SEVEN YEARS ago, state auditors had the number of Michael McLaughlin, the conniving former director of the Chelsea Housing Authority. But it appears they looked the other way in an extraordinary breach of public trust and professional ethics. It is yet another sad reflection on the tenure of former Auditor Joseph DeNucci.
A recent Globe report uncovered evidence that auditors in DeNucci’s office flagged McLaughlin’s bloated salary and his efforts to conceal it from the state in 2005, 2008, and 2010. And each time, they failed to include the findings in their auditing report. By the time the Globe exposed McLaughlin’s scam in October, he was earning an obscene $360,000 to run a small housing authority and reporting only $180,000 to the state.
Auditors can fall down on the job for many reasons. Sometimes, dishonest executives use their deep understanding of an organization’s accounting systems to snooker even experienced auditors. In other cases, inexperienced auditors fail to make sufficient inquiries. But in the case at hand, the state auditors confronted McLaughlin and urged him to report his salary. Yet they didn’t take the next obvious step and document McLaughlin’s failure to comply with state laws and regulations.
McLaughlin’s role as a political power broker - including a friendship with DeNucci aide Robert Powilatis - raises additional questions in this case. Attorney General Martha Coakley has convened a grand jury to investigate whether McLaughlin and others defrauded the state. And current auditor Suzanne Bump, DeNucci’s successor, has forced the resignation of the supervisor of the Chelsea audits.
This latest resignation follows a devastating report from the National State Auditors Association that found in 12 of the 15 audits that were reviewed, DeNucci’s team failed to check sufficiently for risk of fraud, and that DeNucci’s office had no minimum hiring standards and inadequate training. Meanwhile, the State Ethics Commission fined DeNucci for giving his elderly cousin a position for which he was neither trained nor qualified. The job of the state auditor is to provide reasonable assurance that public agencies are effective and honest operations. Now the public is left wondering whether the auditor’s office itself was on the level.