It never hurts an organization to check that its financial processes are running smoothly. Not only can conducting formal investigations serve as proof when strong practices are in place, but a recovery audit can lead to the discovery of large amounts of money that may have slipped away due to accounting errors.
The Los Angeles Times reported that the Los Angeles Department of Transportation recently discovered $42.6 million that had accumulated over time without officials’ knowledge. The source said that the cash built up between 1995 and 2011 in a special funds account that had not previously been audited.
While recovering this staggering amount of money is a positive thing for the city’s budget, some worried that if nearly $43 million had been hidden for so long, there is no telling what other costly mistakes are yet to be found.
“It frankly makes me a little concerned about what other costs aren’t being accounted for,” city councilman Paul Krekorian said during a budget meeting, according to the news provider. “$42.6 million is a lot to fall through the cracks.”
One financial management firm noted that recovery audits are especially crucial when large amounts of money are involved. As an example, the source explained that even when only a 0.1 percent margin of error exists, there would be $100,000 to recoup for a process flow of $100 million. Regaining control of these funds can breathe new life into an organization.