Early miss of SBA audit
SBA trustees could have had access to the internal SBA audit that first flagged troubles in the fixed income group months sooner than they actually did. Most SBA trustees, that's Gov. Charlie Crist, CFO Alex Sink and Attorney General Bill McCollum, have complained they learned of a March 2007 SBA internal audit red-flagging the fixed income group's risky behavior only a few weeks ago.
But all trustees have one appointee to the SBA audit committee, which considered the controversial audit at their August meeting as the subprime mortgage crisis unfolded. The audit's processing delays were so glaring in August, that the CFO’s appointee to that committee, Doug Darling, asked auditor Flerida Rivera-Alsing whether SBA management was dragging its feet. He took her to task for not being tougher on management in getting responses. He told her that her role wasn’t to “negotiate with management” or “make management feel good or look good.”
Darling also made the following foretelling statements, according to an audio transcript of the hearing:
“If management is not being responsive, I’ll tell you right now, my trustee wants to know that,” he said. “I can pretty well guarantee you that if we continue to get non-responsive replies there’s going to be new management," he added a bit later.
Yet, Darling didn't tell his boss. In fact, it appears as though none of the SBA audit committee members told their trustees.
Darling said he didn’t mention the audit troubles sooner, because the August meeting was his first on the committee. The audit was already months late. It reviewed a period starting in early 2005 that stretched 18 months and concluded in March 2007.
“I came in essentially at the final play of the football game trying to determine whether everything had been done was correct,” Darling said. “At the time, it seemed we should go forward and fix this from happening again.”
AG’s spokeswoman Sandi Copes said that their appointee didn’t alert them to the audit in August, because she was following SBA protocol. She said that the SBA audit committee reports to SBA management, which reports to the trustees. “SBA determines what makes it up to the trustees, so we just didn’t get a copy of it,” Copes said.
It's not clear at this point whether Crist's appointee said anything, because Buzz couldn't get comment on the issue late Tuesday evening.
And since we're talking about the SBA in August.....
Despite the near miss on the internal audit, e-mails suggest that the CFO Sink's office was among the first to start asking questions about troubled short-term funds, as early as Aug. 21. Here's the response assuring everything would be fine, which former SBA director Coleman Stipanovich wrote and attached to an Aug. 22 e-mail.