INCLINE VILLAGE, Nev. – The Nevada Department of Taxation’s Committee on Local Government Finance appointed a subcommittee to look at Incline Village General Improvement District’s (IVGID) financial irregularities on Wednesday. 

“The subcommittee that we’ve just appointed, one of the duties I’m going to ask the subcommittee to do is to make a recommendation as to whether you should be placed on ‘fiscal watch’,” said the committee’s Chairman Marvin Leavitt. “Or whether we need to take some action other than that or whether they feel like you’re making efforts to resolve the situation … their intent is to not only assist you, but also make a recommendation as to what we need to do subsequent to that.” 

State law authorizes placing local governments under “fiscal watch” when they exhibit specific conditions including serious internal control deficiencies, insolvency, failure to meet payment obligations, questionable investment decisions, unauthorized expenditures, misappropriation of funds, and non-compliance with regulatory requirements. 

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IVGID is facing significant financial and operational challenges, as revealed by Nevada Department of Taxation Budget Analyst II Kellie Grahmann’s recent assessment. The district’s general fund budget augmentation was denied September 2024 following a request to use ending fund balance as a revenue source. The situation was further complicated by the resignations of General Manager Bobby Magee and Assistant Director of Finance Adam Cripps, which contributed to the district’s high turnover rate. 

Adding to IVGID’s difficulties was a failed transition to a new Tyler ERP system and a concerning “no-opinion” audit for FY 2023 that was received on March 29. 

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“The forensic due diligence audit found a total of 41 (risks of potential fraud) weaknesses of internal controls where 16 were high risk, 12 were moderate risk, and 13 low risk,” Grahmann said. 

In response, DavisFarr auditors will conduct an additional 70 hours of testing. Interim Director of Finance Susan Griffith and Interim General Manager Karen Crocker are working with oversight authorities to address these issues and develop solutions. The ongoing financial challenges have raised concerns about potential budget over-expenditure for FY 2024. 

This has prompted increased scrutiny and monitoring of IVGID’s financial management practices. 

Crocker told the committee that auditors are reviewing high-risk items identified in the RubinBrown forensic report and system improvements are being implemented. The board approved an addendum to the Tyler Munis financial system contract on Oct. 9, which addressed issues that have plagued the district’s financials for 18 months. Crocker emphasized that immediate implementation of fixes for integration and module problems is a priority. 

In response to deficiencies highlighted in the RubinBrown report, the district has already taken several corrective actions, Crocker reported. The IT department has implemented new login protocols. Additionally, the district has significantly restricted procurement card usage and enhanced internal controls by requiring department head approval for purchases, with random audits to be conducted by the finance department. A revised policy for uniforms has been drafted and awaits board approval. 

“I do want to share that I’ve been in municipal government for over 25 years, and I’m also a resident of IVGID,” Crocker told the committee. “So, I’m very committed to fix whatever has been happening … I’m very dedicated and committed to this.” 

Griffith confirmed the fiscal year 2024 audit is underway. On Oct. 15, Griffith presented a comprehensive audit schedule outlining plans to complete the work and establish timelines to receive the audit report from DavisFarr. 

The audit process is on schedule. Griffith said DavisFarr representatives will be onsite Oct. 28 through Nov. 1 to do audit field work. She emphasized that no extension is anticipated. 

Jennifer Farr with DavisFarr, and audit partner responsible for IVGID’s audit for fiscal year 2024, also spoke to the committee. Farr’s team started mid-October. She said most requested items were provided on time. 

If there are minimal accounting errors and if documentation continues to be provided on time, then a draft report should be available in early December, Farr said. Then the draft will go through a review process. 

“It’s kind of our best-case scenario timeline on what we think will happen with the audit this year,” Farr said. “But so far, everything’s looking good.” 

Trustee Ray Tulloch, IVGID treasurer and Chair of the Audit Committee said none of these issues were about complex financial fraud accounting. 

“There were a large proportion of them with complete lack of internal controls,” Tulloch said. “A failure by staff to observe existing procedures.” 

Tulloch said they’re putting proper procedures in place to make sure rules are followed. 

“We’ve had a big turnover of staff departing,” Tulloch said. “… We’ve found issues that have been going back many years. We’re trying to address these. We’re also now in a situation in which our infrastructure, most of our investments are getting to the stage where they require significant replacement.” 

Tulloch said IVGID has “lived for years from overcollection of facility fees that’s not been necessarily used for the designated purposes.” 

“Our salaries and benefits budget has increased over 50% in this year’s budget from 2022,” Tulloch said. “We’re trying to correct these issues.” 

There’s significant pushback with sectors of the community that have benefited from previous policies, Tulloch said. 

“We’re working hard to overcome years and years of issues,” Tulloch said. “This is not just something that’s happened overnight. We’re working and we’re putting every effort into it.” 

Tulloch said with regard to the budget augmentation, the board was assured by then Director of Finance Magee this was the process to follow. The board was surprised to find the procedure was wrong. The board was also told that IVGID had executed a loan with its internal services department to cover a $600,000 loss in 2023. 

“There was no loan,” Tulloch said. “This loan only appeared in the financial statement as a balance sheet item. There was no formal loan made or anything there. The general fund was depleted by over $600,000 with regard to that.” 

Tulloch said there was another $300,000 lost in IVGID’s internal services unit, which effectively comes out of the general fund. 

“The key thing for me as treasurer is to make sure that we get this back on a firm financial footing,” Tulloch said. “…it’s something we take very seriously. And it has got to be a first order of business.” 

Griffith responded to Chairman Leavitt saying she anticipates the fund balance will show an over expenditure of $2 million. 

Griffith did not want to speak to specific numbers until the FY 2024 audit is complete. 

“We are also working on the fiscal 25 budget monitoring and anticipate that the fiscal 25 budget will actually come under budget by approximately $300,000,” Griffith said. 

Leavitt offered a suggestion. 

“Whenever you have an item come to the board for approval of a contract that’s not included in the budget that you have approved, you need at that moment in time to resolve that situation before you approve the contract,” Leavitt said. “Not six months or a year or whatever afterwards that needs to be done at the time you do it. Not later on. And if you do that, we’re not going to have this situation right now with this possible over expenditure, which is an illegal situation of expenditure of monies.” 

Leavitt asked for cooperation. 

“We expect that everyone will do everything they can do, no matter what it takes to get this audit done and provide the material so they can actually issue an opinion in the audit and get these matters resolved,” Leavitt said. “I think it’s clear. When the subcommittee wants to work with you, I want you to be accommodating to them, provide them what they need. And do all of these things so that we can work this out.”