# Last edited on 2014-03-07 01:57:39 by stolfilocal

Here is a personal experience I had once with audits and reports.  Read if you have nothing better to do, or if you suffer from insomnia and ran out of sleeping pills.

Public universities in Brazil, like all government institutions, have lots of red tape and restrictions on things like hiring temporary workers, buying equipment, charging for consultancies, etc..  In order to dodge thos restrictions, every university created at least one "supporting" Foundation, that is not formally part of the university, whose stated mission is to "do things that that the University wants to do but the law forbids it from doing." (Yes, it [i]is[/i] as fishy as it sounds.) 

Being private or semi-private, a Foundation in Brazil has fewer restrictions than a government institution; but it still must keep good accounting, prepare yearly financial report, have the report formally approved by its Board of Trustees, and submit it to a specific branch of the Judiciary.  The latter is  supposed to check, through the financial report, that the Foundation's money is not being pocketed by the trustees or staff, and is being used to foster the Foundation's mission as stated in its "constitution".  

A few years ago, when I became department chairman, I became automatically a member of the Board of Trustees of UNICAMP's support Foundation.  (On my first meeting I learned that the Foundation was actually insolvent, since it had about 2 million USD in the bank, turned about 2 million USD per year, and owed 6 million USD to the government in labor taxes.  It had not been shut down yet only because it kept telling the law and tax officers that closing it would force the university to close its public hospital, etc. But that is not relevant to the story.)

Eventually I was assigned to the Board's Financial Committe, which was tasked with analyzing the Foundation's financial report (prepared by the Executive Director and lower staff) and issuing a recommendation for the full Board to vote on. (I was the "junior" member of the Commitee; the other two were the head of the Economics department, and the head of the Geology department, who had served before as financial provost of the University, overseeing a budget of half a billion dollars per year.)

However, the "financial report" we got from the Executive Director was a skimpy two-page summary with gross totals, but no details and no original supporting documents (invoices, receipts, payrolls, etc.). And with some rather dubious items to boot.

The three of us were rather uncomfortable about recommending approval of that report.  But we were told that the deadline was tight so there would be no time to ask for the missing details and documents. 

Then we saw the recommendation letter that had been written by the previous incarnation of the Committee, for the previous year's report: "The undersigned Financial Committe has thoroughly examined the attached Financial Report, and hereby forwards it to the Board of Trustees to vote."   (Note the studied absence of the word "approved".)

Quite relieved, we copied that letter verbatim and sent it on to the Board with that "report".

A couple of days latter, the Committee was recalled and given a terse note from the Board's president, "You must rewrite your letter to say that you [i]approved[/i] the Financial Report."  We sheepishly did that (he was also Vice-President of the University), but I quit the Committe and stopped going to the Board meetings after that.

I am telling you this story because it came to my mind while reading that statement by Bitstamp's auditor.  I wonder why...  ;)