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City sues ex-auditing firm, adviser over 2015 financial crisis

The city of Yukon has filed a lawsuit against its former financial adviser and auditing firm.

The lawsuit, filed Nov. 9, seeks in excess of $75,000 from R.S. Meacham CPAs and Advisors as well as FSW&B CPAs.

The two companies are accused of providing advice and inaccurate audits that nearly bankrupted the city of Yukon in 2015 and led to the resignation of City Manager Grayson Bottom.
According to the court documents, the city claims that Meacham was hired in July 2011 to provide financial advice to city.

FSW&B were hired in 2012 to conduct the city’s audits.

In 2015, the city became concerned that the financial audits and statements were in error and hired another firm, Crawford and Associates, to conduct a forensic audit.

According to the court documents, that audit found numerous errors.

“For instance, the city improperly used monies that were restricted for specific uses for general operations,” the filing states.

The lawsuit claims that Meacham negligently prepared accounting books, records and financial statements for the city.

“The financial statements prepared by R.S. Meacham contained numerous material misstatements, departures from generally accepted accounting practice principals and omitted disclosures,” the document reads.

The document claims that FSW&B audited the statements and issued an audit incorrectly concluding that the 2015 financial statements were free of material misstatements and incorrectly reported there were no compliance issues of any internal control deficiencies.

The city is suing both companies, claiming breach of fiduciary duties as well as professional negligence.

Meacham is accused of breaching its duties by preparing financial statements and providing accounting assistance and financial advice with substantial inaccuracies, gross inconsistencies, material misstatements, departures from GAAP and omitting required disclosures.

FSW&B breached its duties by failing to spot the errors.

Both also are accused of breach of contract.

In December 2015, Yukon authorities discovered the city’s finances were in dire straits, with less than $3,000 remaining in its reserve funds.

The audit, conducted by Crawford, show instances of non-compliance with competitive bidding requirements, bid splitting and improper payments for some contracts, according to previously reported stories in The Yukon Review.

At the time of the audit’s presentation, Frank Crawford with Crawford and Associates, cited purchases made outside “the normal claims process and approval process for certain purchases” that could involve “individual conflict of interest in regards to a $2.4 million land purchase.”

The city’s finances were in such disarray, said Crawford, “When compared to other communities that we deal with in this type of work, this was the worst mess I’ve ever seen.”

Attempts to reach representatives of Meacham and FSW&B were unsuccessful at presstime.

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