Centerra audit identifies 73 potential spending irrigularities - Reporter-Herald
Thomas Clayton
Potential issues include overpayments, lack of bid records and spending outside project timelines
After analyzing $1.26 billion in cash flows between the entities tied to the original Centerra urban renewal plan, auditors from Ernst and Young have uncovered dozens of potential anomalies in procurement, transaction and disbursement processes totaling millions of dollars.
On Tuesday, representatives from the firm appeared in person before the Loveland Urban Renewal Authority board for a briefing on their findings to date and the next steps before wrapping up the engagement later this year.
“There’s thousands of transactions and activity,” said Gary Burke, a partner in EY’s forensics integrity services practice. “We’re looking at 73 potential hot spots of noncompliance in need of validation from source documentation.”
The LURA board hired Ernst and Young to audit Centerra late last year, after Loveland Mayor Jacki Marsh raised serious questions about whether developer McWhinney Real Estate Services and its network of metro districts have complied with the urban renewal plan’s master finance agreement with the city. The MFA, which governs the use of tax increment financing revenues, sets out rules for competitive bidding, accounting documentation and disclosure of any related party transactions.
Ernst and Young’s work began in earnest in February, with a broad document request from Centerra representatives dating back to 2009, the earliest year records are available in electronic form, according to Burke. To date, the auditors have reviewed more than 2,500 files, identified 313 vendors and analyzed over 90,000 lines of general ledger entries covering roughly $1.26 billion in cash flows and $128 million in project spending.
Related Articles
- Loveland Urban Renewal Authority board hashes out agreements over audit
- LURA board selects national consultant for Centerra audit
- LURA board moves ahead with audit of Centerra
To evaluate the information in terms of the MFA, Burke explained that the audit team looked specifically at three “workstreams” — the procurement process, undisclosed related party transactions and the disbursement process. The 73 “hot spots” identified for further review, he said, include payments to vendors that exceeded the amounts authorized in their contracts, projects with no indication of a public bid, spending over $60,000 without bid documentation, expenditures outside approved project timelines and transactions with vendors that may have undisclosed ties to individuals in governance roles.
Auditors also flagged unusual disbursements such as large round-dollar payments, repeated amounts to the same vendor and developer advances or repayments that were not linked to specific projects.
Ernst and Young has requested follow-up documentation for the questionable items from Centerra representatives and expects the records by Friday, Burke continued. The auditors will then review the material and schedule an in-person meeting with Centerra’s legal counsel to discuss any discrepancies and determine whether further investigation is warranted before completing the audit’s first phase.
“It’s a best practice to make sure that what we’re seeing and what they’re seeing match,” he told the board of the planned visit to Centerra. “It allows for a dialogue and the provision of other information that makes it a more robust conversation.”
Burke said his team expects to deliver a detailed report on the findings and recommendations for further assessment in mid-September.
The LURA commissioners had few questions for the auditors after the presentation, but Steve Olson did get Burke to acknowledge that their examination had yet to identify any “material” breaches of the agreement by McWhinney or its subsidiaries.
Start your day with us: Our top stories curated & delivered to your inbox each morning.
By signing up, you agree to our Terms of Use, Privacy Policy, and to receive emails from Reporter-Herald.
“Currently, we are asking questions,” Burke said. “We make sample selections, we get the source documentation and then assess if the source documentation meets what’s required in the agreement. At that point, maybe it’ll represent better facts for the necessary interpretation of what ‘material’ is.”
 | Tom Clayton Communication and Media Specialist, Public Affairs |
| Commissioners' Office 200 W Oak St, Fort Collins, 80522 | 2nd Floor W: (970) 498-7005 tcla...@larimer.org | www.larimer.org |