the findings of my routine DHS audit—need to be made public for all to see.
At the end of all this, we will have had a skilled team of investigators and auditors at the Auditor’s office, another skilled team at the FBI, and a private CPA firm look at how money was misspent at DHS.
In other words, we will have as comprehensive a look at a troubled agency as has ever happened in our state. Given the large misspending and fraud that has occurred, this is necessary to restore taxpayers’ faith in that agency and in state government more generally.
My priest reminded us this week that a “city built on a hill-top cannot be hidden.” If we want to be that shining city, a lot less of our spending needs to be hidden. And if we follow the path I have set out here, we can achieve that goal.
