Both resent having to pay Western Union a $10 fee to send money abroad and an additional cut to convert dollars to pesos. But these charges have fueled the company’s record profits and made it a relative outlier in the financial services industry.
As billions of dollars in fee income has evaporated at the nation’s largest banks because of regulations passed in the wake of the financial crisis, the money-transfer industry has escaped the crackdown.
Soon, however, the companies, which are largely regulated by states, will be subject to new federal rules. Starting in February, they will have to disclose more to customers about transfer fees and currency exchange rates. The rules, part of the Dodd-Frank financial regulation law, will also require companies to give customers up to 30 minutes after a transaction to get a full refund.
But consumer advocates are raising alarms that money-transfer companies face fewer restrictions because the rules do not touch the pricing of services.
“You still have a situation where customers are subjected to these predatory products with no cap on fees or exchange rates,” said Oscar Chacon, the executive director of the National Alliance of Latin American and Caribbean Communities in Chicago.
Money-transfer companies say that they offer an invaluable service for customers who might not have access to traditional banks and who would otherwise have no way of transmitting money to their families.
“The money-transfer industry is very competitive, and consumers have a range of choices for sending money,” said Tom Fitzgerald, a Western Union spokesman.
Western Union, which dominates the money-transfer market, notes that it already discloses the amount of money being submitted, the exchange rate and the amount that the recipient will receive. It also tells customers that “in addition to the transfer fee, Western Union also makes money when it changes your dollars into foreign currency.”
MoneyGram, among the largest companies, said, “We believe the new rules essentially standardize across the industry our existing high level of disclosure, which should benefit anyone wishing to send funds.”
Mr. Esparza, who sends money to his children in Mexico City, said that the $10 fee would not be onerous if he were sending a larger amount, but that it seemed exorbitant for $50. “Western Union’s fees are just too high,” he said.
Ms. Gonzalez said that even though $10 might not seem like a lot, “In Mexico, that money goes farther.”
Aside from the transfer fees, Western Union and other similar services profit as they buy batches of currencies at a wholesale rate. The money-transfer companies do not disclose the spreads they benefit from when they set exchange rates.
“It’s a big profit center for these companies, borne on the backs of the people who can least afford it,” said Matthew Piers, a lawyer in Chicago, who successfully brought a lawsuit on behalf of Mexican immigrants against Western Union in 2000 that accused the company of misrepresenting exchange spreads.
Western Union did not admit or deny wrongdoing, but agreed to pay more than $400 million to settle the claims.
Referring to the money it makes off the spread, Western Union said in its 2012 annual filing, “we generate revenues based on the difference between the exchange rate set by us to the customer and the rate at which we or our agents are able to acquire currency.”
Western Union received $1.15 billion in so-called foreign-exchange revenue in 2011, up from $910.3 million in 2009.
For Javaid Tariq, a taxi driver in New York City who sends money monthly to his family in Pakistan, the exchange rate is particularly infuriating because of how much money he loses. When he sent $300 to his family in April, he received 89.2 rupees for every dollar, less than the 91.2 exchange rate that he checks each morning, he said. For his family, that means 599 fewer rupees, or more than a week’s salary in Lahore.
Frustrated, Mr. Tariq said, “They are taking this money from the people who can least afford it.”
Analysts expect the market for money transfers to grow. The value of cross-border transfers is expected to reach $437 billion in 2012, up from $387 billion in 2009, according to the Aite Group, a research and advisory firm. In the United States, this is led partly by a growth in transfers to China and India and an influx of immigrants from western and eastern Africa, said Larry Berlin, an analyst with First Analysis in Chicago.
Western Union and rival companies are poised to profit. Western Union, with the largest share of the market at nearly 18 percent, recorded $4.2 billion in transaction fees last year, up 4 percent from 2010. The fees accounted for more than 75 percent of the company’s total revenue last year. In the first quarter, profits totaled $247.3 million, up 18 percent from the year-ago period, and for all of 2011, net income was $1.16 billion, up 28 percent from the year before.
Western Union and MoneyGram, which has nearly 4 percent of the money-transfer market, according to the Aite Group, are primarily regulated by the states in which they operate. The new rules, however, fall under the oversight of the new federal Consumer Financial Protection Bureau.
In the buildup to the Dodd-Frank rules, Elizabeth Warren, in her former role as a special adviser to President Obama charged with forming the consumer bureau, warned that with money-transfer companies, “you put your money in and take your chances.”
The central idea behind the new regulations was that having more transparency would promote greater competition and allow immigrants to shop for better rates, said Betsy Cavendish, the executive director of Appleseed, a nonprofit organization focused on policy reform that provided public comment during the rule-making process.
In a February speech to the League of United Latin American Citizens, Richard Cordray, the director of the consumer bureau, emphasized that “with our rule, we hope to increase competition.”
But competitors have made little progress in penetrating the money-transfer market largely because Western Union has half a million locations in 200 countries and territories, making it more difficult for others to edge in, industry consultants said. Although there was some hand-wringing in the industry during the rule-making, analysts said that disclosure requirements would not significantly dampen the revenue at Western Union.
“There will be some one-time costs, but not anything significant,” Mr. Berlin said. Western Union, he added, already works to make fees clear to customers.
Already there are signs that competition might be slow to materialize, banking analysts said. They pointed to a growing number of partnerships between Western Union and banks that might have competed for a slice of the business.
Regions Financial, for example, just finished introducing Western Union’s money-transfer services through its 1,800 branches. U.S. Bancorp gives customers access to Western Union services through its online banking site.
Immigrant advocates argue that many people do not have time to shop for better rates.
“These are people working who are often working minimum wage jobs with very little savvy or time about where to price-shop,” said Francis Calpotura, the founder and director of the Transnational Institute for Grassroots Research and Action in Oakland, Calif.
Some immigrants complain that while there might be multiple options to send money from the United States, there are not as many in the countries where their families live.
Mr. Tariq, the taxi driver with family in Lahore, says he must use Western Union to send $300 a month because “they have a monopoly on stores and are in every post office.”
That makes him feel “like a hostage,” he said.
Finance Ministry forgets Rs 32,000-crore scam - Express Buzz
NEW DELHI: In UPA’s summer of discontent, it continues to rain scams. The Central Bureau of Investigation (CBI) unearthed a huge forex derivatives scam, pegged at Rs 32,000 crore, which was brushed under the carpet by the government for three years. On January 4, 2012, Parliament’s Public Accounts Committee (PAC) had sent a reminder to the Ministry of Finance, seeking an explanation on an alleged scam in selling forex derivatives to Indian companies. The ministry has failed to respond so far. In a letter dated September 29, 2011, the Department of Financial Services, Ministry of Finance, while forwarding the views of the Reserve Bank of India (RBI) and Indian Banks Association, had responded to a PAC question on action taken to recover the huge losses by saying: “The specific action does not come under the purview of the RBI.” Sources say the PAC, which admitted a private complaint in the public interest to investigate the massive scam, was not satisfied with the response and asked Ministry of Finance to file an action taken report.The story begins in 2008, when 19 Banks violated RBI and Foreign Exchange Management Act (FEMA) guidelines and sold ‘engineered’ forex derivatives to Indian corporates, which resulted in huge losses to Indian investors and alleged gains to foreign-based banks. After almost three years, the RBI imposed a meagre total penalty of `1.9 crore on the 19 banks. Documents accessed by The Sunday Standard reveal a deliberate delay by the government in launching a probe into this scam. A forex derivative is a financial instrument that insures and seals a future foreign exchange rate.The investigating agencies allege that RBI officials, working in tandem with unknown foreign entities and Indian banks, made intentional projections that indicated that the rupee would strengthen against the dollar. The agencies claim banks trapped gullible investors, exporters and importers using these projections, and sold especially engineered forex derivatives to fritter away precious foreign exchange out of the country. The matter came to light after economist Pravanjan Patra filed a writ petition in the Odisha High Court on May 19, 2009, and the court asked the CBI to investigate the scam. “Violations of the guidelines were committed by banks and exporters, who, in many cases, entered into derivative contract for excess of their genuine underlying exposure and also tried to use hedging tools as profit making tools. In the end it was their greed that proved to be their undoing and not the policy guidelines of RBI or the government of India,” the CBI investigation report dated November 4, 2009 stated.The CBI had recommended that both the RBI and the Enforcement Directorate should investigate the matter further but they demurred. The CBI investigation report said: “The derivative contracts entered into by various banks may be examined by Reserve Bank of India and Enforcement Directorate on bank-to-bank basis with the object to identify and pinpoint the violation of FEMA and take appropriate action.”
Money Watch: Investing tips to help put kids through college - USA Today
Q: I am a single parent. I will soon be debt-free and then I can set aside a little money for my daughter's college. Should I put it in a savings account or are there better options? I will only have four years to save.
A: Four years is not a long time horizon; however, you still need to be willing to take on some investment risk in order to grow your money.
A savings account will earn very little income at these low interest rates and you will owe tax on that interest income. But a well-diversified portfolio in a 529 plan offers better upside potential. And your earnings would grow tax free, and withdrawals would be tax free when used for college expenses.
In addition to federal tax benefits, many states offer tax deductions for 529 plan contributions. But some of the states are considering reducing or eliminating the tax deduction as they grapple with mounting budget deficits. Investors need to be very careful in choosing their own state's 529 plan solely on the basis of a state tax deduction that may or may not be there in the future.
It's wise to shop around before you choose a 529 plan. One of the best sites to compare and contrast plans is http://www.savingforcollege.com/. It provides a 5-Cap rating for each state's 529 plans, based on such things as performance and risk. A 1-Cap rating is the worst and 5-Cap is the best.
That four-year time horizon makes your asset allocation challenging. It requires you to look more at the investment markets and be willing to make investment choices that might go against popular logic.
For example, you would naturally consider an age-based portfolio option or bonds and cash as your most conservative options. However, with interest rates at record lows and the possibility that they will rise over the next four years, you would be investing in bonds at exactly the wrong time, because bond prices fall when interest rates go up.
And an age-based portfolio for an 18-year-old would be weighted heavily in bonds and cash. Given the real possibility that interest rates will rise, you might need to put more of your 529 plan into stocks to avoid the interest-rate risk in bonds.
You could place it in stable value funds, but your returns would be meager over that time horizon. Stocks, given all the volatility, have produced the best long-term total returns, but it requires taking a bit of risk.
If your daughter goes to a four-year college, you could continue to invest inside the 529 plan while she attends college, so presumably your time horizon is longer than just the four years she has until she begins college. In addition, many kids take a gap year after high school to travel and save money for college, which may give you an additional year to grow your investments.
John Gugle, NAPFA -registered financial adviser
Alpha Financial Advisors, Charlotte
EU finance ministers haggle over bank rules - Yahoo Finance
BRUSSELS (AP) -- European Union finance ministers are to meet in in Brussels Tuesday to hammer out an agreement over how high banks should build their defenses against future financial shocks, with the U.K. running the risk of being isolated over who should set the height.
The EU's 27 members agree on the need to increase capital reserves of banks, following an international agreement called Basel III, which was negotiated by the world's largest economies to avoid another financial meltdown such as the one brought on by the collapse of U.S. investment bank Lehman Brothers in 2008.
But the U.K. wants national regulators to be able to set requirements significantly higher than those of the EU — a position opposed by almost all other EU members, who fear investors might then prefer UK banks and flee from those in other countries.
On his way into the meeting Tuesday morning, George Osborne, the British chancellor of the exchequer, was non-committal about the possibility of reaching an agreement.
"This is a time of considerable uncertainty in the eurozone economies," he said, referring to the 17 countries — the U.K. not among them — that use the euro currency. "And that uncertainty is undermining the entire European recovery. And I think we're reaching a point where we've got to make a decision to see the eurozone stand behind their currency. A very important part of that, of course, is strengthening the entire European banking system. And that is what we intend to do today."
Once enacted, Basel III would require lenders to increase their highest-quality capital — such as equity and cash reserves — gradually from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times. All members of the G-20 have agreed to implement Basel III; if the European Union succeeds, it would become the first entity to institute the new requirements.
The U.K. is arguing that, because national taxpayers have to bail out banks when they fail, national authorities should be able to set more stringent requirements to guard against such failures. A compromise proposal offered by the Danes, who hold the rotating presidency of the European Union, would allow national authorities some leeway to increase requirements beyond those called for in the Basel III agreement. That proposal has broad support — except, so far, from the U.K.
The finance ministers can approve the compromise proposal without British support, through what is known as qualified majority voting, in which member countries have different numbers of votes according to their populations. However, there is a tradition in the EU that changes that would affect an industry in a particular country — such as the banking sector in the U.K. — are not forced into effect over the objections of that country, and consensus is sought.
"I think there should be a unanimous decision on such an important issue," Swedish Finance Minister Anders Borg said on his way into the meeting.
Money may be factor in walking-horse ‘soring’ - Tucson Citizen
Source: USA TODAY
A blue-ribbon Tennessee walking horse stallion might be worth $1 million or more when put up for sale, but it can earn that money back for a new owner in a year through stud fees as others try to cash in on his champion bloodline.
That’s part of what makes the walking-horse industry so lucrative for top breeders, trainers and owners, and what critics say drives a few unscrupulous horsemen to acts of “soring” to create high-stepping animals that appear to have a true champion’s talent, muscle and style.
Many believe that soring — painful cutting and chemical treatments on the animals’ legs to force the prized “Big Lick” high step that wins shows — is rampant in the industry. Some critics even say that no horse trained naturally, without abuse, could walk that way.
“It’s all about money,” said Dr. Gordon Lawler, an Indiana veterinarian who has owned walking horses for 40 years and sits on the board of the Franklin, Ky.-based National Walking Horse Association rival group to Shelbyville’s industry. “An owner will tell a trainer, ‘If you can’t do it, I’ll give my horse to another trainer.’ “
Others say money doesn’t motivate the true sportsmen in the walking horse industry.
“They’re in it for the love of the animal,” said Chad Williams, a longtime professional trainer whose stables north of here are used to train walking horses for top events like the annual Walking Horse National Celebration that put this city of about 20,000 on the equine map.
“Some of the owners whose horses I train bought this farm just to have a place to come to five or six times a year, and we have horses brought to us from as far away as Minnesota,” Williams said.
While most walking horses that Williams trains to compete in shows sell for $30,000 to $100,000, he has seen them fetch as much as $1.6 million.
He has one animal in his stables now — he won’t divulge the name to protect the owner’s confidentiality — that sold for $50,000 as a 2-year-old but went four years later for $150,000 with a string of blue ribbons to its credit.
Stud fees for champion stallions can run as high as $4,000 per mate, though horse owners say fees typically average about $2,500. But a stallion that nets $4,000 to sire a colt can be used perhaps 250 times a year, bringing in $1 million in stud money.
But whether those champions could win blue ribbons and command high prices — and big stud fees — without being subjected to the controversial practice of soring remains a controversial question.
Critics’ claim that every walking horse must be the product of mistreatment is ” just not true,” Williams says. “The horse doesn’t have to be miserable to step like that. We don’t abuse our horses, and anybody can walk into our barn and watch us ride these horses.”
Lawler, who has been around the industry for decades as an animal doctor and horse owner, scoffs at the notion that soring has been wiped out.
“I believe 90% or more are sored or pressure-shoed, or they can’t compete,” Lawler says. “They just can’t do the high leg kick without soring.”
The financial pressure is intense on trainers to prepare horses that can compete in shows such as The National Celebration, the top annual event held here in late August every year, Lawler says.
But horses in the Shelbyville celebration and related events — considered the pre-eminent ones in the sport — and those sanctioned by the rival Franklin, Ky., association in which Lawler participates have vastly different rules.
While the Shelbyville shows allow walking horses to compete wearing padded front shoes, the Kentucky group doesn’t permit that, requiring all horses in its competitions to perform flat-shod.
Formed in 1998 as a response to the growing criticism of the Shelbyville style of walking horse competition, the Kentucky association believes that even the padded shoes and the associated chains that the horses wear on their ankles are a form of abuse.
“We started out with padded shoes also but elected to eliminate that because too much can be concealed between the pad and the bottom of the foot, such as golf balls or pieces of metal to cause pain,” Lawler said.
Gap in prices
There is a big difference in prices — and stud fees that can be commanded — between high-stepping walking horses with padded shoes and the flat-shod ones that the Kentucky association favors.
“The top price for our horses is about $15,000, and most good ones sell for about $7,500,” Lawler said. “And the average stud fee is about $500. I have two that I get $200 for the stud fee.”
He says the big difference in costs — and expectations — is fueled by rich owners in the Shelbyville-style horse industry.
“It’s a total culture,” Lawler said. “You have rich owners who only come to show their horses to compete for a blue ribbon. Now, I’m not against anybody being rich. It’s a free country. But for them, it’s all about the glory. I don’t have enough money (to compete on that level).”
Lawler says soring is used to take horses with less natural talent and make them into competitors, thereby boosting their value on the open market for sales and stud.
But there’s really no way to turn an inferior horse into a champion, argues Bill Coleman of Shelbyville, a volunteer inspector for the industry — known as a designated qualified person, or DQP. Coleman works for the organization known as SHOW, which checks horses in competitions such as the Celebration.
The horse industry hires the inspectors to screen for compliance with federal and state regulations against soring.
Coleman said he has been around horses most of his life and decided to become an inspector because he got tired of abuse.
He believes the industry has cleaned itself up significantly since his organization was formed in 2009 and that owners and trainers now mostly try to do the right thing.
“A champion horse, trained and ridden without artificial aids, will still make it to the top,” he said.
Still, Coleman said his regular business as a homebuilder has suffered since he started inspecting horses because the rules checkups remain unpopular among people in the walking horse industry.
Bloodlines credited
The Shelbyville area’s biggest breeder, Waterfall Farms, has seven champion studs in residence and four stables mares waiting to be bred or give birth to their colts.
“I can tell you from my years of experience that soring is not going to make an inferior colt any better,” said operations manager David Williams, who said he is not related to trainer Chad Williams.
Soring isn’t in the genes, so an average horse sored to blue ribbons won’t be of much value as a stud, he said.
“Soring is like putting a beautiful dress on an ugly girl,” David Williams said. “The only way to raise a superior horse is to breed a superior horse. We study bloodlines and try to keep our success rate high.”
Waterfall Farms has some of the most-recognized walking horse champions available for stud service, including He’s Puttin’ on the Ritz, which Williams called “the Secretariat of the walking horse world,” a reference to the Triple Crown-winning thoroughbred of the early 1970s.
Lawler takes a harsher stance but sees reason for hope. He said recent publicity and court action against soring “will be the best thing that’s ever happened to the walking horse.”
“It doesn’t mean the (Shelbyville) Celebration has to come to an end. It just means they will finally have to play by the rules. And I will commend them if they can do that,” Lawler said.
Copyright © 2012 USA TODAY, a division of Gannett Co. Inc.
Tax money pays for steaks - Dayton Daily News
Staff Writers Updated 10:17 PM Saturday, June 2, 2012
Funds that give Ohio county sheriffs and prosecutors the freedom to quickly and easily spend money to pursue and prosecute criminals have become a go-to source to pay for office parties, $40 entrees, employee gift cards and gas for one official’s daily commute.
And because of how the Furtherance of Justice funds are designed, sheriffs and prosecutors are encouraged to “use it or lose it,” meaning they must return all unspent money to county general operating funds at the end of each year. This means officials in some counties embark on spending sprees in December, buying tens of thousands of dollars in items such as office furniture, employee meals, computers and car wash tokens.
These are the findings of a Dayton Daily News investigation, reviewing three years of expenditures from the Furtherance of Justice funds in a seven-county area. Reporters also interviewed sheriffs, prosecutors and representatives of their statewide professional associations.
Guidelines for how sheriffs and prosecutors spend the money are intentionally vague.
Over the years, state officials have issued a patchwork of legal opinions as guidance. Now, the state auditor’s office is looking at peeling back some of the loose spending practices.
“There are instances where the expenditures appear to be outside the lines of the original intent of the statute, which is to identify, investigate and prosecute criminals,” said Bill Owen, the Ohio Auditor’s Office’s chief legal counsel, of expenditures auditors have found out in the field.
The FOJ funds are distributed annually from each county’s general fund, equal to one half of each sheriff’s or prosecutor’s salary. It is spent without the approval from commissioners and auditors required of other funds. This has made it a honey trap for some officials.
In the past year, two Ohio sheriffs have stepped down amid allegations they misspent FOJ funds. In March, state auditors ordered former Ottawa County Sheriff Robert Bratton to repay about $7,200 to the county after he used FOJ money to buy things like Cedar Point passes, belt buckles and cigars. In April, Delaware County Sheriff Walter Davis resigned from office amid allegations that he used FOJ money to pay for a hotel breakfast buffet with a female subordinate while at an out-of-state training event. In exchange for Davis’ resignation, a special prosecutor agreed to end a criminal investigation into the spending.
“Normally to spend any money, I have to go through the commissioners and auditor’s office,” said Greene County Prosecutor Stephen Haller. “But with the FOJ, I just write a check, like you would with your personal checkbook. I could see it could be tempting to someone who could want to misappropriate funds. It’s really not that difficult to do.”
“There’s multiple and good reasons to have this,” said Ohio Auditor Dave Yost. “But like any time you build flexibility into the system, there’s potential for abuse.”
The gas pump
When asked why the funds are needed, local sheriffs and prosecutors cite examples of imminent need in the midst of important cases: Detectives working late into the night need a bite to eat; investigators need money for an undercover drug buy; or a suspect or witness needs to be quickly transported from another state.
But the way the accounts are used is often different, the Daily News found.
Montgomery County Prosecutor Mat Heck between 2009 and 2011 billed taxpayers for about $4,000 in gas via FOJ to fill up his take-home, county-owned 2005 Dodge Durango. Receipts submitted to the county show Heck bought gas at filling stations near his Clayton home about two to three times a month.
Heck said in addition to driving to and from his home, he drives the SUV to meetings and crime scenes. Other staff members have access to it, too, he said. He said buying gas is cheaper than driving his personal car because of his office’s policy of reimbursing staff for 55 cents a mile.
“The most practical way to pay for it is out of the FOJ, and it’s also a legally appropriate way to do it,” Heck said.
Gift cards
Several counties use the fund to hand out employee perks, such as gifts or meals.
Butler County Prosecutor Michael Gmoser in December handed out $12,663 in Bridgewater Falls gift cards to his employees and two $100 performance bonuses to interns. Former Warren County Prosecutor Rachel Hutzel frequently dipped into the account for $25 gift cards to Target or restaurants such as Olive Garden or O’Charleys.
Gift cards can catch the attention of state auditors because there’s no way to track what they’re being spent on. It’s also illegal to spend public money on alcohol.
Gmoser defended the purchase: “Because of budget constraints we do not have the ability to give salary increases to my staff, but there are other mechanisms by which I can award their service, and that is what I did.”
The Warren County Prosecutor’s Office gave out $550 in $25 gift cards to employees over three years.
Prosecutor David Fornshell cut back on the practice substantially when he took office, but saw nothing wrong with it.
“Anytime that you recognize employees who work for a prosecutor for going above and beyond in a particular case, that increases the morale of an office,” he said.
Finance board moving forward with scale house audit - Stamford Advocate
STAMFORD -- The Board of Finance is moving forward with an outside audit of the transfer station despite the recent arrests of two private garbage haulers.
Stamford police charged Wayne Margarum Sr. and Wayne Margarum Jr., of Stamford-based Margarum Refuse, with felony larceny Thursday for allegedly defrauding the city of more than $300,000 in tipping fees. On Friday, Board of Finance Audit Committee Chairman John Louizos said he still plans to move forward quickly with an outside review of the Harbor View Avenue scale house.
The police investigation will serve as a foundation for the audit, which will also look into whether the facility is in compliance with city policies and procedures, Louizos said.
"The police have their methods; they have their standards in terms of collecting evidence and probable cause," Louizos said Friday. "That doesn't necessarily encompass our potential scope. For us to move along with the audit we'll gather the information and then see whether there needs to be a forensic analysis in certain areas."
The Board of Finance has authorized up to $25,000 for an operational and internal controls compliance audit at the scale house. On Wednesday, the board's audit committee met to review a scope prepared by Interim Director of Administration Pete Privitera.
"We are handling it incrementally," Board of Finance Republican Jerry Bosak said Thursday. "It's a starting point, and we're open to moving forward into the forensic option."
Four firms have already responded to the city's request for proposals, Privitera said. On Wednesday, the audit committee decided to shorten the list to two companies: J.H. Cohen and Blum Shapiro.
The other firms, O'Connor Davies Munns & Dobbins and McGladrey Pullen, were passed over because they are the city's current and former auditors.
The firm selected to perform the audit will review all contracts and other documentation related to private haulers, as well as drop-off tonnage records dating back to July 2008.
The auditor will also be asked to identify trucks whose weight varied by more than 2 percent from weigh-in to weigh-in, review cash-handling procedures and reconcile the transfer station's accounts to the Controller's general ledger, according to the RFP.
Board of Finance Independent member Kathleen Murphy sharply criticized the review, which she described as "woefully inadequate."
"I think the scope of the audit was defined in there to be too narrow," Murphy said Friday. "This is just a check the box review. Did they move this paperwork from here to there? There's no investigatory nature."
Murphy said auditors should be tasked with examining the transfer station's records for bulky waste in addition to municipal solid waste.
"You look at what's going in and what's going out," Murphy said. "If you're only going to look at what's partially going in, you're not going to be able to draw any conclusions."
Controller David Yanik said the scope of the audit was designed to target private haulers.
"That's the hotspot right now," he said. "That's where we know we have a problem. So let's confirm that this is limited to a single hauler, or it's not. Then you have to find out systemically what went on that enabled fraud among all haulers, or a single hauler."
A wider scope would have exceeded the audit's $25,000 budget, Privitera said.
Louizos and Bosak blasted Murphy for criticizing the audit after she voted to approve the review at the finance board's last meeting.
"The audit, in terms of cost and scope, initially was voted on unanimously, 6-0," Louizos said. "I think for her to then come in after the fact and then take a different position was unfair."
Police have been investigating the scale house since April, a month after city officials received an anonymous tip and conducted a spot audit at the facility. The review uncovered a 3,000-pound weight discrepancy for a truck owned by Margarum Refuse, and police then began looking into whether Margarum had manipulated the weight of his truck to cheat the city out of tipping fees.
Ten different private haulers using 20 different trucks have dumped garbage at Stamford's scale house from April 2009 through June 2011, according to the audit's request for proposals.
The facility historically weighed trucks once a year to reduce waiting times at the entrance, but Solid Waste and Recycling Supervisor Dan Colleluori said city workers are now weighing every truck as it enters and leaves the scale house.
The scale house review will be the finance board's first outside audit of the fiscal year, which ends June 30. A final report on the audit is due Aug. 15, according to the request for proposals.
The Board of Finance has a $242,000 audit budget this year and $300,000 for next fiscal year. Board Chairman Tim Abbazia, who sits on the audit committee but did not attend Wednesday's meeting, did not return a call for comment Friday.
Kate.King@scni.com; 203-964-2263; http://twitter.com/kcarliniking
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