POLITICS
11/09/2011 05:01 EST | Updated 01/09/2012 05:12 EST

Bridgetown, Nova Scotia Had Municipal Funds Misappropriated, According To Financial Audit

BRIDGETOWN, N.S. - A financial audit of a Nova Scotia town released Wednesday says $113,200 in municipal funds were misappropriated.

The auditing firm of Grant Thornton was called in to look at Bridgetown's books after the mayor and town council resigned in May in the face of mounting financial pressures.

The auditors said their investigation found that the town's financial problems may have started as early as May of 2006 and continued until earlier this year.

Their report showed that $113,195 in cash and cheques were misappropriated. But it said cheques worth $33,676 were subsequently deposited to Bridgetown's bank accounts, leaving the town $79,519 in the hole.

The problems were first flagged by the town's bank, the report said.

"The irregularities related to cheques included in the town's bank deposit that did not match the cheques recorded on the deposit slip," the report said.

"The forensic audit ... indicated that only one town employee was involved in the misappropriation. That employee has admitted to misappropriating cash and cheques from the town."

The auditors did not identify the employee in their report.

A number of red flags were raised, including an increase in customer complaints about overdue notices, cash flow problems and invoices that had been altered by hand to hide arrears balances, according to the report.

It pointed to a number of internal control weaknesses that allowed the misappropriation to occur.

It said only one employee was responsible for accepting and recording customer payments, compiling the bank deposit, sending out invoices and handling customer complaints.

It said closer attention should have been paid to customer complaints about invoices.

"Complaints can be an indication of many issues, including fraud," the auditors wrote.

"Management should always take customer complaints seriously and investigate complaints in a thorough and timely manner."

A copy of the audit has been handed over to the RCMP, who are investigating.

About 1,000 people live in Bridgetown, about a two-hour drive west of Halifax.