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Somersworth Housing Authority shakes up internal workings

Sunday News Correspondent

November 10. 2012 10:22PM

SOMERSWORTH - The Somersworth Housing Authority has implemented a series of corrective actions recommended by an independent audit to correct faults that resulted in the theft of between $500,000 and $1 million by a former employee. The exact amount taken is undetermined.

The audit, conducted by certified public accountants at Hurley, O'Neill & Co. and issued Sept. 26, recommended the SHA evaluate control activities, analyze the segregation of fiscal responsibilities and implement a comprehensive fraud policy. The findings were based on an analysis of statements from the fiscal year that ended Dec. 31, 2011.

"Management and the board of commissioners have not operated a control environment conducive to the prevention and detection of fraud and illegal acts as evidenced by a fraud perpetrated by a former employee, which resulted in the theft of over $780,000 from the Authority over a period of more and six years," according to the Schedule of Findings and Questioned Cost section of the report.

In addition to the audit, the SHA board of commissioners wants to hire a new director as part of the process of addressing the environment that enabled the theft, according to Robert Crichton, a board member.

Police began investigating the thefts last Dec. 6 when Elizabeth Salinger, executive director of the SHA, reported an internal theft of at least $100,000 by Fiscal Director Lisa A. Reid.

Reid was found dead at her Rochester home the following day. The state medical examiner ruled Reid's death a suicide, according to police.

Crichton, who recently joined the board, said it's important for the public to understand how the thefts occurred over a period of six or seven years. To that end, he said the board of directors agreed to make the findings of the audit, conducted as an independent investigation from police, available to the public.

According to the audit, Reid allegedly processed more than 100 checks - from certain SHA checking accounts - written to herself and endorsed "by scanning signatures from other legitimate checks and printing them on the checks generated from her personal computer."

Reid then recorded the transactions and subtracted the thefts from proceeds from third parties for management fees earned by the SHA.

"If the authority earned $20,000 in a month for management fees and the employee stole $8,000, she would record management fee revenue of $12,000," according to the report.

As Reid was also responsible for preparing annual budgets, she "intentionally underestimated the revenue earned from management fees, which would ultimately appear consistent with actual results that have been underreported by the amount of her fraud," according to the report.

For example, in 2011 the SHA budgeted $260,000 in management fee revenue, but the actual amount - "exclusive of effects of fraud" - was $360,000, according to the report.

"In her role as fiscal director, the employee took advantage of an opportunity to commit fraud that was created by a lax control environment, a lack of effective monitoring and control activities and an absence of segregation of duties," according to the report.

The independent audit "basically mirrors what the police found," Crichton said, adding the CPA's were hired by the U.S. Department of Housing & Urban Development.

"We need to move on in a positive manner," Crichton said, adding the board plans to meet with an attorney skilled in municipal law to determine how to ensure the SHA is being managed properly.

"We need to hire a competent director to help straighten things out," Crichton said.

More information on the audit is available from the SHA.

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